Small business owners offering health insurance for the first time can experience a myriad of issues. We find ourselves constantly reminding our clients that a health insurance solution is individualized and there isn’t a simple fix that works for every situation. Some of the more common issues we’ve recently observed include the following.
Taking a small business owner who hasn’t offered health insurance in the past to ACA compliance comes with a hefty price tag. Not only does the employer have to explore all the different options available to them, they’ve got to decide how much they’ll be able to contribute to employee premiums on a monthly basis for the long-term. Are there cuts that need to be made in other areas to cover the cost of offering health insurance? In addition, complying with IRS reporting requirements creates a huge administrative burden. Tracking coverage and cost sharing amounts by employee takes a lot of time.
Some small businesses are having a difficult getting a high enough participation rate to enroll in a group plan. For example, a small business owner may primarily employ younger sales associates who due to their age think they’re invincible and don’t need health insurance or may be already covered under a parent’s insurance. Insurance carriers often have a minimum number of enrollees required to setup a plan, making it difficult for employers to have enough employees willing to participate in the plan to even get the plan setup.
Unfortunately, all health plans are not created equal which makes comparing “apples to apples” very
difficult. For example, competing agents might be selling the exact same plan, but the monthly
premium cost is different due to the commission structure of the individual insurance broker. Small
differences in benefits can cause huge differences in monthly premiums, making it difficult to find the solution that is the best fit.
Self-funded insurance is becoming popular from a cost perspective. Again, comparing plans is very
difficult to do so be careful. Many of our clients who have switched to a self-funded plan in an effort to save on cost have almost inevitably had some sort of major medical event shortly after enrolling. So l though you may feel self-funding is the way to go, take a minute to assess how major medical events under a self-funded plan may affect your small business in the long run.
The Affordable Care Act is extremely complex and a single approach to each situation is not adequate. For specific information on your situation, please contact your CPA at Cook Martin Poulson.