According to a recent report in USA Today, most of the largest companies in the US are self-insured. They cover their employee’s claims while insurance companies help administer the plans. Starting in 2014, those businesses that are fully-insured, as opposed to self-insured, will have to pay a tax that is expected to add about 2% to premiums for each covered employee. What is more concerning, is that this tax is expected to increase each year for the next few years. It could be 4% by 2018. There is also something called a reinsurance fee of $63 being charged for every person covered by plan. These taxes and fees need to be paid by business in 2014.
In addition, midsize companies with employees between 50 and 100 got hit hardest in 2013 with premium increases. While very large employers with 5,000 employees or more saw an increase of about 3.7%. Unfortunately, many midsize employers saw increases of 20% to 30% in 2013. The reason for the increases seems to be that the insurance companies are having to price in a period of uncertainty so they are pricing up as much as they can. The health insurers insist that the increases are not arbitrary but are reflective of increases in the underlying health care costs. As premiums increases, many lower paid workers are opting out, which reduces the total participation of an employer to a level where they have difficulty finding health insurance. Many health insurance carriers require a certain percentage of the employees to participate or they won’t offer coverage. This may push more midsize companies to try self-insurance, however the risks can be high if several employees develop costly health conditions. From what we can tell, this situation is leaving many contractors scratching their heads and wondering how this health care law is going to impact their business.