Participation on Group Health Plan

[bluemarlin08]

Seems to me that those groups with mostly higher paid employees will have to think twice before they drop group coverage. With the higher anticipated individual rates, and having to pay after tax will make employers hesitant, at least the first year or so.

 

[VolAgent]

Never said it was a good idea.

Yes, a lot of folks get burned on these start ups, especially franchise.

A few years ago in Atlanta someone opened a MASSIVE art supply store in a ritzy neighborhood. Even with free rent and a huge grand opening with probably 50 employees the store closed in 90 days.

Someone lost a buttload on that. I believe the franchise fee was something like $40k.

Then there was a beignet place about a mile from the house. Place was usually crowded in the AM and late afternoon but not much beyond that. Guy spent a fortune on advertising and especially coupons. I still have a coozy from the opening.

Place lasted less than a year.

And there is the gourmet popcorn store (Heaven Popped or something like that). Opened and closed in 4 months.

Self employment sucks. If I weren't such a horrible employee I could keep a job long enough to retire.

So what you are saying is that perhaps a little market research is in place before investing your life savings?

 

[somarco]

Market research and due diligence never hurt anything.

This applies to dating as well.

 

[ABC]

It's about taxes.

If an owner can use company funds to his/her health insurance they will. Same goes with top employees. The other reason is convenience.

HRA approach excluded owners in most situations.


If an owner is under the 400% FPL they may very well go with a subsidized plan.

Still having trouble understanding why MOST small employers would consider group insurance. With GI + subsidy I see very little reason to pony up for health insurance unless you are in a business with highly skilled workers and a competitive market for those employees.

 

[brandeeno]

I suppose it is about taxes. If an employer is considering dropping coverage, I would advise them to take a look at the tax consequences for the company. I have analyzed around 20 Milliman studies that examine the impact of PPACA on specific companies, and all of them (except for one) were better off financially to keep their health plans intact. It's usually the taxes that no one is thinking about... So, before you advise your clients to drop coverage, think about this first.

 

[ABC]

I suppose it is about taxes. If an employer is considering dropping coverage, I would advise them to take a look at the tax consequences for the company. I have analyzed around 20 Milliman studies that examine the impact of PPACA on specific companies, and all of them (except for one) were better off financially to keep their health plans intact. It's usually the taxes that no one is thinking about... So, before you advise your clients to drop coverage, think about this first.

You bring up a good topic of discussion.

Large group I would 100% agree but I was referencing small group under 50. Really under 20 lives.


So here is one of my current clients. 13 employees on hourly wages. The employer is currently paying the equivalent of $4 a hour in benefits for each employee. This comes out around $108,000 a year for health benefits. (Old and sick group)
Owner drop benefits and gives the employees a HRA with $250 a month in it for the employees to buy a policy in the Individual GI market. They could buy inside or outside the exchange.

The owner just saved $69,000

Why would he not do this?

 

[brandeeno]

Wouldn't the owner need to increase their taxable income by $69,000 though? Therefore, the true savings would be $69,000 * (1-Employer Tax Rate).
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I must say that the HRA idea is not a bad idea. We could call that a defined contribution approach. It works well for small groups like you said ABC.

 

[VolAgent]

Wouldn't the owner need to increase their taxable income by $69,000 though? Therefore, the true savings would be $69,000 * (1-Employer Tax Rate).

Assuming they don't invest it elsewhere in the business. And if not, that is still more profit going to the business owner.

 

[stuy119]

I would still like a clear ruling from the IRS on the DC approach before I commit to it. I'm ready, but don't want to put an employer in a bad spot by having to reverse that approach down the road.

 

[ABC]

I think this real life situation is a easy decision for the owner.