Health Insurance: Balancing Benefits

Healthcare coverage requirements on small businesses is a hot topic, no less so with the recent extension on the start date for employers to provide health insurance to their employees. For some, health insurance is an unwelcome expense that cuts into company profits. For others, it’s an investment in company productivity.

And in some cases, through changes that have followed in the wake of the Patient Protection and Affordable Care Act (known simply as the Affordable Care Act, or colloquially as Obamacare), it’s enabled a welcome opportunity.

“As of February first — as soon as it was available — we got coverage for all 13 of our employees,” says Lynne King Smith, CEO of Mesa-based ticketing company TicketForce, explaining that health insurance had previously been too expensive. In the 11 years she and her husband had owned the business, in fact, finding insurance just for themselves had been expensive and difficult. And not being able to afford to offer insurance to employees, she feels, made it difficult to recruit employees. “I felt like we were being punished for being a small employer, yet we — small businesses — are the backbone of the economy.”

The insurance Smith has now taken out for the company costs $4,000 per month, and the company pays half. Comparing the $2,000 per month for coverage for everyone in the company with the $1,200-$1,500 per month she had been paying for her family alone, Smith says, “We happily take on the expense to attract employees and make it a better place to work.”

Additionally, as a business with fewer than 25 employees, TicketForce is able to take advantage of the small business health care tax credit. Phased-in gradually from the initial rate of 25 percent, it reached the maximum this year: up to 50 percent of what the company pays in health insurance premiums, using a formula based on the average earnings of the employees and the level of the company’s contribution. Says Alan Leafman, president of Mesa-based Health Insurance Express, Inc., “This puts employee benefits in the reach of many more, particularly smaller, employers.”

TicketForce offers health insurance to its employees only — not to their families. The advantage to the business is obvious, but employees may well find it benefits them as well. This is because, explains Leafman, employers subsidize their employees’ health insurance but are not required to subsidize health insurance for their employees’ dependants — and those dependents may qualify for a subsidy through the government health exchange, but only if they do not have affordable health insurance offered to them elsewhere.

Prior to PPACA’s mandate to insurance companies to ignore pre-existing conditions in setting premiums, employers faced the choice of offering potentially expensive dependant coverage they couldn’t afford to subsidize or casting employees’ dependants into the private marketplace where they would “risk rejection or very, very high premiums,” Leafman says. Including an option for employees to cover their dependants through the company’s policy became an important element for many. “But today, they can offer coverage only to their employees, and put the dependants into the marketplace — and if the family’s household income merits it, they can get subsidization.” While the health insurance offered through the employer must meet the requirement to be “affordable,” a subsidized policy through the health exchange may cost the family less than one offered by the employer for which the family had to pay the full amount.

The best plan for a family — the one that will give it the most value — depends on how it consumes healthcare. This involves such factors as routine check-ups, anticipation of need for medical procedures, and whether prescriptions would be filled with generic or brand-name medicines. And even existing relationships with clinics or physicians. “We can steer them toward plans that include them,” Leafman says, observing there are more than 100 different plans available. “Even for small businesses, many carriers will offer two to three plans,” he says, relating, “Lynne was pleasantly surprised at how affordable it was to offer her employees a choice of three plans.”