How Health Care Reform is Forcing Small Business to Seriously Think About a PEO

Small Business PEOThe Patient Protection and Affordable Care Act (PPACA), sometimes known simply as the ACA or Obamacare, is set to go into full gear at the start of 2014.  That’s really just around the corner.  How does your human resources department currently handle all the responsibilities associated with providing your employees with healthcare benefits? Is your staff ready to handle the massive changes which are going to come about when the Affordable Care Act goes into full effect?  Trying to understand how the ACA applies to individuals is challenging enough for most taxpayers; trying to figure out how it impacts your business is even more complicated.

Changes Going Into Effect Next Year

Starting on January 1st of next year, a provision called Play or Pay goes into effect, a healthcare reform employer mandate which is sometimes known as the “under 50 employees” rule.  If you have at least 50 full-time workers, you must offer affordable minimal insurance to 95% or more of your full-time employees.  Any employee who works 30 or more hours per week qualifies as “full time.”  If you do not, you will have to pay a $2,000-3,000 penalty on each of your employees every year.  “Affordable” healthcare is also strictly defined.  The employee’s contribution to his or her own healthcare plan cannot exceed 9.5% of his or her wages.  That means that your human resources department is tasked with keeping very careful tabs not only on your number of full-time employees, but also on how much money each of them makes.

Some employers are already trying to come up with ways to get around this and loopholes to exploit, but many of these loopholes have already been accounted for by lawmakers.  For example, if you were to try and limit the amount of time an employee works during the year, and then replace that person with another employee, you would still be assessed the same penalty on the employee.  Moreover, you would also owe a penalty on the second employee, which would actually double your penalty.

A number of other changes are also going into effect which alter the nature of individual healthcare plans.  For example, annual dollar caps are being eliminated completely, and pre-existing conditions are now excluded from consideration.  Deductible caps will also be set, along with caps for annual premiums.  Children up to age 26 have to be covered (this is already in effect).  Gender will also no longer be a consideration for healthcare premiums.

There are already a number of penalties and compliance requirements for employers which have gone into effect over the past several years, and those requirements will increase substantially in 2014, adding a great deal more complexity to healthcare coverage concerns.  On top of all of the regulatory concerns, though, there is also the matter of trying to stay competitive.  After all, a good benefits package is an attractive incentive to a potential new employee.  Offering quality healthcare coverage which is affordable and thorough can make a difference when it comes to attracting the best talent.

Some employers are asking why they shouldn’t just stop sponsoring healthcare altogether and start sending their employees to public exchanges.  Many employers however are already stating that they will continue to offer employee medical benefits plans in order to stay competitive in the employment market.  Private exchanges are also coming into existence which offer a broad range of health plans, and companies may also go through these exchanges to provide benefits to their employees.  Even small businesses have the option of going this route.

How a PEO Can Help

As a small business, you may be used to having your own staff members handle your human resources operations, but did you know that there are companies which can help you?  A professional employer organization (PEO) is a firm that provides you with human resources outsourcing.  You are able to outsource tasks like payroll management, workers’ compensation, training, recruitment, and employee benefits.  That includes healthcare plans for your workers.  A PEO is a “co-employer” which can submit paperwork and taxes on the behalf of your company.  Each PEO has a different structure when it comes to responsibilities.

Imagine if you didn’t have to put all that effort into researching the massive changes which the Affordable Care Act will put into effect, and instead, you could leave that hard work up to the experts.  PEO specialists are up-to-date on the many changes which have gone into effect over the past few years and which will be going into effect between now and 2016.  As you can see, there are many different options available to you, but how do you wade through all that legalize to understand the best human resources planning for your company?

A PEO can make sure you are meeting regulations and fulfilling all requirements for proper compliance while also offering the most competitive and affordable healthcare plans to your employees.  Since the PEO can analyze your company’s situation and needs against a framework of expert knowledge in the field, the PEO can help your company to avoid penalty fees, find the best plans, and save money.  You’ll also have an easier time retaining your current employees and recruiting new talent when you are able to offer plans which suit everyone.  The PEO will ensure that you’ve met every requirement on the healthcare reform employer checklist.

Choosing a PEO

Selecting a PEO is a big decision for any business, large or small, so you will want to take your time and do some research to ensure that the PEO you are choosing is a good match.  There are many factors to consider when you make your choice.  Some of these include:

  • Who has responsibility and control? Who carries the liabilities when it comes to HR decisions?  Also, who is assuming control of which operations?  Will you be handing a lot of the control over the PEO or retaining it?  There are benefits and drawbacks either way.  Neither is better or worse.  It’s all a question of what works for you and your company.
  • What services does the PEO offer?  Does the company specialize in specific services, like filing taxes, or do they offer a wide range of products?
  • What kind of software solutions does the PEO employ?  Does the software work well with your existing systems, or will you need to upgrade?  How expensive will it be and how long will it take?
  • How much do the PEO services cost?  Are they charged on a monthly basis or is it a fee per employee?  Will hiring the PEO likely save more money than it costs?
  • Does the PEO firm have a strong reputation and great customer service that you can rely on?  Would you feel comfortable referring your employees to the PEO to ask their questions?

The Affordable Care Act will create many improvements in the healthcare system, but not without causing a fair amount of hassle and confusion for employers and employees alike.  A PEO can not only assist your company in avoiding unnecessary fees and costs, but can also help both you and your employees to understand the changing landscape and find your place in the new world of healthcare reform.

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