How Will Obamacare Affect Your Dealership?4 Jan, 2014 By: Jim Kahrs, Prosperity Plus
You can’t turn on the television or radio these days without hearing about Obamacare. Depending on who you’re listening to it is either the best thing to happen to the United States or the next step in our demise. With all of the rhetoric floating around it is difficult to get straight answers as to what Obamacare is and what its true impact will be for you and/your employees. The goal of this article is to provide some basic information and insight to help you navigate the murky healthcare waters in the coming months.
In 2010 the Affordable Care Act, more commonly known as Obamacare, was signed into law. The law states two major goals; to provide health insurance for millions of uninsured Americans and to improve healthcare for those who already have it. The law does not provide or sell health insurance; it simply provides a marketplace for the purchase of insurance and dictates some of the health insurance system structure. Per the law, all Americans living in the United States must have health insurance by Jan. 1, 2014 or face penalties/fines. The law provides new rules for private insurers (insurance companies), public insurers (Medicare and Medicaid) and American citizens. The law also provides for financial assistance based on meeting certain requirements. Another component of the law calls for new health benefit reporting in “plain English.”
Under the law insurance costs are based on location, family size, age and smoking status. Pre-existing conditions cannot be grounds for refusing coverage nor a factor in the pricing of health insurance plans. Coverage may be obtained through an employer, through the government (i.e. Medicare, Medicaid) or as an individual. A federal marketplace has been set up for the purchase of insurance by individuals and small businesses. This marketplace is the website you’ve heard so much about in the news. At the time of writing, the small business section of the marketplace was not up and running yet. Some states (16 at the time of writing) have opted to create their own state run marketplaces.
Four possible levels of coverage exist: Platinum, Gold, Silver and Bronze. Premiums, deductibles, co-payments and co-insurance vary from one level to another. The target is for Bronze plans to cover approximately 60% of the costs while the insured covers 40%, Silver plans are 70% / 30%, Gold plans are 80% / 20% and Platinum plans are 90% / 10%. The actual percentages will vary but these are the targets based on actuarial cost estimates.
Staff based on FTE's...what does this mean?
So now that we’ve covered the basics of the law how will it impact your dealership? The first thing to understand is that the law applies differently to businesses that have 50 or more full-time equivalent employees (FTEs) than to those with 49 or fewer FTEs. Companies with 50 or more FTEs will have to offer health insurance to their employees by January 2015. The coverage must also meet affordability standards. Companies not offering insurance or not meeting the affordability standards face significant penalties/fines. The law also requires businesses owners that own more than one business to aggregate the employee counts together for the purpose of meeting the head count requirement. This means that breaking a large company into smaller companies will not allow one to avoid the stricter rules applied to larger entities. You’ve no doubt heard stories in the news about corporate strategies to minimize the impact of the law on their businesses. Some companies have reduced workers to part time to remove the need to provide coverage. Others, like UPS, have said they will drop coverage for spouses who would qualify to get coverage elsewhere.
Small business, those having less than 50 FTEs will not have to offer health insurance to their employees, though many will still offer coverage. I’ve spoken with many dealers across the United States and have gotten a mixed bag of feedback. Some have told me that they intend to drop health insurance altogether. Others have said that they intend to change coverage to cover only the employee and others have said they will be decreasing the amount they pay for the coverage. Those that do offer coverage will have minimum requirements to meet. Plans must now pay for some services that were previously optional such as prescription drugs, maternity care, etc. They will also have to provide for certain preventive care, check up and cancer screening services at no cost. The net result is that plan costs may go up in many cases. This is also why many polices have been cancelled, which is another hot button in the news.
Many dealerships have been faced with policies that are being cancelled and replaced with new polices that meet the requirements. The cost has gone up in most of the cases I’ve seen. Along with the benefit changes employers will now have to modify pay stubs and W-2s to show what the employer and employee contributions are to health insurance. I view this as a positive change for our industry as most employees have no idea how much their insurance really costs. They seem to think that the only cost is their share. They will now see how much is being paid by the employer.
With all of the changes we’re facing it all can seem overwhelming. How do we react? What do we change? What should we be keeping our eye on as this continues to unfold? There are several things to consider. The financial impact undoubtedly weighs most heavily on the minds of most business owners. I would be looking closely at the options available. Compare your current or proposed plan to the plans available on the marketplace. This may be the time to change your policy on what is offered and how premiums are shared. If you’re going to make changes this is the time to do so. The fact that Obamacare is in the news daily supports your argument for the needed or mandated changes. One very important consideration when making plan changes is the network and doctors covered. Before making a change it is best to find out if any employees will have to change doctors and what impact this will have. For someone with health issues this can be a devastating change. I would also consider the recruiting impact that health insurance has. When surveyed, many applicants list health insurance among their top concerns when looking for a job. The new law will help level the playing field and could be a very good thing for small companies. You may be able to offer insurance plans that compete with larger vendors and manufacturers. A good plan may help you attract better candidates.
The one thing we know for sure is that we really don’t know exactly what the future holds. This new law has already encountered significant problems and will certainly encounter more. Unfortunately the idea that all Americans will now have affordable health insurance with no negative impact is all but impossible. Keep in mind that the media has been telling your employees that everyone will now have affordable healthcare with much better coverage than they had before. The public at large has bought into the idea that they will have great coverage for less cost. Many are in for a rude awakening. As business owners and executives we know that you can’t offer better benefits for less money and expect it to work. Something has to give. The best thing you can do now is take the time to educate yourself on the new law and its impact on your dealership and keep an eye to the future. Those who confront and deal with the changes head on will come out ahead. Those who bury their head in the sand and hope everything will be okay usually end up having problems. Be proactive and you can navigate this tricky time. As always, if you need help don’t hesitate to call or email.
Jim Kahrs is the Founder and President of Prosperity Plus Management Consulting, Inc. Prosperity Plus works with companies in the office systems industry building revenue and profitability and improving organization structure using the Hubbard® Management System. Jim can be reached at (631) 382-7762 or http://email@example.com