Our law firm has just under 70 lawyers and 50 support staff. We have a single office here in Cleveland. We started the firm in 2000, after leaving a large firm, at least in part so we could spend more time on lawyering than on administering and managing.
At first, we simply joined the Council of Smaller Enterprises (COSE), the major regional small business chamber of commerce, to obtain our health insurance. We needed to offer insurance at that time to help attract good people to our fledgling venture. Since then, we have succeeded in getting excellent lawyers and staff, but have not succeeded in avoiding spending far too much time worrying about the coverage we can provide to our personnel.
We have excellent health insurance, provided through Medical Mutual of Ohio (MMO), a mutual insurance company that is “owned” by its policyholders. MMO has consistently given us good rates compared with the competition, but those rates have, of course, gone up with the health care market.
To respond to the upward pressure on rates, we have gone to a high-deductible plan, coupled with health reimbursement accounts (HRA) or health savings accounts (HSA). We also have a Section 125 plan for premiums and a flexible spending account (FSA) for employees to use to cover expenses within their deductible or co-pay. We also have optional dental and vision plans.
With the advent of the Affordable Care Act, we have been concerned about compliance. Our high deductible plan has deductibles higher than what apparently will be permitted. Our HRA plan may well provide greater benefits than allowed. Health saving accounts may be limited. By purchasing our plans through COSE, we have not had to pay a two percent premium tax on group health insurance as mandated under Ohio law. We do not know if that premium tax relief would continue to be available if insurance is purchased on an exchange.
We have, therefore, been inclined to keep our plan grandfathered under the Affordable Care Act. That is increasingly difficult as plan choices evolve. We do not, after all, control what insurance companies offer. All of this has left us facing the tough decision as to whether we can continue to provide health coverage at all. Our business is helping clients, not working through complex health insurance options.
Given our pay scale, it is unlikely that our employees will qualify for subsidies on any state exchange. Right now, though, we have no guidance about what will be possible on an Ohio exchange — or even whether Ohio will have an exchange or will be placed instead into a federal exchange.
With the upcoming health care excise tax, we expect problematic premium increases above and beyond those related to benefit payments. Then in 2018 and later, the administration of the so-called “Cadillac” tax appears likely to be incredibly burdensome to employers. We will have to tote up all of our expenditures in various categories and report them to the insurance company, which will then have to determine if a tax is due and, if so, which parties have to pay which part of the tax. Also, they have to price the tax into their premium model so they do not have to dip into their reserves to pay the tax.
That means the employer will get hit with the administrative costs, the actual portion of the tax it owes and the tax passed through by the insurer. Just the administrative burden alone will be significant, even if little or no tax turns out to be owed.
We have looked into expanded wellness offerings. In an entity as small as ours, the positive impacts of wellness programs are unlikely to be felt in our health care costs, since community rating puts everyone’s experience together. Those who are managing their chronic conditions, keeping their weight down and refraining from tobacco will be lumped in with everyone else for rating purposes. We believe that encouraging wellness is the right thing to do, though, so we will continue to sponsor and support wellness initiatives.
Assuming that we will be able to continue to offer health insurance at all, it is likely that we will reduce the level of covered benefits and increase pay, so that employees can supplement their coverage, if that is what they want for their own families.
The uncertainty about what will happen with the Affordable Care Act (both in its entirety and in its individual complex parts, some of which are written very unclearly and, in an ideal world, would get technical legislative corrections) is a definite barrier to planning for our insurance benefit program and expansion of our firm.
Our health insurance program ranks third in expense behind only payroll and rent, so failing to control its cost clearly inhibits our growth opportunities.
Keith A. Ashmus is a co-founding partner of Frantz Ward LLP, an entrepreneurial law firm in Cleveland.