How to control your “out of control” insurance premium increases.

Insurance premiums expected to riseAmerica is sicker than we thought. The nation’s leading health insurers are seeking rate increases of 20 to 40 percent for the 2016 open enrollment season citing sicker than expected customers who purchased health benefit policies under the Affordable Care Act.

The rate requests, from some of the most popular health plans, suggest that the insurance market is still adjusting to the shock waves set off by the Affordable Care Act. Experts believe the root cause of this problem is the failure of several marketplaces to attract enough young, healthy applicants.

With increasing expenses already hurting your bottom line, how are you going to keep your business alive while facing inflated insurance premiums or massive penalties from the IRS?

  • Self-Insure your health benefits.

This isn’t a new concept, large companies have been self-insuring their health benefits and workers comp for years. We’ve now made it available to any size employer; so why would you pay a large insurance carrier for something you can do yourself?

  • Stop-loss or reinsurance to limit your liability.

When you self-insure, you need to have reinsurance to protect your business.

  • Claims funding is returned to you.Control your insurance premiums

When you self-insure, you are contributing monthly to a fund that claims are paid out of. Any money that goes unused will be returned to you on a quarterly basis. In a nutshell, you only pay for what you use and that unused money ends up back in your pocket.

  • Implement Health and Wellness Programs to keep your costs low

It’s no secret that America is unhealthy. Bringing health and wellness programs to your employees and encouraging yearly checkups can cut down on illnesses and increase the possibility of claims funding coming back to you.

Simple enough, right? Give FreedomCare a call to learn more about self-insuring and avoiding these premium increases.

The $38K Question..

Last week we talked alternatives to traditional insurance plans like self-insuring for compliance under the Affordable Care Act. Unfortunately a large portion of employers have chosen to take a different approach…to do nothing. So you may be thinking, what are the consequences if you choose not to do anything?

For employers, the Affordable Care Act presents 2 possible penalties for not complying.

  1. The first is a $2,000 per employee penalty for not supplying a health plan offering 63 Minimum Essential Coverages. For our purposes we will call that Penalty A.
  2. The ACA also imposes a $3,000 per employee penalty if the employer supplies a plan but it does not offer coverage as generous as a Bronze Plan. We will call this one Penalty B.

To determine how much that really is, lets say your company has 200 full-time employees. If just one of those employees is not offered coverage and receives a subsidy or tax credit on the exchange, you are on the hook for Penalty A which equals $240,000! ($2,000 x (200 employees – 80 (the law allows for a deduction of 80))

The $38k Question

You could end up paying this entire amount even if you are offering insurance to the majority of your employees. On top of Penalties A and B, there is a Catch-All Penalty of $100 per employee per day for numerous kinds of violations that do not fall under Penalty A or B.

There are multiple ways to trigger this Catch All Penalty:

  • Your plan excludes people for pre-existing conditions or otherwise discriminates based on health status.
  • Your “Out of Pocket” limits are higher than allowed by the ACA.
  • You incorporate a waiting period of longer than the 90 calendar days without properly enacting and calculating an additional 30 day orientation period.
  • Your plan includes annual or lifetime limits on essential health benefits.
  • You are not properly offering dependent coverage to children up to age 26.
  • You do not properly provide a Summary of Benefits and Coverage.
  • You do not have adequate claims appeal and external review processes.

The Catch All Penalty would apply to every single affected individual as long as the violation exists. This is calculated on top of Penalties A & B. Calculated over an entire year, the Catch All Penalty would cost an employer $36,500 for one employee. Using our example above, if you have 200 employees and you are in violation for the entire year, your penalties would be too outrageous to even contemplate..over $7 Million! So what are the total amount of possible penalties and excise taxes employers could face per employee?

That is the $38k Question.

To make things worse, these penalties are excise taxes and are not tax deductible like health plan contributions would have been. Does it seem like it’s a good idea to choose not to do anything? It’s not to late to mitigate your losses, check out our previous post about Self-Insuring your benefits to begin exploring alternatives to traditional insurance and choosing not to do anything.