Tuesday, December 03, 2013

Biggest Loser?

My case is not unique. I am a small employer with two employees. Recently I took advantage of the opportunity to early renew. This option allows my plan to remain until January 1, 2015 at which time it will no longer be available. Current rates for my group are around $1800 per month. I believe in what I sell and the value proposition it brings for both my family and my employee so I pay 100% of the premiums. However, because of the Patient Protection and Affordable Care Act I will be forced to reevaluate this position next year.

The plan offered is a local HMO with benefits that are far better than the minimum essential coverage that HHS defines as “quality”. A brief summary of the benefits include a $300 deductible, $10 copays for PCP visits, prescription card with $8 generics and $25 formulary drugs, and a worst case scenario (OPM) of $3000 per person. I don’t know of anyone who wouldn’t want to receive a benefit like this at no cost to them. But I can’t offer it next year.
The actuarial value of the plan is 86.9%. This is outside of the insanely restrictive “metal tiers” so next year I will lose my plan. In 2014 small employer plans must fall within a narrow band of actuarial values. They are 90%, 80%, 70%, and 60% with a deviation of +/-2%. At my current level it leaves me with a choice to either offer a better benefit or reduce the benefit regardless of cost.
While losing the plan is disappointing, that is the least of my concerns. The insurer has also informed us that I should expect a significant (said over 40%) increase in my premiums next year. This is due directly to community rating. We are being penalized because we are such a healthy group. This doesn’t include the new taxes that take effect starting January 1st. That will increase my premiums by $887 more in 2014.
I can’t absorb a hit of close to $10,000 in additional cost without some sacrifice. So what will it be? Drop my plan? Can I pass the cost on to my employee? How about take a pay cut? Maybe I shouldn’t give a raise? Does it make sense to eliminate a retirement benefit? Perhaps I can lower my overhead?
Whatever the outcome, it won’t be good. One thing is certain; I owe it all to Obamacare.
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