[Editor's Note: This is part of an ongoing series of columns from independent insurance brokerage Holmes Murphy & Associates, Des Moines, Iowa, designed to help retailers deal with changes mandated by the Affordable Care Act.]
SCOTTSDALE, Ariz. -- Convenience store retailers are feeling intense pressure from healthcare reform. There is pressure to keep up with the avalanche of regulations and guidance, the pressure to comply with the regulations, but mostly the pressure of figuring out how to best fund health insurance benefits for employees. Government underpayments and further cuts to providers, a seemingly insatiable construction appetite by hospital systems and a cost-plus pass-through insurance system have culminated in anxiety, frustration and sense of helplessness for many business owners and executives.
The downward shifting of financial responsibility has contributed to health insurance premium increases. Employer costs have increased 169%, and the costs for employees have jumped 180%. Employers can't afford this in two different ways. They can't afford the business expense of continuing to absorb this level of inflation. And they can't afford the employee relations cost of passing along this level of increase that effectively deteriorates the value of their employees' compensation plans.
The penalty for a large employer is $2,000 per year per full-time employee, which is a fraction of the $11,429 average employer contribution toward family insurance coverage. Every employer has to at least consider what its business would look like if it no longer offered health insurance--a course that many operators are actively contemplating. The safe harbor trap makes this question even more relevant for employers with a high percentage of low-wage earners.
The government knows what is required to fund healthcare and force participation. The original House bill required employers to fund 72.5% of single premium and 65% of family premium. If an employer did not meet these requirements the penalty was 8% of payroll. The premium requirements and penalties in the final law are insufficient to drive the desired behavior by employers or produce enough revenue to fund the exchanges if they don't.
The February 2013 Congressional Budget Office's (CBO) scoring forecasts the number of Americans receiving health insurance benefits through their employer will increase from 154 million people in 2013 to 160 million people in 2023.
How could the CBO estimate there would be an increase in the number of employees receiving their health insurance through their employer when the cost of exiting healthcare is much less than staying involved? Perhaps the CBO is counting on employers being very sensitive to employee disruption in healthcare. If the CBO is wrong about the number of employees receiving employer-sponsored health benefits, then the associated $1.8 trillion cost for insurance expansion could be dramatically understated.
Businesses and business leaders are not successful if they are passive. American businesses are not likely to passively move along until 2023 while absorbing increasing enrollment in employer-sponsored medical plans unless the rules and penalties are changed dramatically by the government.
Continuing to absorb the inflation risk of healthcare simply seems like an irresponsible business decision. If a retailer cannot grow its business faster than healthcare inflation, then healthcare inflation will decrease the value of the company over time. The employer has the option to absorb the healthcare inflation risk, shift the risk to someone else, or try to influence the risk so it does not outpace company growth.
You should discuss options for mitigating healthcare reform impact on your operation by speaking with an independent risk management and insurance brokerage firm such as Holmes Murphy & Associates. You can also learn more in Holmes Murphy president Den Bishop's book, The Book on Healthcare Reform: The Economic Truth of Healthcare in America.
Jeff Kirke is vice president of Holmes Murphy & Associates, Des Moines, Iowa.
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