Worker's Compensation – A New Era of Health Insurance?
I'm getting closer to the 20-year mark of working in this industry and because the cost of healthcare has risen 134% in the last 10 years, everyone is looking for a solution, especially those who need medical care.
Last week I was having lunch with 3 colleagues, none of which are in the healthcare industry and one of them who’s a CPA brought up a nonprofit client who is very unhappy with their broker because they are unhappy with their healthcare costs for employees. I asked her if she knew if the Worker’s Compensation Ex Mod (lingo for Experience Modifier) was high and her voice went up about 2 octaves and said “YES!!!!” like I had ESP or something.
The bottom line is, with healthcare becoming more and more unaffordable for the employer, they are not able to absorb so much of the increases at the renewals and then pass that cost down to the employees. This becomes a financial burden to them. And this doesn’t mean that the employer isn’t complying with the ACA. My clients comply with the laws and make sure that they meet the ACA standard of affordability, but let’s face it health insurance is still expensive no matter how you cut it. For the employer and the employee.
So, what we will see employees doing more and more when they cannot afford employer paid healthcare is finding other ways to seek care. One way that’s been abused for years is through Worker’s Compensation. Joe Schmoe goes surfing over the weekend, tweaks his back and can’t afford to go to the doctors because he doesn’t have insurance. He gets to work on Monday, goes into HR and says that he slipped and fell in the warehouse. Now, a Worker’s Comp claim will be filed and although the employee may not be able to go to the doctor or facility he/she wants, they will still get care for their injury. This is not new, folks. Desperate times call for desperate measures.
Six years ago, when the ACA began, large employers who weren’t offering coverage really felt like they had their back against a wall. Many companies I spoke to felt like the additional cost could put them under. I remember meeting with an apparel company that had over 250 employees in a warehouse and the owner told me that if he even raised his products by one penny (that’s $.01) that his clients would go to Mexico and the get the product there. But what he didn’t realize was that the penalties that he would be assessed are not tax deductible like premiums are and at the end of the day, the money he would save in taxes would create a narrow margin in cost between offering healthcare and NOT offering healthcare. When I brought up the fact that there are benefits outside of the obvious for offering health insurance, like discounts on Worker’s Compensation premiums and potentially fewer Worker’s Comp claims he warmed up to the idea. I mean, he still wasn’t happy about having to pay these new premiums but there were some pluses.
The good news is that healthcare increases are at an all time low in the past 20 years. We have another 2 years of legislative and regulatory changes with the ACA and who knows what will happen after the election, if anything. I’m certain that many of you have your own views and thoughts on that, but the important thing is that you think about your employer contribution and ask yourself, is it affordable? Can my employees afford the payroll deductions to have the health insurance plan the organization offers?
There are a lot of new plans out there that the insurance carriers are offering. They broadening their portfolios to offer lower costing coverage with higher copays, deductibles and out-of-pocket maximums that the employer can use as a “base plan” and allows for the employer to offer richer plans on a “buy up” basis. They are also beginning to offer plans with lower or flexible participation (depending on the carrier).
The bottom line: Employers can still put together robust benefits packages for their employees. There are all sorts of ancillary benefits both voluntary (100% employee paid) and individual that can be offered alongside the medical to help offset or fray their own out of pocket cost for if/when they do need to use the plan. The key is to have a smart broker that cares enough to ask about and understand the culture of the company and what the budget allows. Once a broker has that information, they should be able to customize a benefits package that offers a solution to both employer and employee by providing choices that work for all employees, which will prevent misuse of the Worker’s Compensation plan. Healthy employees are more likely to be happier productive employees.