A friend of mine who is a business owner says dealing with his company’s health insurance benefits feels like “taking a nail gun to his head.” While many business owners wouldn’t describe their feelings quite as graphically, they share that sentiment. And, as challenging as health insurance issues for Maryland businesses have been, this complicated, frustrating and costly issue for small business owners is only going to get more so.
While there is still some time for business owners to make health plan decisions for 2014, there isn’t a lot. To plan and implement changes in the fall, decisions should be made by the end of August. And this year the decisions must be made with more uncertainty than usual.
Because the Affordable Care Act was highly politicized when it passed and continues to be as its provisions become law, there is a lot of misunderstanding in the business community about what the implications of the law are. On top of this confusion, the Maryland Health Insurance Exchange continues to evolve and insurers are only now beginning to get their hands around costs. As an example, CareFirst just published earlier this month its contract and rate filings for health benefit plans for the Maryland Small Business Health Options Exchange.
It may be tempting to run the numbers for your business and make a decision strictly on cost — if I have fewer than 50, full-time equivalent employees should I even offer health coverage? If my business has more than 50 but fewer than 100 employees, is it cheaper to participate in the Maryland SHOP or to provide coverage elsewhere? But even these seemingly simple questions have complications. For example, many business owners don’t know the penalty of $2,000 for not providing group health coverage applies only to the number of employees over the first 30. There is also a penalty if coverage is provided but doesn’t meet the new standards of the Affordable Care Act.
In the face of this complexity, it’s tempting to take the cheapest and simplest way out. Yet it’s more important than ever to make strategic benefits decisions based on your specific business.
Some of the considerations that go into a benefits strategy include:
— What is competition like for key talent in your industry? Job security is fading as a dominant issue for employees, and benefits are becoming increasingly important. Can you attract and retain the talent you need if your health plan isn’t market competitive? Consider the cost of hiring, training and lost productivity.
— With real wages stagnant for the last several years and employers increasing their benefits cost sharing with employees, surveys are suggesting this is becoming a big morale issue. As an employee, when you see your health plan contribution eat up your salary increase, it’s demoralizing.
— The trend toward prevention and wellness is continuing to grow, and showing good return on investment. You don’t have to have an on-site fitness center and elaborate health screenings to provide some form of incentive in this area.
— Also, the shift to a “defined contribution” approach from a “defined benefit” approach is accelerating. Like the move from traditional pension plans to 401(k) plans, taking a defined contribution approach to benefits means employers give employees a certain dollar amount to spend on health and wellness benefits and the employee makes choices about where to use those dollars. What is your philosophy about employee choice and responsibility for their health decisions?
— Finally, as part of your benefits strategy, think of all of your constituencies, including your customers, the general public and prospective employees, not just your current workforce. Several high-profile companies have suffered significant backlash recently by taking very public political positions on their health plan choices regarding the Affordable Care Act.
Like other aspects of managing a business today, your health plan strategy can’t be fixed. Health plan options, costs, trends and employee perceptions are all in flux and will continue to be. Be prepared to reevaluate your strategy and decisions as this dynamic environment changes.