Q&A with Victoria Braden: The 2017 Health Insurance Outlook – Advice for Small Businesses

By at 13 October, 2016, 11:19 am

Health Insurance

By Karen Kerrigan-

The numbers are beginning to pour in, and they are not pretty. Many small business owners and self-employed Americans are shocked by their health insurance costs for next year. Plans and choices in the marketplace are disappearing, and many business owners and individual entrepreneurs are in angst about what to do next.

(For example, see recent news stories on reported increases for Colorado, Connecticut, Illinois, New York, Florida, Michigan, and Washington.)

What Can Small Business Owners Do?

Joining us for a Q&A on the current state-of-play for small business owners and to offer some advice is Victoria Braden, President & CEO of Braden Benefits Strategies, Inc. Victoria is a member of SBE Council’s Advisory Council, and has been recognized by the National Association of Health Underwriters (NAHU) for seven years as a top insurance producer in the U.S., and as one of the top 1% of health insurance agents for the last three years. Her firm is headquartered in Suwanee, Georgia. She has testified before Congress on behalf of SBE Council on health insurance issues, and has been critical in helping our team – and small businesses everywhere – understand and navigate the Affordable Care Act (ACA) and its impact on small employers and entrepreneurs.

Victoria recently took time out of her busy schedule during this enrollment period to answer questions about the current state of the health insurance market for small businesses, and to provide some advice on getting through 2017.

Q&A with Victoria Braden

QUESTION: Small business owners are beginning to see the numbers regarding health insurance premiums for next year, and many of those numbers are not pretty. Many are shocked. In general what can both small employers and self-employed people expect in terms of cost if they have not seen estimates yet for this year?

BRADEN: Let’s start with small employers – the amount of increase depends. We are seeing three different trends:

One: Pre-ACA renewals, businesses who have stayed on the same plans who have not made the transition to ACA plans and therefore renewals are being calculated on the businesses specific claims/loss ratio. The increases are dependent on the group’s medical history for the past 12 months. Our agency’s average renewal in Georgia on pre-ACA plans is generally running less than 10%.

Two: Businesses that have transitioned to ACA plans with community rating – this is where we are seeing the HUGE increases. When the law was first being translated I think we all understood the annual increases were to be limited to 10%. Since then we have learned the 10% means just medical trend, not the actual increase in providing coverage. On ACA plans, we are generally seeing increases of 15% or more.

Three: Individual insurance, where the company does not offer group health insurance and employees are purchasing individual policies on or off the Exchange is the area, in my opinion, that has been hit the hardest! BECAUSE many of the health insurance carriers are no longer offering individual policies.

Nationwide, United Healthcare has withdrawn from the individual market. In my state, Georgia, Aetna and Humana are limiting their product to 1 individual policy, a very high deductible only plan with a very narrow network and limited prescription drug formulary. Our only viable options for 2017 are Blue Cross and Kaiser. Last year Blue Cross was, on average, 16% higher than comparable policies at either Humana or Aetna. For 2017, Blue Cross filed and received, an average increase of 21% on their individual policies. With the majority of individual policies in the metro-Atlanta area at Humana or Aetna, the average mathematical increase to purchase a comparable Blue Cross policy will be 37%. With no other options. It is not pretty.

We are advising individual business owners to consider putting together a small group; a group can consist of as few as 2 people (excluding married people, you will usually need at least 1 additional W-2 employee). As I explained to one small doctor’s office, you and your employees are paying for your individual health insurance with after tax dollars. In 2017 everyone’s options are being limited and greatly increasing in cost. It makes sense to put together a small group, even ask your employees to take a pay decrease so you can pay at least 50% of their premium (they pay the other 50%) and the employee’s premium is run through payroll, pre-tax. The doctor saves the FICA, the employee saves the FICA and the doctor is able to write off the 50% he is paying as an expense. Plus, hopefully, the 50% the doctor is paying was the result of a pay decrease, thus a break-even for the doc.

Generally, group health insurance policies are going to offer better coverage than individual policies.

QUESTION: The enrollment period is upon us. In terms of your role, is there anything that is or will different from other years?

BRADEN: There has been a huge shift in the role of the agent/broker. In fact, those who have made the transition are now being referred to as advisor or consultant.

We are seeing about 1/3 of the agents operating as they always have, bringing their clients spreadsheets of health plan options and little more. They are not educating their clients on ACA compliance, bringing new options that have materialized in answer to ACA or providing education to employees.

Another 1/3 appear to be riding out the paradigm shift hoping to keep their clients as long as possible however, they are not well versed in the changes in the industry and therefore not able to educate their clients. In both these cases we find the agents have usually changed their focus to other insurance products such as individual life and disability insurance or Medicare.

The consultants/advisors are bringing real solutions and education to their clients. For example, one of the products that has been fine-tuned with the advent of ACA is level-funded insurance, a form of self-funded coverage. In the old days, this type of product was considered too ‘risky’ for small groups.  Today, it is being written and operates like a fully insured contract, except the internal workings of the product are broken out with each component priced separately before it is aggregated to a monthly premium. The employer is protected, just as they are with a fully insurance contract, however, because of the way the policy is internally written, many of the ACA taxes and restrictions are avoided usually lowering the overall premium.

