The Problem(s)

Bad Solutions

Cutting Down to 29 Hours

If your business was meant to operate with just part-time employees then you’d have already been using them.  It is also difficult to manage and exposes you to a potential ERISA class action lawsuit.

Staying Grandfathered

A grandfathered plan offers few advantages to a non-grandfathered plans…especially compared to self-funded plans.  It is very easy to lose the status and carriers continuously drop old plans.  Plus, freezing benefit levels for multiple years can be very expensive.

Restructuring

The law was written to look out for “tricks” to get around the provisions.  Companies under common family ownership are aggregated together for purposes of determining true size.

Moving to 1099's

Reclassifying employees as independent contractors opens up enhanced scrutiny from the federal and state governments.

Not Offering Coverage

If you have 50 employees, dropping coverage can be the most expensive mistake you can make.  You would be subject to a potential penalty of $2,000 per full time employee. Even if you have less than 50 employees, dropping coverage will be a shock to your employees and make you less competitive.

Dropping to 49 Employees

You started your business to grow it, not to have the government create a glass ceiling. There are better ways

Good Solutions


Moving to a partially self-funded (also known as a partially self-insured or just self-insured) plan allows an employer to overcome most of the burdensome regulationsSelf insurance plans are exempted from community rated quoting, guaranteed issue / renewal, 80% medical loss ratios, actuarial value “metal” limitations, essential health benefits, and the $2,000 maximum deductible and taxesSelf insurance plans are exempted from the Health Insurance Industry Tax (HIT), Marketplace Insurance Marketplace Tax, Risk Corridor Tax, Risk Adjustment Fee, State Premium Taxes, and potentially the Cadillac Tax. These taxes add up to 8%-50% of the cost of a plan., potentially reducing insurance costs by 40%-80%. Through proper planning, these plans can help employers overcome much of the burden of the employer mandate, especially for industries that can’t afford full insurance for their employees. This allows restaurants and other industries to focus on running their businesses instead of limiting their employees down to 29 hours a week.

How it Works

A self funded plan looks like a traditional “fully insured” plan to the employees. The major difference is that the employer agrees to take some risk in exchange for reduced premium. An employer has choices of risk tolerance ranging from virtually no risk per employee (for smaller companies) all the way to deductibles of several hundred thousand dollars (for very large employers). Typically, the “worst case” cost scenario for an employer is often structured to be comparable to the premium the employer would otherwise pay for a fully insured plan. As an example, if a fully insured plan costs $400 per employee per month, a self funded plan may cost $250 if no employees had any claims, $500 if every employee maxed out their claims, and $350 based on the expected claims estimates.

While these plans have historically been available only to large 100+ person companies, they now can make sense for companies as small as 5 employees. Self-funded plans can either be offered as a one-stop shop package from the insurance carrier (called a carrier-driven or ASO model) or as a build-it-yourself combination of components (called TPA-driven model). The main elements of a self-funded plan include:

    • Third Party Administrator (TPA)
    • Specific insurance carrier (aka spec, specific stop loss, or deductible)
    • The aggregate insurance carrier (aka ag or aggregate stop loss)
    • The provider network
    • Pharmacy Benefit Manager (PBM)
    • Broker or Insurance Consultant (recommended)
    • Wellness Provider (optional)

FAQ’s

      •     What if my employees have catastrophic claims?
        The specific and aggregate deductibles cap out your losses
      •     When do I pay the claims?
                 The employer would pay claims as they occur from a separate bank account. Many carriers offer “level funding” plans where the payments are the same each month, regardless of claims spikes.
      •     What plans can I offer to my employees?
                 Any plans you would offer in a traditional “fully insured” plan plus you have a lot more flexibility for new option.

What can you do?

A good insurance agent or consultant can guide you through compliance & strategy. TAG is a company on the forefront of health care reform and strategic benefits management, time & attendance issues, workers’ compensation, payroll, 401(k) and much more.

Because the Obama Administration is eager to force people into the new system, it is inventing ways to make it harder for people to use free market alternatives. They are currently pressuring states to make it harder for small businesses to use self-funded plans. We are compiling a list of states that are being pressured by DC so you will be able to contact your state legislatures in the future.

Most states are pushing back with laws to protect their citizens against federal overreach. We are supporting Prop 122 – “Checks & Balances” in Arizona. We encourage you to find out what’s happening in your state and support the local efforts to resist the pressure.

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