The share people firms that don't provide medical health insurance spiked this year, to nearly 55 percent. After the coming year, many New York firms may have to join them – or risk downsizing.
Thanks to some 2012 state law, many mid-sized firms – individuals with between 51 and 100 insured employees – might have to drop their health plans, beginning in 2021. Wittingly or otherwise, their state is pushing employers to buy much more expensive and frequently less comprehensive insurance.
Absent changes towards the law, businesses and employees could collectively lose millions of dollars – and companies would have to consider staff reductions. Empire State legislators must change course.
At issue is an approach to providing health benefits called “self-insurance.” Under this strategy, employers pay their employees' medical claims directly, rather than buy coverage from a conventional insurer.
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Self-insurance encourages companies to create comprehensive health and wellness initiatives that concentrate on keeping employees healthy, versus waiting to deal with them when they are not. Inside my company, Pharos Systems International, our wellness program covers from subsidized exercise and yoga to classes taught by experts on topics like nutrition, child care and the impact of mental well-being on health.
The results can help to save employers and employees significant amounts. Since self-insured companies only pay for the health care their employees consume, they take advantage of helping their employees stay healthy. Employers and employees holds onto money they otherwise might have paid in insurance costs.
Self-insurance's holistic resolve for employee wellness continues to be the most appealing aspect of Pharos' strategy. We're organized as a “B-Corporation,” or “benefit corporation.” This designation requires us to adhere to rigorous standards governing our social and environmental impact – and also to be accountable and transparent to the community. Providing a well-rounded health-care program is key.
Like a number of other self-insured employers, Pharos provides financial incentives for taking part in our wellness initiatives. Employees who get blood work done or undergo an annual physical, for instance, receive larger contributions to their tax-advantaged health savings accounts.
Pharos employees also have an additional incentive to have their health costs in check. The savings from your health plan have allowed additional funding for quarterly employee bonuses.
Those savings happen to be real and significant. Before switching to self-insurance 2 yrs ago, Pharos faced double-digit premium hikes for conventional insurance coverage every year.
Since we started self-insuring and building our wellness initiatives, our overall health costs have dropped significantly and stabilized from year to year. We've not needed to raise our employees' health-care contributions for three years.
That can change unless the Legislature fixes the legal meaning of “small employer,” which dictates whether a firm like ours can self-insure. A 25-year-old state regulations prohibits “small employers” from purchasing “stop-loss” insurance (a kind of coverage that reimburses self-insured plans for medical claims exceeding a certain, relatively high threshold). Without stop-loss, just one catastrophic event – just like a cancer diagnosis – could threaten our business.
In 2012, the state changed the definition of “small employer” from one with fewer than 50 workers to 1 with fewer than 100 employees. Conventional health insurers, seeking more customers, lobbied for the change. Along with their allies within the Legislature, they reason that the traditional insurance marketplace is faltering and requires premiums from mid-sized firms with healthy workforces to stabilize.
That's not attractive to firms like ours. A conventional insurance plan would cost all of our employees an extra $1,000 a year. The organization would need to absorb one more $3,000 in costs per person. All told, New York's looming stop-loss ban might cost us and our employees $300,000 annually.
Other mid-sized employers are considering similar losses. In reaction, they've already to lessen benefits, or perhaps lessen the size their workforce.
These are consequences nobody wants – least of all New York, which is trying to keep and grow our entrepreneurial employment base. Mid-sized firms will quickly need to choose what kind of health advantages they'll offer after 2021. New York legislators must prove that they'll pay attention to the voices of the electorate – not those of the insurance lobby – by rolling back their ban on stop-loss, so that self-insurance usually stays an option for employers.
