Employer-based health insurance is in death rattle

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Fair Exchange

Q:

My boss mentioned that he may cut back our hours to avoid paying the employer mandate for health care next year. Is that legal?

A:

Unfortunately, it is legal. But regardless of what your boss does, both Washington and Oregon are on track to have their online health care exchanges up and running in the fall of 2013. Any uninsured adult will be able to shop for health care and pay a premium based on income. You can expect to have several policy options and insurance providers to choose from.

The Affordable Care Act ("Obamacare") will not be in full effect until 2014. However, the number of full-time equivalent employees on the payroll during 2013 will determine if a company is considered small or large.

The two numbers businesses are focusing on are 50 and 30. A business will fall into the "large" category in 2014 if it had 50 or more full-time equivalent employees during 2013. A full-time employee is defined by the ACA as working 30 or more hours per week. This definition, however, is only true for the ACA.

The ACA doesn't count employee bodies; it looks at hours worked. If Joe works 18 hours a week and Judy works 12 hours each week, their combined hours are 30 and that equals one full-time equivalent employee.

Only businesses with 50 or more full-time equivalent employees will pay a penalty for not providing health insurance. But, the penalty (a minimum of $2,000) is assessed for full-time employees (those each working 30 hours a week or more). Therefore, if a large business doesn't want to provide health care insurance and wants to minimize the penalty for not providing coverage, it will increase the number of part-time employees, those who work less than 30 hours a week.

The number small businesses should focus on is 50 percent, which is the amount of the tax credit provided to offset the cost of employee health care insurance. Most small employers will qualify for this tax credit.

In 2014 small employers will have much better access to affordable health care through the online health care exchanges. The web-based exchanges eliminate the need for a broker and small businesses are no longer at a disadvantage due to their size.

Additionally, the ACA has measures in place that will control premium growth, and the law requires that at least 80 percent of the premium dollars paid to insurers be spent on medical care or refunded to their customers. Approximately $1.2 billion in 2011 premiums was refunded over the summer.

The ACA legislation is complex, loaded with rules and exceptions to those rules. The reporting requirements and bureaucracy needed to categorize, penalize or subsidize every employer and employee add to the list of tedious tasks that comes with managing employer-based health care benefits.

For that reason I believe that employers will begin to move out of the health care business as soon as they see that the state-run exchanges are working.

What some large employers are just beginning to realize is that the ACA provides a way to stop providing health care benefits to their part-time and full-time employees. A penalty of $2,000 or $3,000 per full-time employee is a bargain compared to the cost of providing basic health care coverage.

Health care costs have not been evenly distributed and ACA will slowly level the playing field. The large employers that provide good health care coverage have carried the costs for their own employees plus many employees working in small businesses. Spouse and family coverage has kept some people in jobs much longer than they would have liked just to keep the family insured.

While some large businesses effectively subsidized small businesses, others decided to provide benefits to no more employees than necessary.

Walmart, for example, has had a net income in excess of $12 billion every year since 2008 and it could provide its employees with health care benefits. Instead, tens of thousands of its employees qualify for food stamps and state provided health care for employee dependents. Walmart shifted expenses to the taxpayer and charities and boosted its net income.

Employer-based health insurance is coming to an end. Most of the complexity of the ACA comes from the need to accommodate employer based exceptions -- who will be covered and what services will be provided. Take the employer out of the role of deciding what is included in your health care and a lot of problems go away.

I have never met an executive or business owner who wouldn't be glad to hand off the costs and problems associated with health care. It is a costly and time-consuming duty and most business managers would rather focus their time and money on their business.

Next fall, when the health care exchanges come to life, employers will see a wide range of plans and premium levels available and many will decide it's time to move their employees onto the health care exchanges.

I hope they provide guidance and make the transition as easy as possible for their employees; it could be the last time they talk about health care with them.

Virginia Detweiler is a human resources consultant and has taught business and management at Walla Walla Community College and Walla Walla University. Submit questions to her email address at awwcomplady@gmail.com or call her at 509-529-1910. Questions used in her column will be edited to remove information that would identify the sender.

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