The biggest question for most businesses in Vermont right now is, “What will health care reform cost for our business?” Right now, that question is unanswered and is producing political wrangling from groups and individuals who want answers before the November 2012 election rather than next January, when last year’s health care reform law requires that the estimated costs be presented to the Legislature. But, stepping outside the storm of uncertainty and politics, there are five real steps a small business can take now to better prepare for the proposed changes in how it will buy health insurance in 2014. During the next several weeks, I will discuss each of these steps in detail. The five steps are:
- Understand what a health insurance exchange is and what it means for your business.
- Understand your current cost trends for providing health insurance.
- Understand the tax credits available to you for purchasing insurance on the exchange.
- Understand the tax credits that are available for individuals and families, as it may affect whether you provide health insurance.
- Understand what Green Mountain Care is now and what it may become in the future.
Step 1: Understand what a health insurance exchange is and what it means for your business.
One way or another, it is likely that a health insurance exchange is coming your way, and you need to know what it is and what it is supposed to do. The federal Affordable Care Act (ACA) requires that all states have a health insurance exchange starting in 2014. A health insurance exchange is a place where individuals and small businesses will shop for and enroll in a health plan that meets their needs; it is a marketplace that will allow for better comparison shopping than that available to insurance purchasers now.
The exchange will be a website, and on it insurance plans will be divided into several categories. Although what the plans will include is still under consideration, the idea is to have a pre-defined set of “essential benefits” which will include at least: ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental health and substance abuse services, including behavioral health treatment; prescription drugs; rehabilitative services and devices; laboratory services; preventive and wellness services and chronic disease management; and pediatric services, including oral and vision care.
All the plans offered on the exchange will provide these essential benefits, but their price will differ based on the “actuarial value” of the plan. “Actuarial value” is defined as the measure of the level of protection a health insurance policy offers by looking at the percentage of health costs that, for an average population, are covered by the health plan, as compared to the percentage of costs that are covered by the insured. This measure is made more understandable by the “metal” levels that have been defined by the ACA: For a platinum plan, an average individual will pay 10% out of pocket for his or her covered benefits and the plan will pay 90%. In a gold plan, the plan will pay 80% of the costs of the benefits and the average consumer will pay 20% out of pocket. In the silver plan, the plan will pay 70% percent of the costs and the consumer 30%. And, if a bronze option is included on the exchange, as Vermont now seems likely to require, the plan will pay 60% of the costs of coverage and the insured consumer will pay 40%. Bronze plans are the controversial “high-deductible” and HSA plans. Obviously, the more the insurance company is on the hook to pay, the more expensive the plan.
To understand what this sort of purchasing arrangement means to you, you should assess how much time your business spends understanding the cost and coverage differences among plans, and then selecting, negotiating, and explaining to your employees each year what their plan will cover and how much it will cost. Many businesses find themselves taking an increasingly large amount of time buying health insurance for their employees. The costs of coverage are going up, premiums are going up, the cost to the employee is going up, and the benefits are usually slimmed down to make coverage more affordable and more palatable. Some employers give up, which at present may cost them competitively.
In Vermont, under a bill that passed the House last week and will now be taken up in the Senate, starting in 2014, all individuals and businesses with 50 employees or fewer must purchase from the exchange. Employers with between 50 and 100 employees will wait until 2016 before joining the pool of businesses and individuals buying on the exchange.
The next post will discuss Step 2: Know your current cost trends for providing insurance.
