2014 – Mandates, Exchanges and Executive Carve-Outs
Employers have come to me for years asking if they can write a health insurance plan for the Key Employees within their company and exclude the rank and file. Over the past 20 years there has been as many ways to accomplish that goal as there have been laws passed to prevent it all together. Therefore, employers that can still afford coverage, continue to offer reduced benefits to all employees and throw in ancillary products as good faith gesture.
Intrusion of government plans have continued to increase the price of group health insurance by eroding the participation. Healthy Families and expanded Medicaid opportunities drain these employer pools of the healthy young premium payers leaving the higher risk behind to push premium higher. The implementation of ObamaCare over the next few years is the Gorilla beating on the backs of my employer clients. The employer mandate and penalties are sending company planners running into the hills looking for cover.
Health Insurance agents desperate to keep agency commissions up are pushing voluntary benefits in hopes of staying in business when their base medical commissions erode or change to a direct-fee basis. There is nothing wrong with voluntary benefits if the employees can afford those extras in this economic environment. However, I want my clients and potential clients to understand that we have to work with what it given to us and there may be a workable and affordable solution to the future of their benefits.
The employer mandate has many facets but I would like to focus on just one here today. There is a penalty that affects employers who offer benefits but whose employee contributions exceed 9.5% of an employee’s adjusted gross income (AGI). This rule applies to employees that fall below 400% of the Federal Poverty Level (FPL). The penalty is $3,000 for every qualified employee that goes to the Exchange for coverage. The exchange will offer those low to mid income employee’s plans with highly subsidized premiums. If it benefits the employer to have the employee go to the Exchange, why not push them there?
Why not design a plan of benefits designed to attract those Key Employees and charge a premium that intentionally blows the mandate limit of 9.5% AGI at an income level of your choice? In the end, these employees receive low cost subsidized coverage of THEIR choice from the exchange and your key employees enjoy the plan that will keep them with the company. Finally, a management carve out plan built to suit!
Of course, all employees are important for any company to succeed. Those low cost voluntary plans currently on the market could easily become either partially or fully subsidized by the employer for a great set of benefits that every employee to hang their hat on. Ancillary benefits with a great interactive Wellness Program leads to healthier happier more productive employees.
Will this work for all companies? Maybe not this exact example, but as well informed educated agents we are here to explore the many ways this new law can be screwed together to make the best of the whatever survives the upcoming HHS regulation or Supreme Court decisions. Coming up with the perfect plan that will avoid the 2018 Cadillac tax and conforming to new market participation requirements will need to be properly finessed.
Large employers planning ahead should be looking for the right agents for the planning to be done. Slick marketing and new agents aren’t going to have the institutional knowledge to understand how the road ahead is going to change.
Paula L. Wilson, RHU, REBC
Paula L. Wilson, Inc.
A Professional Benefits agency since 1986