As a Florida small / mid-sized group health and individual insurance broker in Florida since 1999, I’ve listened to small business owners complain that the government never helps true small business owners with under 50 employees. So why are small business owners missing the opportunity that the ACA uniquely brings to them on a silver platter? Here’s what my clients have learned through my program:
The Hard Cost of a Group Plan
Though people still see the Affordable Care Act as something not to be touched out of some principle, those that see the advantages of how the ACA could potentially provide huge cost savings to their company, have taken advantage of this law and realized significant savings.
Most small business owners typically have some form of employee benefits consisting of one or two group health “cookie cutter” plans that normally do not fit a person’s budget nor the benefits that all the employees need to address their health concerns.
In a recent January 1st effective date case, a group of 20 with an average age of 48.2, their low-end selection cost was $612.44 per person. On average, pricing on lower end plans range from $400 – $600 per person with substantial weight given to average age.
This liability, at a minimum, means that the average small business owner must contribute at least $200 – $300 per employee, per month. If the small business owner has 25 employees, this cost would be $7,500 per month or $90,000 annually. If that cost could be applied elsewhere, it would provide significant dollars that a small business owner could use to enhance employee benefits, raises, loan repayments, and capital investments. This much needed cost opportunity lies within the very design of the Affordable Care Act.
The ACA Opportunity
The Affordable Care Act allows the small business owner a real choice that did not exist prior to the ACA. What’s better is this choice actually benefits the employee as well as the employer, a true win-win scenario. The choice is: Does one keep my group health plan, or do I help my employees search through the 96 potentially subsidized exchange policies to find the plan that better fits the needs of the employee and their family, possibly at lower rates?
So why is this a win-win for both the employer and the employee? In most cases, the low-end group health program is a high out-of-pocket / low-end co-pay or pure high-deductible plan. These plans are chosen due to pure premium affordability for the small business owner and the typical employee, but takes the “one size fits all” approach to insurance which usually fails to meet the true needs of anyone but the perfectly healthy.
So how does the ACA make the small business owner more competitive? The answer is pure and simple: SAVINGS! Because in most cases the mid- to low-wage worker qualifies for Federal Tax Subsidies, which lower the premiums of any exchange health plan offered. Employees could also realize Federal Cost sharing benefits which could lower out-of-pocket costs to as low as $500 per calendar year on certain silver programs! And in other cases the premiums can be as low as $0 with bronze and in some cases silver plans too! What’s more, each employee gets to select the plan that offers the coverage that best suits their needs by offering not only higher end platinum programs, but access to PPO and Open Access plans that group plans have as well.
CASE ANALYSIS: Single, 45 Year old, non-smoker, 33305 zip code (Silver Ranges)
- Low-cost Silver Plan: $67 /month: doctor co-pays, HMO referral, Out-of-Pocket $1,900
- Broader Options Silver Plan: $243 /month: $1000 deductible, PPO with no referral, Out-of-Pocket $1,000
CASE ANALYSIS: Family, 40, 36, 5, & 2 Year Old, non-smokers, 33305 zip code (Silver Ranges)
- Low-cost Silver Plan: $337 /month: doctor co-pays, HMO referral, Out-of-Pocket $5,000 p/p
- Broader Options Silver Plan: $821/month: doctor co-pays, PPO with no referral, Out-of-Pocket $5,000 p/p
Real Employer & Employee Savings
Why is this significant? Using the average costs cited earlier, the small business owner could attain annual savings of at least $90,000! This would be a huge reduction to small business cash flow!
CASE ANALYSIS: 19 Employees, Bio Research Firm
Company’s decision was to cancel the group health insurance and save the $5700 per month. Each person that obtained insurance got a $150 per month raise, 100% Employer paid Dental, Vision, and Long Term Disability and Access to Supplemental Insurances at Pre-Taxing Rates. The Employer received a net savings close to $115 per month per employee with overall better benefits and access to more competitive health insurance at cheaper rates for the vast majority.
CASE ANALYSIS: 32 Employees, Plumbing Company
Company’s decision was to cancel the group health plans and save the $4800 per month. Each person that obtained insurance got a raise, access to a partially subsidized dental, vision, and hospital gap program where there was none before this time. The employer ended up saving on average $84 per employee ($32,256 annually) and used the savings to pay off debts to their vehicles financing, and other longer term liabilities which allowed them to lower their per hour cost which in turn was passed to the consumer and allowed a more aggressive competitiveness in future larger projects which the company has obtained and increased their employee base.
CASE ANALYSIS: 8 Employees, a Gym Facility
Company’s decision was to cancel the group health plan and save the $3,600 per month. Each person received a raise to offset their health premium, and got fully subsidized dental, vision, and hospital gap programs. The employer save $225 per month per employee ($21,600 annual savings) post sponsorship of new benefits. Client used the savings in the purchasing of much needed new equipment and larger office space which has allowed them to take on more projects and more revenue.
More Benefits for Less
The realized monthly savings allow the business owner the flexibility of developing a much richer employee benefit structure that was probably too expensive to be considered prior to the ACA. Or, the savings could be used to give raises, invest in much needed new equipment, lower bid costs to compete with larger firms, hire additional employees, or for anything else that the owner may feel is appropriate.
In the majority of cases, this allows the employee to get the insurance they need at a more affordable price with more reasonable out-of-pocket costs. However, if an employee is eligible for a group health plan, they lose eligibility for themselves in Federal assistance programs like the subsidy and cost sharing. So there is actually an advantage to the employee if the group health plan was not in place!
If you are a small business owner with group health insurance programs, ask for an analysis from your broker or myself to determine the potential savings for your company!