How a proactive approach can make handling healthcare reform easier
(Editor's Note: This is the seventh in a series of columns by family business leaders and advisors with information and ideas about topics unique to family businesses, developed in conjunction with the Conway Center for Family Business. Read the sixth here.)
ByScott P. Rider
For many family-owned businesses, managing, understanding, and adapting to the numerous changes associated with healthcare reform have been overwhelming challenges. These challenges, however, can be made easier if a proactive approach is taken to handling what seems like the ever-changing landscape of healthcare reform.
The strategies utilized by family-owned businesses to adapt to the new world of providing employer-sponsored health insurance to their valued employees largely depend upon the number of individuals employed.
Family-owned businesses with 25 or fewer employees should implement a four-step process to ascertain how health insurance should be delivered to their employees.Step one of the process involves comparing an employer's current health insurance rates to that of the new "community rating system." If, prior to healthcare reform implementation, an employer's rates were consistently at the high end of the rating system, it is quite possible that community rates might be lower than previous rates that were based on the overall health of the employees. Step two involves comparing an employer's current health insurance rates to that of the rates available utilizing the new SHOP (Small Business Health Options Program) plans. Some employers will qualify for a significant tax credit if implementing a SHOP plan. Step three involves comparing an employer's current rates to that of the individual health insurance rates obtained through the "private exchange." This would allow an employer to compare individual health insurance rates to that of their current rates, which likely were based upon the overall health of the employees insured under the employer's group health insurance plan. Finally, step four involves determining if an employer has employees that might benefit from utilizing what is referred to as the "public exchange." Most people know the public exchange as www.healthcare.gov. It is possible that individuals employed in a family-owned business might be eligible for a premium subsidy and/or a deductible reduction subsidy.
Once the information is obtained through means of these four steps, an employer will be in a much better position to make an informed decision regarding how to manage healthcare in the future.
Employers with 50 to 99 employees have been granted a temporary reprieve from many of the rules imposed by the federal government until 2016. However, to be eligible for the delay, there are a number of steps these employers must take to qualify for relief. It will be important for employers in this category to determine exactly how many employees they have according to the guidelines set forth by the federal government as it relates to what constitutes a fulltime equivalent employee.
Specifically, employers in this category must certify in writing that they employ at least 50, but fewer than 100 fulltime equivalent employees on each business day in 2014. Additional requirements these employers must meet to to qualify for relief include items such as the employer contribution for employee-only coverage and making sure that the plan's benefits, such as deductible and out-of-pocket, meet the necessary guidelines.
Lastly, for employers with 100 or more fulltime equivalent employees, the year 2015 creates a number of issues that must be considered, such as documenting that health coverage is offered to 70% or more of their fulltime employees. These employers should conduct a thorough analysis that includes comparing the cost of paying the employer penalty for not offering insurance to that of the current cost.
Additionally, employers should identify those employees who would be subsidy-eligible through the public exchange. There are a number of scenarios for employers of this size to consider that would create a win-win opportunity for both employers and employees.
When one considers that family-owned businesses account for 50% of the U.S. gross domestic product, generate 60% of the country's employment, and account for 78% of all new job creation, any issue that impacts business impacts family-owned businesses.1 This is certainly true of healthcare reform. However, with guidance and preparation, this challenge can be managed adeptly.
Scott P. Rider, CLU, AEP, Certified Family Business Specialist
Managing Partner, Rider + Reinke Financial Group LLC
1. Perman, Stacy. "Taking the Pulse of Family Business," 2006. Bloomberg Businessweek. Retrieved November 2012