Big thanks to Sequoia for being our first sponsored post! Please read, learn, enjoy, and discuss in the comments! -Kim Rohrer, OrgOrg CEO & Co-Founder
To borrow a term from OrgOrg’s founders, organization organizers are involved in a lot. You juggle the needs of diverse groups of people and handle with care all the day-to-day necessities in order to keep them humming and purring like the well-oiled machines they all can be. But machines often come with a lot of moving parts to consider, and such is the way for the ACA.
It shouldn’t come as a terrible surprise that the ACA could be overwhelming. This act houses a true reform of a gigantic industry. To put “gigantic” into concrete terms, the US healthcare system alone, at $3 trillion, accounts for almost 20% of the entire US economy. The ACA delves into all facets of this system, including insurance coverage requirements, regulations for small and large businesses, minimum levels of coverage by insurance carriers, preventive care standards, affordability, Medicaid, and so on.
So what happens, then, when the onus of pouring through ACA details falls to the office managers, the operations teams, the People Officers, each of whom already work at capacity? We are all about to find out as more small to mid-sized businesses become affected by the ACA legislations that kick in at the end of 2015.
Maybe you haven’t had much time to read through the 20,000 some-odd page (and growing) ACA tome in order to figure out what applies to you. Maybe the questions you’ve been asking have only been met with more questions. Maybe you haven’t even had enough time to ask the questions you need to ask in order to make sense of it all.
Well, we are happy to demystify it for you.
Sequoia Consulting Group (Sequoia.com) specializes in helping hyper-growth companies improve their employee benefits, 401(k) and risk management programs – and navigate wide range of HR challenges and topics. One of our services, called Sequoia One, is a great answer for smaller tech companies that are moving fast and need to focus on their core business. The idea is simple, but powerful. We take the lead on the administrative aspects for HR, benefits, and payroll, so the internal team members like you can be more strategic with your time and contributions. (It comes with great benefits plans, too).
Because of all this, we carry a special focus on what is affecting small tech companies. So, if you are a small company with less than 100 employees, you need to know a few things about what’s going to happen with the ACA changes and what you can do about it.
For California groups with less than 50 employees who had coverage in 2013, those groups were allowed to “early renew” their plans on December 1, 2013 and “grandfather” themselves into their existing plans to avoid moving to ACA-compliant plans until the end of 2014. Then in 2014, “early renewal” was offered again by a different ancestor, and groups were allowed to “grandmother” themselves into their existing plans one more time.
And unless we all of a sudden find ourselves with an estranged great-granduncle (which isn’t to say is impossible—family trees, as with major reform implementations, can yield surprises), there will be no more extensions for California groups with under 50 employees.
Bigger Small Groups
Also coming down the pipeline in 2016 is one of the largest changes for all groups under 100 employees. Currently, the small group market is defined as companies with 2-50 employees. Beginning January 1, 2016, the classification of a “small group” will expand to include all companies with 2-100 employees, which means that groups that previously had access to “large group” benefits now may have to move to ACA-compliant plans.
What does this mean for me?
For starters, plan benefits may become leaner. Costs will likely increase – and for some, up to 30-40%. Also, rate structures will become age-banded and community rated, posing unique administrative challenges. And you probably don’t want any more unique administrative challenges to add to your growing list of tasks.
But not all is doom and gloom, and there are options to minimize the impact of these changes and maintain control of benefits programs as companies come up on their 2015 and 2016 renewals:
Option 1: Leverage a Pooling Model
PEOs and trusts provide price control and stability, as well as typically richer, large group benefits, which are not usually available to small companies. These products pool many small groups together so they have “big company” leverage.
Be careful, though: joining a poor quality pool could add risk and cost uncertainty, so do your shopping.
Option 2: Wait for more delays
While all indications show that these changes will go in to effect, the history of implementation has proven that anything is possible.
Especially for groups with 2-50 employees, it looks like the delays have run their course. 51-99 groups, though, will likely have a chance to “early renew” their plans for December 1, 2015 so that they can stay on the large group platform until their 2016 renewal.
Any further procrastination is just delaying the inevitable. Whether it is 2015 or 2016 or 2017, all companies will eventually be forced to change to ACA-compliant plans.
Option 3: Move to a self-insured or partially self-insured model
Companies under 100 do not normally think of self-insurance as a potential solution, but there are a number of options available that allow for smaller companies to self-insure.
Potential cost volatility, increased risk, and increased administrative burdens, however, could mean that this is not a good fit for some small companies.
Option 4: Move to an ACA plan
While ACA-compliant plans certainly come with their challenges, they are still a viable option to offer coverage to employees. Companies with higher risk factors like an older population or employees with serious ongoing medical conditions benefit from community rating. Companies with younger, healthier populations, like many tech companies, pick up a lot of that burden.
You have options
Ultimately, so much is possible with the right knowledge about the best choices, and Sequoia can help arm you with what you need to know. If you are interested in learning more about any of the options we described above, or have not yet decided which option is best for you, contact my friend Shane, one of our expert consultants today to start a conversation: [email protected].
Mark Morgan – Market Analyst Manager at Sequoia Consulting Group and resident guru for all things ACA, Mark is also an avid music festival goer. So far, none of those festivals have included Miley Cyrus, much to his disappointment.