When Tim Berney, president and co-owner of VI Marketing and Branding, set a goal two years ago to double his business, he was thinking about revenues, not staff.
The good news is 24-year-old VI — formerly Visual Image — has hit its target, on track for nearly $50 million in annual revenues this year. The downside is Berney expects his firm — which ballooned from 25 employees to 48 over the past 20 months — to number 50 soon, a threshold that will make it subject to new health reform mandates that take effect Jan. 1.
Berney already offers a health plan, but he's worried about increased costs, risk of government audits and a slew of regulations. One rule, for example, is a worker can't pay more than 9.5 percent of his annual salary for individual coverage.
“I feel like some control will be taken away, that I can't always make the decisions I consider best for my company and my employees,” said Berney, who suspects he may have to raise deductibles or move to a lower health plan to bear increased costs.
“For now, we're just trying to become more efficient, and make up in volume what we expect to lose in margin,” he said.
Demise of Insure Oklahoma
While VI braces for greater government oversight next year, other Oklahoma employers are mourning the death of Insure Oklahoma, a seven-year, state-run program that uses state tobacco tax revenues and matching federal funds to slash health insurance premiums for lower-income employees of businesses with 99 or fewer workers. In the absence of any last-ditch saving efforts by the state lawmakers in their end of session this past week, the program will expire Dec. 31.
“There is not a chance for Insure Oklahoma to be saved by Oct. 1 (when enrollment opens for calendar-year coverage), and there are no plans to work on it until the 2014 legislative session,” Sasha Bradley, a spokeswoman for the Oklahoma Health Care Authority, said last week.
According to the latest reports, 4,732 small businesses, representing 16,699 workers and dependents, are enrolled in Insure Oklahoma — including Cherokee Hills Veterinary Hospital in northwest Oklahoma City and a nursing home in Stroud.
Debbie Marshall, co-owner of Cherokee Hills, said it was Insure Oklahoma that enabled the 36-year-old business to provide a health plan three years ago. A retired federal probation officer, Marshall and her husband, veterinarian Bob Marshall, have federal health coverage, but wanted to offer insurance to reward and retain their three employees.
Under Insure Oklahoma, one thirty-something worker pays just $48 a month for individual coverage; the clinic pays $91 and premium assistance covers the remaining $227 balance.
“If we continue to offer health insurance and their costs go up, so would ours,” Debbie Marshall said.
Connie Prewitt, office manager of Stroud Health Care Center, said Insure Oklahoma allowed that organization to extend its health plan to all 71 employees. Of the 38 on its health plan, 28 — including nurse's aides, housekeepers and cooks — qualify for premium assistance under Insure Oklahoma, Prewitt said.
For their part, workers pay $50 to $70 a month and have only a $500 deductible, Prewitt said. “I don't see how the Affordable Care Act (ACA) could be any better,” she said.
Prewitt fears that, without Insure Oklahoma, most of the nursing home employees won't take the company insurance, for which other workers pay 50 percent. “It's a very big concern of ours,” she said. “We're hoping for the best, and that Mary Fallin comes up with something.”
Larry Gundlach of Oklahoma Business Insurors said he has about 50 other client companies with like concerns.
“There's a myth out there that all people will have assistance after Jan. 1,” Gundlach said. “But the subsidies (available through the state's federally run insurance exchange) will only pay a portion of premiums,” he said. “Right now, under Insure Oklahoma, premiums, with assistance and employer support, are slashed 60 percent for workers; 85 percent for their dependents.”
“A lot of people will be in a worse financial situation because of the loss of Insure Oklahoma,” Gundlach said.
Changes create opportunities
Meanwhile, Paycom, an Oklahoma City-based online payroll company, is fielding more business, due in large part to the coming health care mandates. And a Tulsa-based insurance company is encouraging firms of all sizes to consider self funding to have greater control over health care costs.
Stacey Pezold, executive vice president of operations for Paycom, said the company — which has about 10,000 customers nationwide — is adding 300 to 400 new clients a month. “I'd say about 70 percent of that is because of the ACA,” she said. “Our services help companies have their i's dotted and t's crossed.”
Among other things, the new mandates call for companies that employ 50 or more full-time equivalent employees to offer health insurance to workers who average 30 or more hours a week, and to new hires after no more than a 90-day waiting period, Pezold said.
“Tracking all that is burdensome,” Pezold said. But Paycom, on a per-head annual fee, can handle the tracking and maintain information in a central place for consistency and in case of audits, she said.
Self-funding is one response
Jim Millaway, of The Holmes Organisation, said moving from fully-insured health plans to self-funded plans is a way for employers to avoid many of the ACA mandates and better control health care costs.
“If you're self-funded, you know where you're spending your money, versus writing a big premium check every month with your eyes closed,” Millaway said.
“Under no circumstances would you pay someone to tile your bathroom without knowing until it's done what the job costs,” he said. “And if the costs were still going up 20 percent a year, I promise you we'd fix it.”
Millaway said the attachment point for stop-loss insurance, which covers the risk of companies that self-fund, has dropped dramatically to affordable levels, now near or even with employers' annual insurance premiums.
“Every employer — especially those with over 50 employees — should look long and hard at becoming self-funded,” Millaway said. He said his own company, which has a staff of 42, moved to the model in October. “It was the ACA that helped us finally make the call,” he said.
AT A GLANCE
NEW MANDATES COMING
Businesses with 50 or more full-time equivalent employees must offer health insurance to employees who average 30 or more hours per week from the preceding year or pay annual penalties of $2,000 per full-time employee, excluding their first 30. The formula to determine large employer status takes employees' total number of monthly hours worked during a designated three-month to 12-month measurement period. Employees who work more than 130 hours for the measurement period are considered full-time. If the company has fewer than 50 full-time employees, it also will want to count full-time equivalent employees by taking the total hours worked for a month divided by 120 (the total monthly hours for a full-time, or 30-hour-a-week worker) then add the two together. An employer with 35 full-time workers and 20 who average 24 hours a week, for example, could be deemed as having the equivalent of 51 employees. The 20 part-time employees who work an average of 96 hours per month would count as 16 full-time workers — 1,920 (20 multiplied by 96) divided by 120. Employers may not be subject to mandates if they only exceed 50 full-time equivalent employees for 120 days or less a year.
The waiting period for insurance for new hires can't exceed 90 days without penalty.
Most residents must have health insurance or pay penalty taxes on their 2014 tax returns. Residents between 100 percent of the federal poverty level ($11,490 for 2013, or $31,322 for a family of four) and 400 percent ($23,550, or $94,200 for a family of four) can buy health insurance through Oklahoma's federally run exchange and be eligible for variable tax credits based on annual income and family size. Online or phone enrollment begins Oct. 1; coverage is effective Jan. 1.
Businesses can face fines of $3,000 per employee for each worker who buys insurance on the exchange if the company's insurance is deemed inadequate (covers less than 60 percent of essential benefits) or unaffordable (costs more than 9.5 percent of a worker's salary, or $117.67 monthly for a minimum-wage worker).
Since 2010, small employers who paid at least half the cost of single health insurance coverage for their employees could claim tax credits of up to 35 percent of premiums; 25 percent for tax-exempt organizations. The credit depended on the number of full-time employees, limited to 24, and average annual wages, which could be no more than $50,000. Businesses that use part-time help may qualify, even if they employ more than 25.