Most businesses with 50 to 99 employees already comply with a new federal law that requires them to provide health insurance to employees by Jan. 1. What business owners may not be prepared for is the amount of paperwork involved.
Louisiana firms and their advisers say the added administrative duties already are the stuff of nightmares.
Because most companies with 50 to 99 employees offer health insurance, estimates are less than 1 percent of U.S. workers actually may gain health insurance under the new federal law.
For those few businesses that don’t already provide coverage, the enrollment period started this weekend for buying health insurance that has to be in place Jan. 1.
Businesses in that mandate that don’t offer health plans face a steep penalty: $2,000 per full-time employee, or a maximum of $138,000.
However, it may be cheaper for some firms to pay the penalty.
In 2014, for example, Louisiana employers’ share of a single employee’s health premiums was about $4,400, according to the Kaiser Family Foundation. For family coverage, employers paid about $10,900.
Meanwhile, businesses also face a steep learning curve with the new regulations, whether the firms offered coverage in the past or not.
That’s partly because the Affordable Care Act was put in place before all the details had been worked out, said Stuart Sonnier, chief financial officer of marketing firm Zehnder. As a result, every quarter, it feels as if small businesses have to deal with updates, some of them pretty significant, and the latest mandate is no different.
“We’ve spent dozens of hours at trainings or on phone calls or podcasts trying to stay current on the changes to the law, so it’s a pretty significant time investment in just trying to understand the law,” Sonnier said.
Zehnder employs about 70 people in three locations: New Orleans, Baton Rouge and Nashville, Tennessee.
Before “Obamacare,” it took a couple of days to choose a health plan, Sonnier said. Now it takes a couple of weeks.
An additional requirement under the employer mandate is complicating matters. This tax year, small businesses must provide new federal tax forms, 1095s, to each employee. The forms must include coverage details for employees and dependents on a monthly basis, including the cost of coverage, whether it was offered and accepted and whether the plan was considered affordable.
Collecting all that information and massaging it into an Affordable Care Act-compliant form can prove complicated. Some employers’ costs have been estimated at $10,000 or more, most of that in the time workers will spend collecting the information.
Sonnier said Zehnder is paying another company to complete those forms because doing it in-house would have been too time-consuming.
Natalie Vicknair, vice president and director of benefit services at Bancorp South Insurance Services, said the company has tried to help clients through face-to-face seminars, webinars and, more recently, small group sessions limited to three or four employers.
In the latter, Bancorp South really digs deep on issues, helping employers see how the calculation methods on affordability apply, she said.
To avoid the penalty, the health plan offered must:
- Provide minimum value, or cover at least 60 percent of allowed costs.
- Be affordable. This means the employee’s share of the premium can’t be more than 9.5 percent of his or her income.
About 835,000 U.S. employees, or 0.75 percent, work for companies around the mandate range but are not offered coverage, according to The Commonwealth Fund, a health care think tank. But most of those people get insurance through another source. Roughly 296,000 employees of midsized firms don’t have coverage.
It’s unclear how many of those people work in Louisiana. The state has 2,301 firms that employ between 50 and 99 people, according to figures from the U.S. Census Bureau and the Small Business Administration.
Kerry Drake, Bancorp South regional president, said most firms in the mandate range already offer coverage.
B. Ronnell Nolan, president and CEO of Health Agents for America, said all of the changes, such as basing the count on full-time equivalents and not just full-time employees, there is going to be lots of confusion for small employers across the United States.
Those companies should get with their insurance agents and/or vendors to get some help, Nolan said. “They shouldn’t be afraid to say they need help.”
Jay Butcher, managing partner of the benefits division at online payroll company Netchex in Mandeville, said it varies by industry.
“If you’re a 50-man engineering firm, there’s a high likelihood that you already have health insurance,” Butcher said.
But lower-wage employers, such as nursing homes and restaurants, have struggled to do so, he said. Some of those firms offered coverage but were unsuccessful.
Insurance carriers typically won’t sell a plan unless half the employees enroll, Butcher said. For a low-wage worker, even $100 a month can place coverage out of reach.
Vicknair said Bancorp South has spent a lot of time this year helping customers with the new tax forms, similar to W-2s, that are now required.
“Employers are really scrambling to get all that information ready,” Vicknair said.
Bancorp South has created a tax tool for clients because many payroll vendors couldn’t keep up with the demand and won’t have software tools in place by January, she said.
Butcher said Netchex began developing its tax form tool years ago, a gamble that is paying off now.
Netchex can print the forms and file them for $4.25 apiece, Butcher said. The big expense for employers is their cost to gather the data.
On the plus side, Netchex benefits/administration software collects the necessary information, and clients who use that tool are in better shape, Butcher said. Others have not, and Netchex is gently nudging them toward compliance. But those firms will have to expend a lot of man-hours on the task.
Still, it could have been worse.
Drake said businesses in the mandate range caught a big break when the Protecting Affordable Coverage for Employees Act passed.
The bipartisan legislation allowed firms to avoid the “community rating” pool, Drake said. Under community rating, every policy in an area is priced the same, regardless of employees’ health.
This would have punished the companies that have instituted wellness programs and gotten employees engaged in their own health, Drake said.
Those companies that have strived to improve their workers’ health would rather have premiums based on their experience, which includes claims history.
Basically, Vicknair said, the only people who wanted to go into the community rating pool were firms who had high claims and premiums.
The Congressional Budget Office estimated that the PACE Act will reduce the deficit by $400 million over 10 years. According to the CBO, the act will lower premiums in the midsize employer market, which will lead to increases in employees’ taxable income.
Follow Ted Griggs on Twitter, @tedgriggsbr.