What’s Your Health Care Strategy?

The Affordable Care Act’s employer mandate now goes into effect Jan. 1, 2015, giving employers more time to consider their options before making a decision on their employee health care coverage.

But with so many options to consider, where do you even begin?

The delay is certainly welcome news for employers with at least 50 employees, who before the deferral had until the end of 2013 to offer affordable coverage to full-time employees or pay a substantial fine.

The bad news? In its current form, the law is complicated enough to make even the most seasoned insurance broker’s head spin. There is no one-size-fits-all approach, says Bob Chiesa, owner and president of Custom Benefits Insurance Group.

“Defining who is a full-time worker under the employer requirements and what constitutes a 50-employee company is proving far more complicated than many expected,” he says. “At the very least, at this point, retailers need to be aware of what they’re up against.”

Four independent home improvement retailers—with stores of all different sizes and locations—share how the Affordable Care Act is affecting their operations and what their plans are moving forward.

(Note: Because each employer’s situation is unique, you should always consult with your accountant, attorney, tax or financial adviser or human resources or insurance professional before making any changes to your employee health insurance coverage.)

NRHA Offers a Solution

NRHA has teamed up with insurance agency Custom Benefits Insurance Group, Inc. to offer a source for affordable health care coverage. NRHA members can call Custom Benefits Insurance Group at 888-201-7408 and reference the NRHA Health Insurance Program or visit cbigi.com/nrha-program for more information.

You can also download a template letter for employees regarding ACA changes, developed by Custom Benefits Insurance Group here.

Small Store’s Policy Changes Give Employees More Choices

Handyman Hardware
St. Cloud, Fla.
Owner: Rick Heuser
Employees: 8 (5 full-time, 2 part-time, 1 part-time/seasonal); 6 full-time equivalent under ACA
2012 Revenue: $775,000
Current Benefits Cost: $28,320/year, $590/month per employee

Current Benefits

Rick Heuser, owner of Handyman Hardware in St. Cloud, Fla., has been paying for all full-time employees’ health insurance ever since a long-time employee fell ill 10 years ago and couldn’t afford to go to the doctor.

Heuser started offering his employees small, inexpensive hospitalization policies and eventually began offering complete coverage. Making the move from handling payroll in-house to handing it off to a payroll service made his business eligible for larger group rates.

Heuser is covered under his wife’s previous employer, so he is currently paying coverage costs for the store’s remaining four full-time employees.

This year, the company paid 100 percent of a Blue Cross PPO, a cost of $28,320 for the year, or $590 per employee per month, but he says this expense isn’t as well used as it could be.

“Two of the four employees have other medical coverage, and the remaining two didn’t even go in for the free physical,” he says.

Strategy

Starting in October, Heuser is reducing the amount the company contributes to $287 per month per employee, and at the same time, giving an across-the-board wage increase of $2 per hour to both full- and part-time employees.

“Our full-time employees are scheduled for 45-hour weeks, so, with overtime, they should earn an additional $95 per week,” he says.

Heuser says he was initially concerned the Affordable Health Care Act (ACA) would drastically increase insurance costs, but after analyzing his situation with his financial adviser, he learned some of his employees may be eligible for some ACA-related tax credits.

“I was also worried about the talk of raising the minimum wage to $10.50 or higher. My thinking was I could pay the health premiums in full or raise wages, but I couldn’t do both,” he says. “The changes I’m making to our plan cover both concerns.

“Those who want high-end coverage can still have it without reducing their take-home pay. Those who don’t need that much coverage have several other options and can pocket the difference in pay.”

If Your Business Is This Size

You don’t have to provide health insurance if you employ up to 24 full-time employees (note: the ACA’s definition of full-time employee is more than 30 hours/week, or 130 hours/month).

However, you can buy it through your state’s Small Business Health Options Program (SHOP) exchange and claim a special tax credit for two consecutive years between 2014 and 2016. The credit is up to 50 percent of the insurance’s cost if you’re a private business.

Medium Store May Get Tax Credits by Joining Health Exchange

Cornell’s True Value
Eastchester, N.Y.
Owner: John Fix III
Employees: 33 (23 full-time [including four owners], 10 part-time); 28 full-time equivalent under ACA
2012 Revenue: More than $3 million
Current Monthly Benefits Cost: $10,500/month

Current Benefits

John Fix III, owner of Cornell’s True Value, already offers coverage for his full-time employees, with the company picking up 75 percent of the cost. He sees it as a competitive advantage to attract quality employees to work at his store, as most of the big-box competition in the area does not currently offer coverage to full-time employees, he says.

“As a third-generation business, we look at our employees as extended family,” says Fix, who sits on the board for Member Insurance, an agency that specializes in insurance programs for cooperatives and associations. “We want to make sure they are healthy and happy.”

The company pays a total of about $10,500 each month for the 12 full-time employees who opt for individual or family coverage under the company’s insurance plan. If employees want any additional coverage, they must pay the difference, he says.

Fix says he anticipates if he participates in his state’s Small Business Health Options Program (SHOP) exchange, his company’s employee coverage costs could decrease. As a result, he could be eligible for up to 50 percent of the insurance’s cost in tax credits under the law (see Page 42 to see if your business qualifies for any tax credits under the ACA).

