Guest Post about the impact of health care reform on a Texas-based small business, Software Advice, and how the CEO, Don Fornes, plans to keep providing quality benefits while controlling costs.
Software Advice CEO Don Fornes recently learned how the Affordable Care Act (ACA) will impact his relatively small business and decided to share his thoughts on how he plans to keep providing quality benefits while controlling costs. Even though the employer mandate for large groups has been delayed, 2014 is still the year the majority of the ACA’s provisions go into effect – and they are more significant than he initially realized.
The bottom line: Our business is facing price increases of anywhere from six percent to 40 percent per employee next year. There are a number of reasons why we’re facing such uncertainty and here are some things for other small businesses to consider:
- Health insurance pricing is changing dramatically. With the ACA comes a shift toward “community rating,” which means insurance carriers will only be able to price coverage for employees of small groups based on four factors: age, gender, tobacco use and ZIP code. In other words, if you’re a small group, other employee populations in your area will affect your insurance rates.
- The ACA’s expanded coverage requirements. Health care reform brings broader requirements on what an employer’s health care plan must cover. For example, starting in 2014, small groups’ coverage must provide for essential health benefits, and it is subject to maximum deductible and out-of-pocket limits. In 2015, the “pay or play” rule for large groups goes into effect. Their plans must cover a minimum value of 60 percent, and employee contributions are capped at 9.5 percent of their income.
- Is your business a large group or a small group? Under current Texas law, a small group is one with 2-50 employees. However, pending legislation (Texas State Senate Bill 85) could change the definition to 2-100, if passed.
Whether we are classified as a large group or a small group is, primarily, what will determine how much our costs will increase in 2014. And we just hired our 55th employee. One thing we will do is push our renewal date out to December 2013, so that our new plan won’t take effect until January 2014. We are also considering switching to a self-funded insurance plan.