Health Insurance for Business Owners under ACA – Which way to turn?

Health Insurance for Business Owners after ACA – Which way to turn?

ACA – Obamacare – It’s Really Happening

While business across the USA struggle to access the impact of the ACA laws on their company health plans and their employees, the traditional pool of people to help them figure it all out is going away. Many employers are now becoming aware of the reality that the November 2012 defeat of Mitt Romney all but guaranteed that the ACA is here to stay. Business owners who had deferred planning on their health insurance options are now under the gun to understand their options for themselves and their employees. The implementation schedule for the ACA is already underway and for business owners and managers, important compliance issues and decisions must be made.

Company Sponsored Health Plans Decisions – More Complex and More Significant
For small and mid-sized businesses the complexity of making decisions about how to handle their health insurance plans or whether to offer one at all, just got much more complicated. For every business there is a unique set of factors that will influence their health insurance plan decision.

  • Meet the legal requirements or pay the fine – What is the best option?
  • What tax credits are available if we continue are plan? (35% in 2013 and 50% in 2014)
  • What plan design and combination of co-pay and deductible is legal, affordable and fits our employees?
  • Should we kill our plan, pay the fine and let our staff go to the individual exchanges being promised? What happens to the employee pretax treatment for premiums if we do that?
  • What about part time employees, should we reduce full time staff to avoid the fines?
  • Should we offer different benefits for different employee groups like managers?
  • How much should we pay towards the premium? For employee only? Family plans?
  • What networks will be available for the carriers that fit our needs?


This is just a start on the complicated analysis required for business owners who want to maintain legal compliance with ACA and still provide and affordable plan for their staff. Get more detail on navigating the ACA.

Calling Your Agent for Guidance – A thing of the Past?

A part of the PPACA (Patient Protection Affordable Care Act) implementation was the requirement that insurance companies spend at least 85% of the total premium revenue back out as payments to medical service providers. This regulation demanded that commissions paid to health insurance agents be included as a part of the maximum 15% remainder for administrative expenses and company profit. It is ironic that most of the health insurance agents in the USA are actually independent agents and or not employees of the health insurance companies, yet their commissions are included in the max 15% requirement. These regulations have the affect of making the insurance company largely an actuarial entity without any financial room left for sales and marketing costs. The exchanges are meant to provide the method for individuals and businesses to shop for their health plans. The end result is that the commission compensation for agents is disappearing at the same time the complexity of business health insurance planning is greatly increasing. Many predict the net result will be that as many as 100,000 life and health agents will leave the industry. Some agencies may move to a fee for service model where business pay for flat fee in exchange for unbiased guidance. Insurance agents have long provided valuable services such as explaining the basics of health insurance, explaining and exploring options that best meet their needs, shopping various companies to find the best deal, handling the enrollment procedures, negotiating the best outcome.

Who Will Help Businesses Now?
The complexity of buying health insurance and placing benefit programs for employers, the administration of those plans, compliance with state and federal laws etc. is far more complicated than clicking a few buttons on an exchange website. For individuals new to insurance the individual exchanges may be adequate, but for companies, they will be challenged to get adequate advice, especially if the best option for an employer is to give employees a raise, pay the penalty and let the employees go to the individual marketplace. In fact for many employers, the decisions may be very complex depending on type of coverage, cost, wages, location and affordability for the entire group; and all groups are unique.

PEOs Add More Value for Their Clients

Somebody will still have to perform these activities for the business health insurance decision makers. Since agents may be fading away, the pay for service model (i.e. a consulting engagement to perform analysis and recommendation) by health advisor may be the marketplace solution. One challenge it presents is that many of the employer health decisions are not static. It is one thing to assess the options and implement the plan, however it is another thing to maintain it. Many activities for maintaining a group health plan require ongoing HR and payroll service actions. Since many pretax treatment options remain for employee premiums, the natural fit for payroll services and insurance premiums will remain and other items like life events and adds and drops will not go away. The service model currently offered by PEOs will become even more attractive as the complexity of regulatory compliance increases and the costs to sustain that compliance increase rises as well.

Getting Guidance and Ongoing Support – PEOs are Ready

Many are predicting that the availability of individual insurance though the government established exchanges will result in many employers simply paying the fines and letting their employees find their own insurance. This may or may not be a wise business and financial decision. Time will tell. For those companies who believe that a robust benefit plan is critical to their ability to attract and keep the best talent, PEOs will continue to offer an efficient delivery platform for small and midsized businesses.

The PEO value proposition for American businesses continues to grow. As compliance and regulations expand, PEOs nationwide stand as their partner to meet those challenges efficiently and professionally. The implementation of ACA provides yet another reason for small and midsized business to engage a Professional Employer Organization. PEOs are dedicated to the success of American businesses.