With new requirements for employer-sponsored health coverage under the Affordable Care Act about to kick in, some benefit industry insiders predict small business group health insurance will soon be a thing of the past and benefit advisers who want to thrive will need to adapt.
Zane Benefits a vendor of defined contribution health care coverage products for small- to mid-sized employers predicts 60% of small businesses will eliminate group health insurance throughout the next three years in favor of individual health plans funded by defined contribution health care arrangements. The groups analysis is based on a 2014 National Small Business Association survey that found in the next 12 months, 23% of small businesses plan to drop coverage and provide money toward individual health insurance, while another 15% plan to drop coverage altogether.
The benefit companys president Rick Lindquist says the individual market is expected to expand from 30 million insureds in 2012 to more than 150 million insureds by 2025 and benefit advisers who bring new defined contribution and individual health insurance solutions to employers will have the first opportunity to service these 120 million new consumers.
Small employers with fewer than 50 full-time equivalent employees are not subject to the Affordable Care Act employer mandate and, therefore, will not be penalized for discontinuing a health plan and giving their employees money to purchase an individual market plan. However, the IRS this month clarified that employers with 50 or more full-time equivalent employees will not escape taxes and penalties under the ACA if they choose to send their employees to the exchanges and reimburse them with tax-free dollars for premiums in lieu of offering an employee-sponsored health insurance plan.
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When the first open-enrollment period under the ACA kicked off last year, Connie Framberger, president of Framberger Employee Benefits and Insurance Services in San Luis Obispo, Calif., says she saw businesses maneuvering around the health law in several ways, including dropping group benefits altogether or by making their employees part-time and, thus, ineligible for benefits.
In California, she says, the potential demise of group health insurance plans for small businesses, hinges on several things, including several proposed pieces of legislation, such as one bill proposing rate restrictions.
Zane Benefits says in a new white paper that minimum contribution and participation requirements are forcing small businesses to stop offering traditional health insurance plans. Small business health insurance costs are simply not sustainable, the paper says.
Once educated, the benefit firm adds, employees prefer individual health policies to employer-provided plans due to two key advantages:
- Choice: with individual health insurance, employees can choose the coverage and doctors hat best fit their familys needs and budget.
- Portability: Employees keep their health insurance when they leave the company because individual health plans are independent of employment.
Framberger agrees doctor choice will have a huge impact on the future of the group health insurance market. She advises benefit brokers and agents in the field to understand the level of provider coverage on new health insurance plans in their area. Those that do not are doing a disservice to their clients, she adds.
