Healthcare Reform School - Lesson # 8 - Options for Small Businesses

Welcome back.  Summer is in full swing and that out of school routine is in place for most families.  Look down the road just a few months and you will see that January is not very far away and the a change in our society will start taking place for real.  Of course I am talkiing about the Affordable Care Act or Obamacare as it has become known.  Oddly enough that term is used as a derogatory term or a term of endearment, depending on which side of the political fence you reside.

In my last lesson I discussed how individuals can prepare for January by reviewing their insurance, checking the rate calculator to see what they are in for regarding rates and subsidies, and then to talk to their health insurance agent and put a new health insurance policy in place now that will be stable through all of 2014.

This lesson will be about how small businesses can prepare for January.  This is for businesses owners with fewer than 50 full time equivalent employees (FTEs). The first thing to do is determine if a business has 50 FTEs.  This may be very simple, but if the number is close and there are part time employees to add into the mix, then it is a bit trickier. Here is how you figure out how many FTE's a company employees.  First, figure the number of full time employees that work an average of 30 hours per week in a given month.  Then add the full-time equivalent of part-time employees. To calculate that number add the number of hours worked by part-time employees in a given month and divide the total by 120.  So two part time employees that worked and average of 60 hours in one month, equal one FTE.

First and foremost, companies with less than 50 FTE's are not required to provide any type of health insurance under the Affordable Care Act.  Employees with more than 50 FTEs are required to provide "qualified" and "affordable" coverage to employees or pay a tax penalty of $2000 per employee.

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So how do these small businesses prepare for 2014.  Currently some offer benefits and some do not offer benefits.  The most popular way to offer benefits currently is through a small group plan.  In 2014 small groups will become obsolete because of the following reasons:

• Group plans are too expensive, rates keep raising as the group gets older and submit claims to the insurance companies
• In 2014, everyone will be eligible for insurance on the private market.   Currently many employers feel an obligation to create a group so that sick employees are able to get health insurance. This will no longer be necessary under the Affordable Care Act because the insurance companies are mandated to accept all applicants regardless of pre-existing conditions.
• IN 2014, if an employee is eligible for a qualified group plan, then they are not eligible to go on the exhanges and purchase insurance utilizing.  This means they will not have any opportunity to take advantage of government subsidies to help pay for their insurance.

However, benefits are an important hiring and employee retention tool.  So what is the alternative?

To prepare for 2014, I recommend strongly dropping that group plan and implementing a new health insurance benefit through a Health Reimbursement Arrangement or HRA.   Why is it exciting? Because you can offer a Health Insurance Benefit to your employees that has the followoing attributes:

• Costs are set by the business and stay fixed
• Employees are able to buy health insurance with the benefit and still have the opportunity to receive government subsidies if they qualify based on their income.
• The time it takes to administer the health benefits is 5 minutes per month, which can free up a lot of time.
• This is a tax free benefit, their are no payroll taxes paid on the benefit and the employee uses the benefit tax free for health insurance and other health related expenses.

HRAs are a HUGE deal.  However they are not all created equal.  I highly recommend using Zane Benefits to implement and administer the HRA to keep the business records compliant with the laws and to use me as the health insurance agent that will help employees find the health insurance policies that they purchase with the benefits provided through the HRA.










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