Economies of Scale for Small Businesses

ebso-embIn late June, the Department of Labor introduced final rules on Association Health Plans (AHP), which will allow bonafide associations to offer healthcare plans to member companies. While we had hoped for a different approach to regulating these plans, association health plans will be regulated by states as MEWAs.

According to the final rules, an association that wants to establish a healthcare plan must already exist for another purpose. In other words, an association cannot be formed for the exclusive purpose of offering healthcare plans to its members. Another stipulation is that new self-funded association health plans cannot be established until April 1, 2019.

Association Health Plans will be exempt from the federal mandate on essential health benefits, but will remain consistent with popular Obamacare rules such as coverage of pre-existing conditions and bans on lifetime limits.

While reserve requirements will vary from state to state, we expect that these plans will be quite costly to establish and closely monitored by state regulators. Nonetheless, for large associations with significant cash reserves, we expect this option to make it possible for thousands of small businesses to lower their cost of employee health benefits.

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Transitioning small employers to self-funding strategies

This article was published on September 4, 2018 on BenefitsPro, written by Cort Olsen.

Source: BenefitsPro

With premiums constantly on the rise for employers offering fully insured health plans, brokers are searching for ways to convince their small and mid-size clients that switching to self funding can cut costs on their top line items.

Switching to one of these plans means that the employer assumes more risk, with stop-loss insurance providing financial protection against catastrophic claims. They can also pay medical claims as incurred as they would other corporate expenses, or can deposit expected or maximum costs into an account each month.

There are many ways brokers are going about convincing their clients to make the leap, from educating them on the cost of the medical loss ratio, highlighting the financial pressure health care is placing on their business, or just making them feel as uncomfortable as possible by explaining their fully insured payment methods.

Bob Gearhart Jr., partner at benefits brokerage DCW Group in Boardman, Ohio, says explaining the MLR and how it guarantees fully insured premiums will rise is a great starting point when initiating the conversation.

“Benefits is one of the few areas the CFO has not optimized and they are feeling pressure from the CEO to drive earnings to the bottom line,” Gearhart says. “This organizational pressure coupled with health care in the headlines is slowly changing the buyer within the organization.”

Gearhart adds that leading HR professionals recognize this and proactively engage the C-suite in the buying decision.

Robson Baker, employee benefits and HR adviser for Clarus Benefits Group in Houston, Texas, says getting the C-suite and HR through the awareness phase of the conversation is the hardest part.

“The broker needs to educate and bring the pain points to the forefront of their minds,” Baker says. “Then it moves to consideration — which can be led by a strategic CFO and compassionate HR department.”

Framing health care cost as a financial decision allows the broker to approach the CFO first and then bring the self funding plan down to HR and out to the other employees. Continue reading

Why brokers should explore level-funded plans for small group clients

The article below is from benefitsPro.com, written by Michael Levin on April 18, 2017.

Now that the American Health Care Act has failed to advance, small businesses, and the brokers who serve them, are looking for ways to manage health care costs within the status quo of the Affordable Care Act (ACA).

As it did with individuals, the ACA community rating methodology benefited some while burdening others. The community rating methodology spreads the costs associated with the differing risk of group (or individual) profiles over the entire risk pool. In the case of small groups, older and/or sicker groups benefited from lower rates while younger and/or healthier groups pay more. Those small groups for which this “peanut-buttered” risk solution has resulted in increases to their health insurance may want to look at level-funded plans, an alternative to fully-insured plans.

But what if the group has a really bad year? In a bad year, the stop-loss kicks in to protect the employer.  Again, the entire concept of the level-funded plan is that the employer never has to pay more than the level monthly amount.  But as an underwritten plan, it is reasonable to expect an increase — perhaps even an untenable increase — in the level-funded plan.  Here is where it really gets interesting.  Today, in such a situation, the group can simply revert back to a community-rated ACA plan.  Here, small groups have an advantage that large groups do not: they can revert back to a non-underwritten plan; one that is likely to be to their financial benefit.

So, for small groups, the question is why not explore a level-funded plan?  With savings of up to 30 percent, protection against extraordinary costs, and the ability to fall back on an ACA plan, there is very little reason not to do so.

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Paid Leave Bills Advance

One of the biggest concerns of small business owners continues to be the paid and unpaid leave bills passing out of committee. In the Senate, the Healthy Workplace Act S.B. 2147 would require all employers to provide up to 7 paid sick days each year. The House passed H.B. 3297, creating the Employee Paid Health Care Time Act, requiring any employer of one or more to provide paid healthcare time at a rate of one hour for every 22 hours worked for an employer of 50 or more and one hour for every 40 hours worked for employers with fewer than 50 employees.

The Federal Government isn’t the only governmental body pushing paid leave. Several states and even the City of Chicago are considering paid leave for a variety of hardships, from bereavement to bone marrow and organ donations. A 2015 survey by NFIB shows that the vast majority of small businesses already offer some type of paid leave, with many offering up to 2 weeks per year.

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