Pay Raises v. Health Insurance

Another update from the HR jungle….

Pete has a small company with 12 employees, many of whom are also related to him. Running a business with lots of family is not easy. (Who knew that Aunt Martha’s feud with Uncle Les would still be an issue after 50 years?) Pete figures the best way to keep everyone happy is to offer good pay and benefits.

One of the benefits he’s always wanted to offer is a group health plan. Pete gave up on a group plan for employees after his nephew had surgery and the rates on the group plan shot through the roof. Back when employees were risk-rated based on health factors, his nephew and a couple of other less healthy employees guaranteed that the premium increased dramatically each year.

Pete knows that under the Affordable Care Act (ACA or Obamacare) small group plans with less than 50 employees are no longer risk-rated. Instead, the premium is based on the age of each participant, geographic location, family size (number of individuals covered), and tobacco use. So Pete decides to ask his insurance agent for a quote on a group health plan for his employees.

Pete gets sticker shock again when he sees the amount of the premium. He knows that he simply can’t afford to offer a group health plan. Still, he wants to do something for his employees.

What options are available to Pete?

1. He can tell employees that no pay raises will be given this year so that he can offer a group health plan.
2. He can go ahead with his plan to give pay raises and let his employees buy individual health policies. He hopes some will qualify for the subsidies offered by the Healthcare Exchange (a/k/a Marketplace).
3. He can give each employee a set amount of money, in lieu of a pay raise, that would cover employee-only health insurance on a low cost bronze plan (bought via the Exchange or directly from the insurer).

Is your company struggling to understand how the ACA will affect the employee group health plan? Corporate Compliance Risk Advisor can help you grasp the basics of the ACA and how it affects an employer of your company’s size.

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