Health Reform: Not Just a Math Problem

No matter which side of the aisle you are on - single or married, business owner or employee, young or old – experts agree that health care reform will impact each and every one of us. Words like market exchanges, community rating, large group, small group, and individual mandate will become household terms that not only affect a person’s health care, but it can also affect a person’s pocket book.

As to those specific terms and their meanings, I will refer you to any search engine. Anyone can go online and find more information than is humanly possible to read in a lifetime. Besides, many are happy to only discuss the obstacles and uncertainties, without much in the way of solutions. I choose instead, to discuss possible insights and solutions, while acknowledging that much of the bill, like a suspense movie, is still unfolding before our very eyes.

So here’s what we know; the magic date is January 1, 2014. Though the bill was passed in 2010, the full weight of the reform will actually be realized next year. With a few months to get serious about forming a strategy, that date is looming ever more closely on the horizon.

Beginning in January, employers with 50 or more employees will be required to provide their employees affordable health insurance with minimum essential coverage, or pay a hefty tax. Employers with less than 50 employees are exempt; however the individual mandate affects everyone. This means that with few exceptions, each and every legal citizen of this country will be required to have health insurance with minimum essential coverage. This care includes individual market policies, job based coverage, Medicare, Medicaid, CHIP, TRICARE and certain other coverage. If a person chooses to ignore this mandate, beginning next year, a tax penalty will be imposed by the IRS for not participating.

With the individual and large employer mandates, the current system of underwriting and assessing risk for individuals and small groups necessitated reform also. Hence, the implementation of health insurance marketplaces, commonly referred to as “exchanges,” where a set of government-regulated and standardized health care plans will be available for purchase. Through Utah’s marketplace, individual and small group plans will not be underwritten for health risk, but will receive a community rating instead. The idea is that because if the mandate for everyone to have coverage, a flood of healthy and young people will offset the cost of providing coverage to unhealthy and older people. On paper this sounds almost Utopian, but many experts are skeptical. In fact, industry experts are forecasting significant increases in insurance premiums in the individual and small group markets due to the requirement of community rating.

Even just skimming over the specifics, a person can get a headache trying to make sense of it all. Here’s a little advice: with all of the changes and reforms, don’t lose focus on why you already choose to offer employee benefits to your staff. Statistics show that a good benefits package increases attraction and retention of key employees, improves morale, and provides a measurable increase in employee productivity and profitability. Business owners that look at health reform strictly as a math equation may be overlooking a serious issue. The purpose and intent of providing employee benefits will not change, and if anything it will become more critical. Many small businesses, though not required to provide health insurance, may find themselves competing with larger businesses that do. Key employees may begin looking to larger companies that are required to provide coverage, have access to large group pricing, and don’t have to deal with the volatility of community rating.

The bottom line: why would a business owner even want to manage this reform? The best strategy is to get rid of the headache altogether and outsource the management of reform to qualified experts. With large group health plans that preclude community rating, payroll functions that satisfy the IRS reporting requirements, and HR experts to help a business address regulatory compliance proactively, why not focus on your core business and leave the compliance issues to PEOs that specialize in them? After all, how many business owners really got into business to be experts in ever-changing reform mandates?