Navigate the New Health Insurance Laws While Keeping Your Valuable Employees
As seen in Barista Magazine
By Tracy Allen
On a typical day, Tom Baker dials in his grinder and espresso machine, pulls shots of sweet espresso, steams milk and happily serves Blue Bottle Coffee to the people of San Francisco. He answers questions about roast profiles and brew methods, and knows many of his customers by name. As a full-time employee, 80 percent of Tom’s medical costs are covered by Blue Bottle. The other 20 percent comes out of his paycheck. It’s a comprehensive plan that even includes add-ons like dental, vision, acupuncture and massage.
Small businesses typically struggle to cover the costs of employee health insurance, yet benefits like Tom’s are fairly common at small to midsize coffee businesses, particularly roasters and roaster-retailers with at least a few locations since they tend to have several employees, and more of the staff tend to be long-term or full-time with opportunities to grow into different positions at the café, roastery, office, etc. (Read: benefits help you retain employees.) A recent survey conducted by The Small Business Majority found that 72 percent of companies with 10 to 25 workers provide their employees with full or partial coverage. Another survey, commissioned in 2009 by the Agency for Healthcare Research and Quality, concluded that about 41 percent of businesses with fewer than 50 employees offer health insurance.
Any benefits you can provide at your shop to keep valuable staffers are a good idea. But as evidenced by the large numbers of uninsured workers—and, to be fair, a lack of state or federal mandates for coverage—health insurance is an expensive perk. (On average, single coverage for one employee cost businesses about $4,600, and coverage for families is $12,000.)
When the 2,500-page Patient Protection and Affordable Care Act (PPACA) was passed by Congress last March (with the stated goal of ensuring that more Americans are covered by health insurance, and to make it more affordable), many small business owners were concerned that mandates for insurance coverage (which take effect in 2014) will squeeze them to the point of slashing wages, reducing hiring, and even laying off workers. But other small-business owners — frustrated by the current system and skyrocketing health-care costs — are willing to “give it a chance,” according to state Rep. Chris Molendorp of the Kansas City-area Republican who is working to enact the PPACA in the Missouri Legislature.
One of the PPACA provisions already in place is tax credits for small businesses that provide coverage for employees. Beginning last year, 4 million small businesses became eligible for the credits, and many are taking advantage of them and extending insurance coverage to employees. Businesses with 10 or fewer full-time-equivalent employees earning less than $25,000 a year on average will be eligible for a tax credit of 35% of health insurance costs. (Companies with between 11 and 25 workers and an average wage of up to $50,000 are eligible for partial credits.)
The Small Business Majority has a handy tax credit calculator at smallbusinessmajority.org that will help you figure out the total credit your company would receive for offering insurance to your staff.
Though the main complaint made about the PPACA is that the law is essentially a job killer, small businesses are in fact voluntarily taking advantage of the tax credits with no mandates yet in place. The national numbers won’t be complete until small businesses file their 2010 tax returns this April, but early indications are positive. The Boston Globe reported in March that United Health Group, Inc., the nation’s largest health insurer, added 75,000 new customers working in businesses with fewer than 50 employees last year. Coventry Health Care, Inc., a large provider of health insurance to small businesses, added 115,000 new workers in 2010—an 8 percent increase. Blue Cross Blue Shield of Kansas City, the largest health insurer in the area, reports a 58% increase in the number of small businesses purchasing coverage since April, 2010. And nearly 40 percent of the businesses Blue Cross is signing up had not offered health benefits before.
That said, also in March, the New York Times reported that the overall cost of health care is still rising while coverage is shrinking. The health care law may eventually “bend the cost curve” downward, as proponents argue. But for now, many employers are looking at ways to offer competitive plans and control costs. (See sidebar: “Control Your Health Care Costs” for a breakdown on how to get a handle on your insurance costs.)
For the most part, businesses will not begin feeling the effects of the PPACA until 2014, when the penalties and coverage mandates go into effect. That’s when the tax credit expires and are replaced with health care exchanges. (Some states, like Missouri and Illinois, are already going through the process of adopting health care exchanges.) The exchanges will direct small businesses (those with fewer than 100 employees) and uninsured individuals to a one-stop shop where they can find and compare health insurance options.
Bolstering Molendorp’s assertion that some small businesses are game for the PPACA is the SBM survey, which found that 33 percent of the small companies that don’t currently provide employee health insurance might change their minds when insurance exchanges take effect. Molendorp sees Missouri exchanges modeled on travel websites that provide customers with loads of options for prices and services. “If you’ve been to a farmers market or to Travelocity, you’ve been to an exchange,” said Molendorp.
For the small business owner, the exchanges are about power in numbers. In the insurance world, the more people who are insured under one plan, the lower their premiums. If small businesses can band together under one plan, their individual costs should go down.
Tom Baker of Blue Bottle has chosen coffee as his career path. He hopes his employer will “provide opportunities to develop more as a professional,” meaning on-the-job training, rather than Tom having to increase his coffee knowledge on his own time. For baristas, there can be a trade off between insurance benefits and professional development. Not a lot of small companies can afford to offer both. Tom is passionate about coffee nonetheless, but also wise to value medical coverage. “Although I do not need to make very much money, I do need to know that I will be taken care of if I get sick.”
[SIDEBAR] Control Your Health Care Costs
There are a few ways to help control your health care costs while still providing coverage that will attract and retain employees. Also consider using a benefits broker to help you navigate the big, confusing world of healthcare options. A good broker will help you come up with a plan that meets your needs, and he or she can also help to educate your employees on the plan so they will fully understand and embrace it.
1. The most widely used health-plan option is a health reimbursement arrangement. The HRA is set up and funded by businesses to help employees pay for medical expenses like deductibles and co-payments. HRAs can encourage employees to make cost-effective decisions about their health care, like shopping for less expensive services or using generic prescriptions. An HRA can be paired with any health plan. If you match it with a high deductible health plan, your premiums will be most affordable.
2. You can also establish health savings accounts for your benefits-eligible employees. An HSA is an employee-owned bank account that can be funded by both the employee and the employer. Employers often contribute to the accounts with the savings incurred from a high deductible health plan. Unused funds accumulate and roll over each year.
3. Partial self-funding uses the your company’s collective health status as the basis for the health plan rates, unlike community rated health plans which are more general and often more expensive. With partial self-funding, the employer pays for the health plan and funds claims up to a predetermined amount. If actual expenses are less, the employer can keep the savings. If expenses are greater, there is a limit on your financial risk through stop-loss insurance protection.