Know Your Health Insurance Options
Should your non-for-profit organization SHOP, Drop, Roll or Self-insure?
You’ve got a lot on your plate. Running your organization. Managing your board of directors. Carrying out your organization’s mission. And if that wasn’t enough, now the Affordable Care Act (ACA) has shined a bright light on another issue – how you offer health insurance to your organization’s employees. Under the ACA (a.k.a. Obamacare), depending on the size of your employee pool, you may be required to offer your employees health insurance or face some hefty penalties. But don’t despair; Obamacare has also created some new opportunities for you regardless of how many employees you might have.
Shop, Drop, Roll or Self-insure?
Ever heard of that popular saying, “Stop, Drop and Roll?” This is what we were taught in case a piece of our clothing or hair caught on fire. This same clever saying can (with a few modifications) be used to instruct us as to our options under Obamacare with respect to providing health benefits to our employees. So how exactly does this apply? Read on!
SHOP – Small Business Health Options Program
If your organization employs fewer than 50 employees (50 is the current Ohio number, its 100 in some states), the Small Business Health Options Program (SHOP) might be an option for you. This is the business portal to the insurance exchanges. In a few years, Ohio employers with fewer than 100 employees will be able to use it too. This exchange:
- Allows you to get out of higher risk small insurance pools
- Enables you to give out pre-tax payroll deductions to your employees
- Allows you to set the contribution dial from 0 percent to 100 percent
Organizations that meet certain goals also may be entitled to a tax credit. No federal premium subsidies are available for SHOP participants. SHOP is best for businesses that have high group costs, whose employees are not eligible for subsidies, and who would be eligible for the tax credit.
Drop … Health Insurance Coverage
You also have the choice to drop employee coverage and allow your employees to go to the insurance exchange. If you drop coverage and employ 50 or more employees, you will be subject to a shared responsibility penalty. Employees must use after-tax dollars to buy insurance through the exchange; however, health savings accounts can help shelter some of that.
Premium subsidies are allowed, and when they apply, they can be powerful. It’s possible for you and your employees to come out better financially with this option – the same or better coverage, same or lesser costs for employee and employer. You can take some of the savings and look at wage increases to drive further value to your employees. This option is typically best for companies that have a majority of employees that would get premium subsidies or where premiums are being driven up by relatively few group members.
Roll … With Private Insurance Coverage
If you’re ineligible for SHOP and dropping health care coverage isn’t an option for you, could continuing with your private insurance coverage be best for you? You may realize cost savings if the plan quality is diminished (from 70 percent actuarial value to 60 percent, for example) or if the premium share amount is shifted between your employees and you. The “roll” option is probably most useful for organizations who want to spend a little more time deciding what to do or to see how the markets react and how the exchanges work.
You have a fourth option related to health care insurance. You can move toward a self-insured arrangement with a stop-loss policy over the top. This allows you to assume some of the risk an insurance company typically assumes. You may be able to offer far better coverage than the price of normal insurance to participants and to you.
There are several new fees and reporting requirements that you are responsible for with this option. Since you basically function like an insurance company, you have to start abiding by some of the same fees and reporting rules of these companies. This is an increasingly attractive option for organizations with 100 or more employees, and a growing option for organizations with under 50 employees.
Self-insuring offers organizations the ability to choose the level of risk they are willing to take on in return for being able to offer lower premiums.
If you’re unsure of what to do regarding your organization’s health insurance offering, contact your trusted financial advisor. Email Rea & Associates to learn more.