Health care reform will usher in a new era for medical practices, clinics and hospitals that provide benefits to their employees. As you look for ways to control costs and optimize spending on employee benefits, you will increasingly look for the best strategies and opportunities to take advantage of the changing benefits landscape. The ISMA Insurance Agency stands ready to help with new ideas.
The new approach
"Play or pay," government subsidies, essential benefits, public exchanges, private exchanges, accountable care organizations, new and unique funding strategies, as well as technologies to create administrative efficiencies and accuracies will replace the old "shop your insurance once a year" approach.
This new approach starts with understanding that health care reform or the Patient Protection and Affordable Care Act will do little for most medical-related businesses providing attractive benefits to employees – and seeking ways to continue providing them.
A recent study of varied industries by Aon Hewitt, a national consulting firm, determined 94 percent of businesses were committed to continue offering and financially supporting health benefits.
Also, note that the new federal tax subsidy is available only to employees with incomes below 400 percent of the federal poverty level who are not provided a minimum standard of coverage at a reasonable payroll deduction. Most medical practices, clinics and hospitals pay for and provide benefits that meet the new standards, eliminating any free lunch under reform.
So how can a practice offer the right benefits while controlling health care costs?
The private exchange
Over the past 15 years, most employers moved their pension plans from defined benefit to defined contribution or 401(k), allowing employers to create a budgetable line item for pension expense. Today, many employers are taking the same approach to health care spending with a defined contribution health plan financing strategy. Around for many years, this concept is getting real traction today.
The practice simply decides on a fixed dollar amount to provide employees in a tax friendly way and then allows employees to visit an online store and buy from a comprehensive menu of benefits. This option allows the practice to set a budget for benefits expense at the current level or one that supports business goals.
The ISMA health plan is developing a defined contribution offering – in conjunction with its current health plan – to be available later this year to ISMA members, their families and staff. To adopt this approach, the practice will need to use a new benefits delivery technology or an online benefits store called a private exchange.
In the next issue, part two of this series will detail the private exchange and explain how it might benefit your practice, clinic or hospital.
* B. Michael Haffey, CLU, has more than 25 years of employee benefits experience and is the managing general agent for the ISMA’s group health insurance plan. Contact him here.