Advisors and consultants are using technology extensively; it takes much less of the employer’s time and there are fewer mistakes which helps limit liability.  At a minimum you should expect electronic enrollment (for all size clients), employee education, employer notification of reporting requirements or changes directly affecting the specific business owner. Providing these services, in addition to the carrier ‘service’ of yesterday are just a few of the ‘clues’ when determining if you are working with an agent/broker or a benefits consultant.

QUESTION: In many states (and as you note above) health insurance companies are pulling out of the exchanges, the co-ops are failing and many are bankrupt, and quite frankly business owners and the self-employed are finding (or will find out) they have limited choices. What are their options?

BRADEN: I wish I had a silver bullet answer. An executive from our local Blue Cross made a statement last week to a group of agents: “We had 1.8 million individual contracts in Georgia prior to ACA, in 2015 we still have 1.8 million individual contracts only 80% of them were subsidized, subsidized so the people can pay the increased premiums, a result of the implementation of ACA.”

I will offer a caution. Because we are all so desperate to find an affordable answer, we are seeing health insurance alternatives. These are financially attractive as they are much lower in premium. However, there are limitations to these policies. Please make sure you know what you are buying.

The most common is a short-term medical policy combined with a Minimum Essential Coverage (MEC) plan. To avoid the ACA tax penalty, your policy must have preventative coverage. MEC plans provide preventative coverage. The short-term medical policies provide healthcare, as we all know it, with a few holes. The policy is short-term; it cannot be in effect for a complete year to be considered short-term. It may not be guarantee issue, meaning the insurance company can deny someone coverage. (Remember, these plans are not required to be ACA compliant.) There is a pre-existing clause AND there is a policy maximum. The insurance company will not cover a condition you have been treated for in the past (how far in the past is determined by the individual insurance company.) And, if you have a medical event, the amount the insurance company will pay toward your medical expenses is limited.

We recently worked with a company where the previous agent had sold the entire group individual short-term medical policies. Here was the owner’s first inclination there was a problem: During the employee introduction meeting the agent stated the policy would not meet the Minimum Essential Coverage requirement and the employees would be subject to the penalty tax. The second and even bigger problem was the employee who had breast cancer. The insurance company would not renew her coverage when the 364 days were up AND she exceeded the maximum annual/lifetime amount of benefit. Actually she exceeded the maximum policy payment prior to the end of the policy and has been left with over $70,000 in medical bills, which she is personally responsible for. All during this time, she thought she had insurance. (There was a question as to if the employer was liable for these expenses since the health insurance was presented through the company. As a result, the employer paid the remaining balance of this employee’s medical bills.)

QUESTION: Based on your work with small business owners during the current enrollment period, and your on-the-ground knowledge about what is happening in the market right now, what other advice can you provide small business owners and self-employed people?

BRADEN: If you cannot afford medical insurance, if you cannot put together a group plan, if you cannot afford to offer your employees insurance – buy the least expensive, highest deductible full health insurance policy available. You will pay out of pocket for all your medical expenses including prescription drugs, however, your total financial exposure will be limited, you will not have $70,000 in unpaid medical expenses that you are personally responsible for. Even on the high deductible plans, ALL preventative care is covered at NO cost. Also, we are seeing health insurance companies and/or pharmaceutical companies reaching out to people offering to offset the cost of some medications. They are realizing it is less expensive to keep you well than incur a very large claim.

If you can afford it, there are WRAP policies that inexpensively pay for many of the costs not covered until the deductible is met. I would caution using AFLAC, Colonial, Allstate or others when the policy only covers a specific disease such as cancer or an accident. Look for a policy within the Allstate, Colonial or AFLAC family of policies that fills in the gaps for all possibilities rather than purchasing a policy for each possibility. If you buy policies by the incident versus a wrap, you might as well buy a copay robust health insurance policy. (Sales people are paid based on the number of policies they can sell. Make them find the policy that wraps around a high deductible plan.)

What is the best single piece of advice that you have for business owners that they need to do right now to prepare for the enrollment period?

You should be started on evaluating your open enrollment options now for 12/1 and 1/1 renewals. If you are not, there is a problem with your agent.

Make sure you are not using an agent or broker but an advisor or consultant. If you are using your neighbor, a person from church or other ‘friend’, make sure they are experts in the health insurance arena. If they are not, I strongly recommend you bite the friendship bullet and seek someone who can help you and your business. It will save you money, protect you from compliance mistakes and make your job easier. Generally, agents/brokers and advisors/consultants cost the business the same. If the consultant charges for some of their services, know you are saving money, you are receiving good advice from someone who knows the ins and outs of ACA and will keep you compliant.

Karen Kerrigan is president & CEO of the Small Business & Entrepreneurship Council


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