Victor McKnight is a principal with EPIC Insurance Brokers & Consultants in Petaluma, where he oversees employee benefits. Mr. McKnight, a North Bay insurance veteran with more16 years experience, has represented both employers and carriers, and has lobbied in both Sacramento and Washington, D.C.
Q: Now that health reform is here to stay, what should companies be planning for and what can they expect, in terms of health care costs and overall impact on their workforces?
Mr. McKnight: If health care reform stays in a format resembling the Affordable Care Act, then companies have a number of areas to focus on with regards to health care reform:
- Will we continue to offer coverage and if so do our plans meet all minimum qualifications?
- Are we offering coverage to all eligible employees and do we have written policies in regards to seasonal employees?
- If we do have seasonal employees that we need to offer coverage, then what will the financial impact be?
- Are we distributing the required notices and disclosures and do we have the required documentation?
- Are we prepared for a Department of Labor audit and the associated fines?
- Have we considered partial self-funding as a way to reduce cost?
- Can our payroll company aggregate benefits costs for my W-2?
- Is our insurance broker able to walk us through these issues, perform a quantitative analysis and provide the proper guidance?
Q: Much has been made of the notion that companies will be incentivized drop employer-sponsored health coverage with the health insurance exchanges coming on line. Is this still a possibility or is it hype? What might incentivize employers to keep health benefits in place, particularly small to mid-sized business?
Mr. McKnight: It is likely in California that a small number of employers will drop coverage but we feel that most employers will continue to offer coverage. Remember, there is currently no mandate to purchase health insurance for your employees and most companies still choose to provide health benefits to their employees. The companies that may drop coverage are those with a majority of lower-compensated employees that will be eligible for subsidies through the exchange.
Premiums paid by employers and employees are currently tax-deductible when purchased by the employer. Employers will be required to pay fines with after-tax dollars, and if they increase wages to compensate employees for dropping group coverage then the wages would be subject to payroll taxes and the income will be taxable to the employees.
We created a sophisticated pay-or-play calculator for employers to determine the financial impact. Even if it makes sense financially to drop coverage, employers will need to weigh the impact on recruiting and retaining quality employees.
Q: If employers do drop their plans, will the exchanges and other elements of health care reform be enough to provide comprehensive health coverage for individuals?
Mr. McKnight: There will be an adequate number of plans from a variety of carriers offered in the exchange. The concern is, will they be able to control costs in the exchange? Individual rates in and out of the exchange are predicted to increase significantly. Unfortunately, the mandate may not be severe enough to drive younger healthier employees to the market to offset those enrolling with pre-existing conditions.
Q: The federal government recently said it would roll out two nationwide health insurance plans in every state, as a means to keep costs down and expand access. Will that plan be effective in containing costs?
Mr. McKnight: Federal plans may have some advantages including the ability to avoid many state mandates that California has enacted. HHS has released very little guidance on how this plan will work.
Q: Does California’s exchange contain adequate, too much or not enough “essential health benefits” in order to be a successful augmentation — or perhaps replacement if companies drop coverage — to the current mix of employer-sponsored coverage and public health programs?
Mr. McKnight: The California exchange will have adequate essential health programs to satisfy the needs of Californians. The concern is whether they will be able to control costs.
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