With the collapse of the Republicans’ plan to repeal and replace Obamacare, employers’ and business owners will probably experience significant premium increases again this year, especially if they are on an ACA plan and have not been grandfathered in. Having said that, it is imperative for employers to recognize that cost shifting these increases to employees through higher payroll deduction, larger deductibles and out-of-pocket costs will no longer work. This is especially true with the tightening of the job market and the improvement of the economy. So the question is, what is the answer to holding health insurance costs to a minimum for employers with 5 to 50 lives?
The answer is the level premium model which is not governed by the ACA State Department of Insurance regulations on a state-to-state basis. The single biggest reason for price differentiation between these level premium plans and the ACA plans lies in the fact that the level premium model is written on the Employee Retirement Income Security Act (ERISA), which governs large self-funded plans for companies like Whole Foods, Home Depot, Costco and more. Therefore, they avoid the Obamacare taxes and regulations that are part of ACA.
Because these plans are medically underwritten, each population is judged on its own demographics and they are not community rated on the 3 to 1 ratio of Obamacare. Employers using level premium plans receive composite rates that simplify employee contribution and the payroll reduction process. The level premium plans can save as much as 30% over the ACA plans. In addition to these cost savings, employers can recoup unused dollars from a claims fund at the end of the policy year.
The level premium model can be a great solution for small employers, allowing them to take advantage of the ERISA platform and the savings it provides, just like the large, national employers do.
If you have any questions on this subject, or would like further information, please feel free to contact us via our website or by phone at 913.385.2224.