All cards are on the proverbial table as financial advisers struggle to figure out how to implement looming changes to health insurance coverage for their employees, as well as their clients.
Individual enrollment in health insurance exchanges, which states and the Department of Health and Human Services are working to establish, is expected to begin in October, with coverage taking effect in January.
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Small business owners are unsure about what they'll do.
“When we meet with employers, we have a lot of conversations about the mandate — what it would mean if they changed the way they provide health care to their workers,” said Jon Greif, vice president of insurance and a financial adviser at PSA Insurance and Financial Services.
“As much as we talk about sending workers to the exchange, nobody can make that decision until the third quarter,” he added. “A whole lot of it is still up in the air.”
The Patient Protection and Affordable Care Act of 2010 mandates health care coverage for all individuals. Businesses with fewer than 25 workers that still provide health insurance can qualify for a tax credit on the insurance premium of up to 35%. That credit will rise to 50% next year, helping to cut down the cost of providing insurance coverage.
Employers with 50 or more employees who work at least 30 hours a week could be subject to a fee if the employer doesn't offer health insurance that meets minimum essential coverage requirements. The fee also could apply if the employer provides coverage but it's not affordable or fails to provide minimum value.
The pending changes are leading many financial advisers to rethink their insurance arrangements. Though employee counts tend to fall below the 50-person threshold for advisers running their own firms, some independent advisers still provide health care coverage as part of a competitive benefits package.
Carolyn McClanahan, an adviser at Life Planning Partners Inc., said she will evaluate the role the exchanges can play as a way to cover her employees. Right now, the firm pays fully for its workers' health insurance. Small plans require some health underwriting, which can affect premiums if some of the workers have health issues.
“We want to look at what's going to be cheaper,” Ms. McClanahan said. “When the exchange opens, we'll look at whether we should continue to provide group coverage for the business, or should [employees] buy their own coverage and we'll reimburse them.”
The cost of providing the insurance is forcing Rob Siegmann, chief operating officer and an adviser at Financial Management Group Inc., to reconsider his coverage. The firm has 12 employees and pays a monthly premium of $7,500 for a high deductible health plan with a health savings account, to which the firm contributes. The independent shop is looking for a way to reduce its health care costs, perhaps by asking employees to share the costs and scaling back deposits into workers' HSAs.
“Since Day One, we've paid 100% of the insurance premiums, and we're generous with HSA deposits,” Mr. Siegmann said. “But we've been talking with our peers, and we're not out of line if we ask for 20% cost-sharing from the employees. We feel that providing top-notch benefits keeps people here, but that's an unsustainable path as premiums go up.”
Advisers are also working to help clients figure out their own arrangements.
Some of Mr. Greif's clients are struggling with the health care reform act because they'll now have to provide coverage to workers who were otherwise ineligible for benefits. For instance, a landscape contracting firm has a number of seasonal employees who will now need to be covered.
“The cost of excluding them, by the time you adjust for taxes and penalties, is in close proximity to the cost of providing a new standard benefit,” Mr. Greif said.
In other situations, employers are uncertain enough that they are considering taking the risk of having the worker shop for coverage on the public exchanges, he added. Some employers are looking at even-more drastic actions.
“We have several clients who have just over 50 employees who are looking to drop their employee count,” said Rick Kahler, president of Kahler Financial Group Inc.