While the Affordable Care Act has become a reality, employers are still struggling to understand their options while providing sufficient, yet affordable health benefits for their workforces.
Small group employers in particular are perplexed. In 2014, some small businesses with fewer than 25 employees are eligible to receive health care tax credits up to 50% if they purchase insurance through the Small Business Health Options Program. However, as of January, not every state or county has signed on with healthcare.gov to offer SHOP, nor do they all have operational websites. As a result, many small firms cannot receive subsidies to help them pay for coverage plans purchased via the state-run marketplaces or the federal exchange.
The good news is that this creates opportunities for benefit professionals to offer clients alternatives in 2014. The following are four trends to keep an eye on this year:
1. Self-funding
Self-funding continues to gain momentum in the small to mid-sized market as a strategy that helps companies avoid adjusted community ratings. Self-funded plans typically offer employers greater plan design flexibility than fully insured plans, while avoiding the state health insurance premium taxes. Additionally, small companies with self-funded plans can access loss and trend data in order to design benefits that meet employee needs and better align with company costs.
2. Employer group waiver plans
Employer group waiver plans (EGWPs, often called Egg Whip) can help companies manage costs while continuing to provide their valuable retiree benefits. In fact, an EGWP has financial benefits that significantly exceed current Retiree Drug Subsidy payments. EGWP+wrap plans allow employers to continue offering existing health benefits with no disruption to retirees while lowering costs and reducing future obligations. With these plans, employers can realize additional cost savings from both the government-contracted 50% manufacturer drug discount program and the reinsurance provided by the federal government for catastrophic care.
3. Private exchanges
As employers realize the advantages of a defined contribution model, private exchanges are becoming an increasingly attractive solution. Employers have offered defined contribution plans to help fund their employees retirement benefits for decades. Now, utilizing defined contributions in a private health care exchange is an innovative strategy to introduce to clients, especially since they are already familiar with the concept, have seen the benefits and know how easily it can be administered.
4. Providers taking risk
In traditional capitation payment systems, both insurance and performance risk was transferred to providers, causing significant financial burden when providers had to care for many sick patients without any increase in their reimbursement. Alternatively, when providers shoulder the financial risk, the scenario plays out very differently. For example, if a procedure is expected to cost $12,000 and it comes in at $10,000, then the provider receives the excess $2,000; if its $15,000, then the provider must cover the extra $3,000. While this new system involves negotiation with insurers and hospitals about charges for certain procedures, it can be highly effective if done correctly.
A brave new world
The benefits market is finally beginning to settle down; however, employers are still feeling some level of uncertainty. This can be a good thing for brokers who are interested in embracing change and offering new insights to their clients. The opportunities to use new tactics exist and can increase your business in 2014.
Fleet is president of AmWINS Group Benefits, a wholesale broker of comprehensive group insurance programs and administrative services.
