Health Insurance Seminar by John Klimchak - Part 4

In addition to the individual coverage to the individual exchange you have the S.H.O.P which is small health options for small businesses. So in addition to individual coverage a small business wanted to get through it get their health insurance through the exchange they're able to do so.

What is the definition of a small business?

Under 50 FTE right?

Correct.

Fifty?

Well it's FTE it's not just 50 employees.

But that's still quite like, it's not like small, like less than 10.

I think it's a lot.

What is this S.H.O.P.?

Small health insurance office.

But what kind of coverage do they offer?

That's a very good question. So basically the shop offers the basically same as individual coverage however under the small employer umbrella each employee can choose any plan that they want that's offered under the exchange.

So if one person, now under the exchange, you have different carriers you have Health First you have Blue Cross, Blue Shield you have Oxford but with that being said it's very important to understand that the insurance companies did not want the Affordable Care Act really to come through.

And what they did, as a result of being forced to provide health insurance through these exchanges, they created very thin networks of doctors. So if you take a look at the network of doctors that's being offered through the healthcare exchange versus the health care that is being provide in under the small group option they're apples and oranges.

So while a person can go and get health insurance through the exchange if they're looking for a broader network of doctors they're gonna be better off getting it outside of the exchange going directly to an insurance company it's just, just is

You talking about small groups?

Yeah

Now one with a dollar small group on the exchange, you would do that direct or would you incorporate.

Yes, direct.

Now while if you do that directly honestly we don't the exchange doesn't incentivize brokers to do it, that's why they don't do it, it's just a fact of life but if a small business wants to go do it themselves, they can, and they may be actually eligible for premium tax credit if they do do it.

If they have less than 25 full time employees and the average earnings of the employees is less than $62,000 by going to the exchange they can get a up to a 50% tax credit for private companies and if it's a not for profit they can get a 35% tax credit or for the premiums.

So I mean there's an incentive to go there but the brokers aren't gonna direct you there okay then the question becomes okay do you qualify based upon the average salaries of your employees is your average salary 65,000 or higher. So if you have higher earn it's not really gonna make a lot of sense.

The reason employers and this is no new news I don't think to anybody here, we're an employer based we just went over that we're an employer based system, the burden is being put on the employers and really the burden is being put on the employers that need to attract and retain employees.

If you've got an a business that really the employees are interchangeable and there's no reason really to retain them that long low skilled work level or something like that if you're less than 50 employees you really don't have to provide benefits because there is access to care through the individual exchange the only reason you can provide benefits is because you want to attract and retain the employees that's what it's all about the cost of training.

How much does it cost to train somebody?

Significant and to keep them. That's the biggest thing.

That's exactly right. So, getting back to the definition of a small group to your point in New York the definition of a small group is from 2 to 100 full time equivalent employees.

2 to 100 no?

2 to 100 in New York

Now what that also means is this, used to hear many years ago, probably about 4 or five years ago used to have husband and wife groups qualify as a small group a husband and wife group does not qualify as a small group anymore.

Personally and this is my own personal belief sharing that with you right now, might not be right you don't have to agree with it but I'm of the belief that the insurance CEOs belong to the same country club and I believe they get together once a year you say okay you know you captured market share you know what you do a modest increase you know we're gonna come on a little bit lower to see if we can capture our market share so everybody can eat at the table that's what I believe.

That's why it's interesting when you take a look at a small group race from carrier to carrier there's really not that much of a difference. Getting back to to the definition of a small group 2 to 100 full time equivalent right so what that means husband and wife plans are a no go because what the insurance companies decided to come up with in order to be a qualified ERISA plan you have to at least have one W-2 employee.

So now it's not unusual if you have a family business maybe the spouse isn't gonna be covered as an employee or because you're not gonna qualify so maybe you'll have an adult dependent child, adult child put on payroll now you're gonna qualify as a small group okay but you need that other individual that non spouse to be on the plan not be over the plan, to be on the plan to qualify for the small group platform.

Even if the husband and wife both get a W-2 from the business?

Correct, we need somebody else. Now that goes up to full time equivalent employees so we know the Affordable Care Act came into being that's a whole different other set of requirements that has to do with providing benefits that are deemed affordable to the employees so it gets a little tricky or confusing in New York because we have one definition of a small group going up to 100 full time equivalent employees.

But the federal government says that listen if you're a group that has 50 or more full time equivalent employees then you have to provide benefits that are deemed affordable to the employers.

Maybe the employees and not have to provide fill out them apart time, it all comes back to the FTE formula.

That's exactly right so now with that being said, well we're gonna talk about that a little bit, the definition for a 50 or more of a full time employee is a person working 30 hours or more a week that's the definition of full time employee.

So when you're taking a look at the definition of a small group that's still gonna use that 30 hours as a full timer however since it's full time equivalent what you have to do is add up all of the part time hours divide by 30 that will give you a full time equivalent so if you've got hypothetically I don't know just choose a random number, 50 employees working 30 hours a week more got you 50 full timers there and then you had you add up a bunch of hours and maybe you have another hundred employees and you add up all of those hours and you divide by thirty that might come up to 20 employees or 25.

So technically speaking while you might have over 100 employees total you might have 150 employees total.

You got to be 75 employees.

Exactly which will qualify you for small group rates in New York but what you have to do is if you're at 50 or more then you have to provide the benefits that are deemed affordable which in 2025 means you can't charge employees not more than 9.02% of the W-2 wages for the cost of care that's what you can charge.

And then the cost of care that's for a 60% actuarial value plan basically a bronze plan a high deductible plan so with that said I'm gonna give you some examples when the Affordable Care Act was passed we had a lot of I'm gonna say fast food a lot of low wagers, manufacturers a lot of low wagers these guys the owners they're saying Johnny The Affordable Care Act is gonna bankrupt us they're gonna kill us because when we take a look when we're getting the cost the cost of healthcare is through the roof but the key here is this.

The employer's responsibility is to provide the coverage doesn't mean the employees are gonna have to take it they have to provide the coverage so if they're providing the coverage that meets the 60% actuarial value which is basically a bronze plan a small group you have you know or the small group you have metallic tears which again was brought on by the Affordable Care Act you have bronze, silver, gold and they brought in platinum.

So, a bronze plan is gonna be the lowest cost plan gonna be the cheapest in premium from premium perspective but it's gonna have the highest out of pocket when you use it not the highest deductible so a bronze plan might have a 5, 6, 7,000 dollar deductible that bronze plan does meet the 60% actuarial value in the eyes of the IRS is providing affordable coverage.

So the 9% only relates to that 60% I'll call it 5,000 dollar deductible plan but if you're talking to somebody that's working in fast food that's making minimum wage, for the manufacturer that is making minimum wage and you're gonna ask them to pay 9% of their W-2 wage to the cost of care for a 5,000 dollar deductible plan to this person that's like having no insurance at all.