Get Out Front

Blue Cross Blue Shield of Michigan reform expert advises tackling the ACA now

By James Martinez

Page 48

As the vice president of the Office of National Health Reform for Blue Cross Blue Shield of Michigan, Kirk Roy has a front-row seat as the implementation of the Affordable Care Act (ACA) continues to redefine the landscape of health care. As the reforms are being phased in, crucial information to businesses including costs are yet to be settled. The Detroiter interviewed Roy to discuss how small businesses should be preparing for October 1, when individuals and small businesses can purchase benefits through the new health care exchange.

Roy’s overwhelming message was: Visit your insurance advisor now and learn how your business will be impacted before it negatively impacts your bottom line or employees.

How will ACA affect small businesses and health benefits for their employees?

For small businesses (50 eligible employees) it will change the actual benefits they are required to offer and how the cost-sharing and other factors that make up a health plan are structured. It’s going to change the price of those benefits. There are going to be many new administrative and compliance processes. And then there is the question of ACA giving employers new options as to whether or not they should offer benefits and how they should be offered. Many small employers will have the opportunity to as if they should be doing something differently than offering employer-sponsored benefits.

What should small business owners know?

Know enough to know what questions you’re going to need to answer: 1) Do I know what I’m trying to do as a business? 2) Do I know where benefits fit in with what I need from my employees to make my business function? 3) Given those two things, do I know how many of my people are eligible for subsidies and what would that option means to them compared to what they are getting today? and 4) Are there any other requirements of me that would put me in the spot to pay a penalty?

Answer those questions now, but know that your final decisions will be based on the prices that are not yet set. Know that most people will see the normal fluctuation in their benefits renewal, but know that some will see more volatility as the exchanges are in place.

What is going to happen to health care benefit prices for employers?

It’s hard to give a definitive answer. There are a bunch of competing forces and it depends on the starting points for your business. There are taxes and fees associated with the ACA that are going to drive the price up. Also, the ACA will change what are allowable factors to set rates on businesses for the benefits they provide. The old system would take characteristics of certain businesses and set their rates differently based on a variety of factors. All of those things are going away. You had a situation where some small businesses were getting a surcharge under the old system. Those surcharges will go away and so their rates will go down.

Some businesses that received discounts will lose those, so those prices will go up. We as an industry won’t be able to give those answers until probably the third quarter once more information is available.

Why not wait until those prices are set?

It’s smart to get ahead of the changes, allowing you to be prepared as a business owner, and giving your employees a sense of comfort as to what’s to come.  Business owners should  answer those first couple of questions now to avoid last-minute decision making during what could be a chaotic and confusing time in the marketplace – businesses should make every effort to get as far ahead as possible. It’s a bit of a Catch-22 for small businesses. They don’t want to think about it, but if they engage now, we can’t give them all the answers (due to the impact of the regulations on prices being finalized). But they need to get started. They need to take it in bites.

What are you seeing from employers who might opt not to offer benefits?

We see some employers that look at the wage structure of their workforce, they are very paternalistic and have 10 employees and they are like family. However, in the system they see that their employees can actually get a better plan at a lower cost by getting a plan on the exchanges and getting the federal subsidy, rather than going through their employer. That is a very compelling case for a lot of employers. Their cost will be reduced, they don’t have to pay the penalty, if they are a small business and all or some of their employees can get covered (through the exchanges). It’s a bit risky for employers, because we don’t know yet how the exchanges will work – but everyone is talking about it.

What should employers be aware of with ACA and the impact on their taxes?

When it comes to taxes be aware of what taxes are in your prices. Be aware of tax credits if you are in that fairly small group of (businesses) that may be able to get some money for it. And if you make the decision to stop sponsoring employee benefits, be aware of the impact to your bottom line and the impact to your employees’ bottom line as far as tax impact.

If you’re considering other options, and you’re going to have folks go to exchanges, you need to think about “what is the bottom line impact to my business” and “what is the impact of that decision to my employees?.” “What is the net tax impact if you cut benefits to your employee but increase salary to compensate?”. That’s going to be a conversation that you’re not going to want to be surprised by when your employees come back and say: “Hey, what’s the deal?”

Business owners should  answer those first couple of questions now to avoid last-minute decision making during what could be a chaotic and confusing time in the marketplace — businesses should make every effort to get as far ahead as possible. It’s a bit of a Catch-22 for small businesses. They don’t want to think about it, but if they engage now, we can’t give them all the answers (due to the impact of the regulations on prices being finalized). But they need to get started. They need to take it in bites.

What are you seeing from employers who might opt not to offer benefits?

We see some employers that look at the wage structure of their workforce, they are very paternalistic and have 10 employees and they are like family. However, in the system they see that their employees can actually get a better plan at a lower cost by getting a plan on the exchanges and getting the federal subsidy, rather than going through their employer, which is a very compelling case for a lot of employers. Cost will be reduced, they don’t have to pay the penalty, and given the size of their  business, all or some of their employees may be able to get better coverage through the exchange. It’s a bit risky for employers, because we don’t know yet how the exchanges will work — but this is a popular and continuing point of discussion.

What should employers be aware of with ACA and the impact on their taxes?

When it comes to taxes, be aware of what taxes are in your current prices. Be aware of tax credits if you are in the fairly small group of [businesses] eligible for funding. And if you make the decision to stop sponsoring employee benefits, be aware of the tax impact to both your business and employees’ bottom line.

If you’re considering other options, and you’re going to have employees go to exchanges, you need to think the bottom line impact to the business and what is the impact of that decision to employees? What is the net tax impact if you cut benefits to your employee but increase salary to compensate? That’s going to be a conversation that you’re not going to want to be surprised by when your employees come back and say: “Hey, what’s the deal?”

James Martinez is director of communications for the Detroit Regional Chamber.