Brokers: Employers are facing benefit challenges in 2016

The upcoming new year will bring some important changes for employers and the health benefit packages they offer — or don’t offer — their employees.

The biggest impact will be on businesses with 51 to 99 workers as they will now be subject to the so-called pay-or-play penalty in the Affordable Care Act.

Arguably just as significant will be a new rule taking those mid-sized employers out of the large group category and placing them under the small group rubric, although the U.S. Congress is working to stop that.

“There is definitely going to be some big differences in terms of cost and in terms of plan designs available,” said Melissa Davies, benefit solutions consultant, Clark & Associates, an insurance broker and consultant in Reno.

And all employers are looking at a new requirement to file forms with the Internal Revenue Service documenting employees’ hours, starting with 2015.

“A lot of employers are very nervous and apprehensive about doing these,” said Davies. “It’s information they probably have through payroll, but it’s just one more IRS form and they have to make sure do it correctly.”

The pay-or-play provision requires employers to offer “affordable” healthcare coverage to employees working 30 hours or more a week or pay a penalty.

Affordable coverage means a company pays for the benefit entirely or the employee contributes to the insurance premium an amount not to exceed 9.5 percent of their wages.

Davies said she has one client that she is running the numbers for to see how much it would cost to pay the penalty rather than comply. But most large employers already offer benefits and for some, such as restaurants and retailers, the work will come in making sure they track workers’ hours to include employees putting in 30 hours or more in their benefit plan.

Congress this week may vote on the PACE — Protecting Affordable Coverage for Employees — Act, according to the Nevada Division of Insurance, which oversees rates in the state.

That bill would retain the current definitions of small and large employers and keep businesses with 51-99 employees in the large group category.

The difference could be significant. The goal is to create a larger pool of small employers in order to reduce insurance costs for all of them. But in the short term it will raise costs for those employers now pushed out of the large group category and into the small because underwriting is handled differently for the two classes.

“We’re seeing anywhere from a 15 to 25 percent increase,” said Davies.

No one knows if the PACE Act will pass so Davies and other brokers have encouraged clients that are being affected to negotiate new insurance contracts before the end of the year even if their plans are not yet up for renewal in order to lock in better rates for the coming year.

The good news is as the dust has settled on the new healthcare law, providers are adjusting to the changes and the market is getting more competitive.

“HMOs and PPOs are expanding coverage and pricing. Last year there were not as many products, and the pricing was higher due to the uncertainty of the Affordable Care Act,” said Tim Holland, benefits consultant with LP Insurance Services Inc. in Reno. “Now it seems to be playing out and competition is growing.”

No new carriers entered the Nevada market, according to the state insurance division, but there are about a dozen providers in each category — individual, small and large.

Rates for 2016 for individual and small group markets, which the division oversees, were recently approved. Rates for small employers will rise an average of 5 percent, according to the division.

Holland said competition is improving in rural areas, which generally pay higher rates based on the division’s geographic rating areas.

“The cost of health insurance for a small group in Storey County, which is in Rating Area 3, is generally less than a small group in Churchill County, which is in Rating Area 4,” said Holland. “While the two businesses are only 50 miles apart, the difference in cost can determine if a small business is going to offer health benefits or not. Hopefully that trend will spread to more carriers so I am able to offer a large selection of pricing and plan designs.”

Another trend Holland sees is telemedicine, which lets a patient in Tonopah, say, see a physician in Las Vegas remotely via the Internet.

It’s more convenient for workers in rural areas, particularly, and saves businesses money because the employee doesn’t need to take a day off work to see a doctor.

Steve Dalinis, president for sales at MFG Benefits LLC in Reno, markets a telemedicine program called Healthiest You, which lets employees call for medical advice and even some prescriptions without seeing a doctor and being charged a co-pay.

“We have a local credit union with about 48 employees. It costs $9 a month and the employer pays for it,” said Dalinis.

Dalinis says another trend are so-called gap plans.

“We just did three of them,” he said. “Say an employer has a plan with a $2,000 deductible. They can take it to $5,000 and decrease costs and provide a gap plan that pays 100 percent of the deductible if the employee goes into the hospital.”

Another popular product, said Dalinis, are flexible spending plans that let employees save part of their earnings before taxes to be spent on allowed medical costs.

Dalinis said everyone expected self-funded insurance plans to become more popular under the ACA, but so far that hasn’t happened, at least not in northern Nevada.

“But we’re definitely going to take a look at self-funded plans for small employers starting Jan. 1,” Dalinis said.