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The Big Picture: Wait and See


Florida’s small-business owners are making like Scarlett O’Hara. When it comes to preparing for 2014 — when the bulk of the new healthcare law kicks in — they’ll think about it tomorrow.

The year 2014 is when the individual mandate and its penalties take hold along with insurance exchanges. For now, owners and managers are focusing on staying in business. Lacking the HR staff and time of larger companies, they feel they have enough to do absorbing this year’s health insurance rate increases. The sentiment is “we’ll worry about 2014 when it gets here,” says employee benefits adviser Steve Farmer, a senior vice president with Wallace Welch & Willingham in St. Petersburg. It’s not sloth; owners want to see what the courts and a Republican House and more balanced Senate do — and who is president in 2013.

Nonetheless, some provisions take effect this year:


» Kid Coverage
Before: No government mandate on how old an employee’s children can be before coverage expires.

Now: If a plan covers employees’ kids, coverage must be offered up to age 26.

» Ounce of Prevention
Before: Employers and their insurers settled how much of preventive care — checkups and the like — was covered.

Now: Insurance has to cover 100% of certain preventive care.

» Pre-Existing
Before: People with pre-existing conditions could have treatment of that condition excluded from coverage under certain circumstances.

Now: No exclusions for pre-existing conditions up until age 19 and no exclusions over 19 starting in 2014.

» Caps
Before: Companies could cap the maximum benefits they would pay. Typical plans capped employee coverage at $1 million to $5 million lifetime.

Now: Unlimited lifetime maximum for “essential” benefits.

» The Bottom Line
New mandates raised rates 1.5% to 4% this year. “It’s obviously a factor,” says Steven Barber, an employee benefits lawyer and partner with Shutts & Bowen in Tampa, but “if nothing had happened, the costs would have gone up anyway.”

Indeed, the law-related increases came atop a 10% to 13% increase attributed to medical care cost rises. Employers responded with maneuvers such as raising deductibles and out-of-pocket maximums. That kept their cost increases to 6% to 9%.



» Closed Counter
Before: Employees could use their health savings account, flex savings
account or health reimbursement account money to pay for over-the-counter meds.

Now: If workers want to spend their money on over-the-counter purchases, they’ll need a doctor’s prescription.

Implication: Employees and doctors won’t bother with prescriptions for runny noses, so employees will ratchet down the money they park in accounts.

» Class Distinctions
Before: Businesses could put their employees in different “classes” with different coverage for each class. A restaurant company, for instance, might put wait staff in one class and chefs, administrative staff and executives or owners in another.

Now: All are treated equally — or companies will pay significant penalties down the road if they “discriminate” in favor of highly paid employees. That raises concerns that some companies may drop coverage altogether rather than absorb the cost of adding dozens of employees, says Robert Pariseau, president of West Florida operations in Tampa for benefits company AGIS.

Exception: Companies can grandfather their existing plans — and avoid the penalties — provided they don’t make substantive changes to the plans such as increasing the share of the premium employees pay for coverage by more than 5%. That rule against major changes could force employers to give up grandfather status rather than absorb rising insurance costs. How many companies will seek or maintain grandfather status is unclear. The rules aren’t finished and the size of the penalties won’t be announced until the middle or later part of this year, giving companies a year to decide what to do. “Penalties could be huge,” Barber says. Some companies, if they can’t offer key talent a better plan or some healthcare perk, instead pay bonuses so high-value employees can obtain the coverage they want on their own. “They’re having to think outside the box to maintain their competitive advantage in recruiting talent,” Farmer says.

» Care Standards
New: Small-business insurers must pay out 80 cents of every premium dollar for patient care. Insurers of larger employers have to pay out 85%.

Implication: Insurers will see margins pressured and so may cut back on broker commissioners, administrative costs or services to businesses and their employees. “I don’t see how the service gets better if they have to cut the administrative costs, maybe drastically,” Pariseau says. “It’s a low-margin business anyway.”

» Tax Credit
New: A tax credit for small companies of up to 35% of their premium cost. “It’s a good deal. It’s better than a deduction,” Barber says.