“We provide health insurance for our staff, so in our case the ACA is a good thing due to the tax credits,” he says. “However, I imagine that stores that do not offer health insurance (and perhaps offer different benefits or salary structures) will find it will cost them more or force them to restructure their compensation and benefits in order to keep costs level.” 

Strategy

Fix says since the ACA passed, he looks a lot more carefully at adding full-time employees.

“We used to have full-time cashiers during the day, but now we have one who is a part-timer,” he says. “When a full-time position opened up, we didn’t fill that position. It’s a minor amount, but it adds up.”

It also affects how much of his employees’ plans he can afford to cover. In the past, Fix could cover up to 90 percent of employees’ premiums, sometimes even offering dual coverage, allowing the benefits of one policy to be coordinated with the benefits of other policies. “It’s changed how we take care of our people.

Health insurance was an easier benefit to offer in the past; we didn’t want to take benefits away,” he says.

If Your Business Is This Size

If your business has between 25 and 50 full-time equivalent employees, the ACA does not require you provide health insurance. However, you can buy coverage on your state’s SHOP exchange. If you offer coverage, you can deduct your contributions as a business expense.

Large Operation Looks to Reduce Claims

Sunshine Ace
6 locations in southern Florida
President: Michael Wynn
Employees: 251 (165 full-time, 86 part-time); 275 full-time equivalent employees under ACA
2012 Revenue: $28.3 million
Current Monthly Benefits Cost: $40,000

Current Benefits

Sunshine Ace currently covers about 80 percent of premium costs for its 165 full-time employees and runs tests to make sure the plans offered are considered affordable under the ACA.

In the past, president Michael Wynn went to the company’s insurance broker to compare insurance companies to find the best rate or consider making changes to the company’s current benefits package.

Now, under provisions mandated by the ACA, that ability to be selective is much more limited. Wynn says he’s also anticipating the company’s current health insurance renewal rates will increase 10 percent, as well as an additional 10 percent as a result of complying with ACA’s employer mandates for minimum essential benefits.

To lower the cost of coverage, Wynn is working with his broker to develop more of a consumer-driven model with a focus on long-term claims reduction. For the company’s group plan, most renewal costs are weighted on claims experience, meaning the more claims employees file, the more the company would be responsible for paying in premiums. Claims reduction starts with finding better ways to create wellness incentives for smoking cessation or covering part of the fees for gym memberships if employees use it a minimum of 12 times each month, he says.

Strategy

While Wynn says he hopes the wellness incentives will lower the premiums his company covers for his employees, he would like to have a foundation for a self-funded model before the company must comply with provisions under ACA’s employer mandate starting in 2015.

“With health insurance, you can get yourself in trouble from a liability standpoint talking about private health issues. That’s something we were very sensitive to when discussing our options,” he says. “We want to create a resource where employees can call trained benefit experts who help them navigate through all of their health issues. We have that resource with our new broker. They provide enhanced services that direct participants to the best value provider, and they prevent us from having access to confidential health matters.”

Wynn also provides updated coverage information to employees through the company’s newsletter, daily huddles and direction to other resources.

If Your Business Is This Size

Self-funding your workforce is one option you can consider if you’re what the ACA considers a large employer (more than 51 employees)

With this strategy, you take on all the financial risk for employees’ medical claims and administer the plan or use a third party, which could be a health insurer, to administer it. Self-insured employers are exempt from many new rules, including for premiums and minimum benefits, but you would be assuming an increased risk.

Additionally, if you have more than 200 full-time equivalent employees, you must auto-enroll your employees in a health plan. They can then choose to opt out if they don’t want coverage from you.

Ohio Chain Still Considering Options

Orme Do it Best Hardware
6 locations in Ohio
Owner: Dick McCoy
Employees: 102 (29 full-time, 73 part-time); 80 full-time employees under ACA
2012 Revenue: $10 million
Current Benefits Cost: $670/month per employee

Current Benefits

Orme Do it Best Hardware owner Dick McCoy has offered health insurance coverage at his business for as long as he can remember.

Currently he covers 75 percent of employees’ coverage, which averages out to be $670/ month per employee.

With 80 full-time equivalent employees, his business is considered a larger employer under the ACA. When it comes to complying with ACA’s employer mandate, McCoy’s main concern is how he will have to change his current plan to meet the law’s minimum requirements.

For now, he is working with his insurance agent to renew his policy for 2014 until he has a clearer picture of what the employer mandate will look like beginning in 2015.

Strategy

McCoy says he is much more conservative in hiring full-time employees as he navigates how to best approach complying with the health care law.

“The only thing we’re doing differently is conserving our hiring resources,” he says. “If it’s a right fit, I would start a new hire at full-time, but in general, right now we’re starting everyone off at part-time.”

He has also been diligent in keeping up-to-date on his state’s government websites. He says he still doesn’t yet have all the information he needs to decide what would be the best option for his employees, although after doing some research, it appears his health insurance costs may go down under the law.

“You have to really be careful when you’re looking at resources, because you can get online and there are some sites that are way off base,” he says. “Also, because the ACA seems to change so frequently, you’ve got to make sure you’re going to a site that’s been updated.”

If Your Business Is This Size

As a larger employer, you could also choose to offer the ACA’s definition of affordable coverage (no more than 9.5 percent of an employee’s household income and at least 60 percent of employees’ health care costs). Many experts say it’s OK to make an educated guess using employee W-2s as a baseline to determine an employee’s household income.