Our Quote is In... Insurance Premiums are Up

At one company, the employer provided health insurance premiums are increasing as a result of the Affordable Care Act - their agent said so.

Our employer provided health insurance premiums are increasing, and it's a direct result of Obamacare. Our agent said so.

Despite our group's trend rate of cost being the lowest he has seen in years, our premiums are still increasing over 14%. It's hard to make sense of the large increase in a "good year" with claims history. I suspect our group is not the exception.

As most employers will do, we are looking at the changes in benefits that can save our employees the most money. The most common changes we have made in the past will be reviewed again this year. We go through this dance every year to avoid increases but this year is different. Double-digit increases are hard to explain to employees whose spouse may be out of work or had their work hours cut. Increases in copays for physician visits and drugs will result in the biggest reduction to the monthly premium.

Best case, we may be able to save 3% to 4%. Even though our company pays 100% of the single premium, it will still be a "tough pill to swallow" for our employees who make up the difference to get family coverage.

We all know health care is not free. The expansion of benefits (mandated), the elimination of limits and imposition of caps, additional taxes and the increase in reporting and compliance have all factored into the double digit increases that our group is now experiencing. It sounds good when politicians promise free health care for everyone, while also promising an increase in quality and lower costs. But let's face reality. Costs go up when you get more coverage and better quality. We are smarter than Washington gives us credit for. Before the full force of the law is in effect, our group plan sees the beginning of more cost increases that are sure to follow.

Jackson Thornton is a large employer under the Affordable Care Act (business with 50 or more FTEs) so we will be at risk of the employer-shared-responsibility-penalty (employer mandate) if we do not provide affordable, minimum essential coverage for all full-time employees working more than 30 hours per week. We risk getting assessed with this nondeductible penalty and risk losing valuable employees if we don’t play. We are running out of options to keep insurance affordable for our employees except to pay more for the benefits and coverage mandated by this law.

Will our employees eventually ask to buy their insurance on the exchange? Maybe. Hopefully, the coming year will show the security and safety in providing personal information to the exchange — or it may not. I have serious concerns about recommending the exchange when it has not been certified or tested as HIPAA compliant or at least as secure as the IRS network that contains our tax information. But data privacy and security within the exchange is a subject for another day.

In the interim, I recommend the following homework for you to be prepared when your insurance agent shows up with your company's renewal:

• Become familiar with your state's exchange and how it will work

• Research and learn the basics of insurance (i.e., the difference between copays, coinsurance, deductibles and out-of-pocket costs. Especially out-of-pocket costs defined by the law)

• Make a list of questions for your agent about how individual policies will be sold (i.e., through the exchange exclusively or outside the exchange as well)

• Make a list of questions about changes in member level ratings and impact on premiums effective Jan. 1 when the individual mandate starts

• Ask how their grace period works (i.e., when will an individual policy be cancelled for missed payments)

• Request amounts of the Obamacare fees and taxes that are assessed per policy life. Evaluate how this new addition to the cost premiums will be communicated to employees covered by the insurance.

Beginning Jan. 1, 2014, everything we know about health insurance changes. Prepare early.

Patti Perdue, CPA.CITP, is a Principal in the accounting and consulting firm of Jackson Thornton (headquartered in Montgomery, Alabama) with offices in Alabama, Mississippi and Tennessee. Patti specializes in services to physician practices of all sizes. She can be contacted at patti.perdue@jacksonthornton.com or (334) 240-3657.

Jackson Thornton is a proud member of the National CPA Health Care Advisors Association (HCAA). HCAA is a nationwide network of CPA firms devoted to serving the health care industry. Members provide proactive solutions to the accounting needs of physicians and physician groups. For more information, contact HCAA at info@HCAA.com.