For businesses, clock ticking on health care choices

Phil Castle, The Business Times: 

Business owners and managers face difficult decisions about health care coverage for their employees under sweeping federal legislation even as the clock starts ticking on implementing many provisions of the law.

Ross Manson

“Now’s the time to get educated,” said Ross Manson, a principal with an accounting and consulting firm that’s developed a new service to help businesses make choices about health care insurance.

While it might be tempting for businesses to simply drop coverage and pay the penalties, a variety of variables should go into the calculation, Manson said. “It’s important that businesses consider all aspects of their decisions.”

Manson works for Eide Bailly, a firm that provides a variety of accounting, auditing and consulting services to nearly 40,000 clients.

The firm operates offices in 19 cities across the United States, including Grand Junction.

The firm developed Employer Health Reform Analytics, a service that takes into account insurance premiums, staffing and wages in calculating the effects of federal health care legislation on an individual business.

Under the provisions of the Patient Protection and Affordable Care Act, businesses with 50 or more full-time employees must provide health insurance or pay a fine, Manson said.

Businesses that elect to drop coverage will be assessed a fine of

$2,000 a year for each employee, excluding the first 30 employees, if at least one employee goes to a health care exchange and receives a federal subsidy to assist with purchasing insurance. If a business provides coverage deemed unaffordable — that is, above

9.5 percent of an employee’s wages — the business will be fined $3,000 for that employee, he said. Those provisions are scheduled to take effect Jan. 1, 2014.

The federal legislation also affects smaller businesses with fewer than

25 full-time employees that pay less than $50,000 in average annual wages in offering tax credits for providing health insurance. Those credits already are available and will increase to 50 percent of the cost of providing coverage in 2014, but subsequently phase out, Manson said.

While withholding judgment on the legislation itself, Manson said the potential effects are some of the most profound to be enacted in decades.

Given the requirements, penalties and credits imposed under the law — not to mention the various insurance plans expected to offered by health benefit exchanges — business owners and managers face some tough choices, Manson said. “It gives them more options than ever to consider.”

He expects some businesses, particularly large firms, to postpone dramatic changes in employee insurance coverage until after the new provisions are implemented and they observe what other businesses do.

Eide Bailly performed some preliminary calculations that identified three general types of businesses most likely to experience the greatest financial differences between options: small businesses that don’t currently offer insurance; businesses with large numbers of part-time or seasonal employees; and business that pay, on average, lower wages.

In one test case, an employer would realize a 40 percent savings by dropping coverage, sending employees to a health benefit exchange and increasing salaries to cover employee costs for those who aren’t eligible for subsidies, Manson said.

Nonetheless, it’s important that business owners and managers not assume dropping coverage and paying the penalties will be the less expensive option, he added.

In addition to the current and future costs of health insurance premiums and penalties, employee wages and potential subsidies must be considered, he said. What’s more, a business owner or manager should consider how their decisions affect the competitiveness of their firms in recruiting and retaining employees. There’s also the issue of how much control a business wants to retain over the health care benefits its employees receive.

At the same time, though, a health benefits exchange could offer employees more choices to purchase coverage that better fits their individual needs, Manson said.

Employer Health Reform Analytics calculates the financial aspects of the decision to generate cost estimates for various options. Eide Bailly then can offer recommendations based on the analysis and other factors, Manson said. The process takes a couple of weeks to a month to gather the required information, calculate the estimates and prepare reports.

While many provisions of the federal health care law don’t take effect until 2014, Manson encouraged business owners and managers to start considering their options well beforehand.

Help is available, he added. “We’re ready to start the process now.”