LINCOLN(KPTM)- This week, Kirsten McMann celebrates nine years operating a growing day care business but instead of throwing a party, she 'll be telling her full-time employees that they will no longer be receiving health insurance through her company.
Academic Advantage Child Development Center employs 80 people in 3 locations. In the past, McMann has prided herself on giving those who work for her the most competitive benefits but she says changes in health care legislation mean she has to adapt too.
"Never did I think we would sacrifice our health care insurance here for the employees or
that could be the best option," said McMann who said she found out last week that she'd
either have to cut staff or drop the business' group insurance plan to make ends meet
while continuing to provide quality, education-oriented child care for her customers.
Finding herself in a financial bind, McMann consulted insurance expert Chris McPike of
Compensation Programs, Inc. who helps small business owners navigate the maze of new
coverage rules mandated under the Affordable Care Act.
Starting in 2014, health insurance plans must include ten essential health benefits and policies must be issued on a "guaranteed" basis which means those with pre-existing health conditions are not penalized. Both of these requirements factor into the cost of coverage.
McPike says many of the small businesses she serves are struggling to pay for the new group policies and scrapping company-sponsored insurance isn't uncommon.
McMann says when she became aware that most of her employees would qualify financial assistance on the Marketplace, she opted to cancel her group plan. McPike attributes the eligibility of many of the day care's employees for the "premium tax credit" as the reason why getting coverage through the exchange will likely cost them less than they would have paid under McMann's new plan.
"The premium tax credit means that you will pay a lower amount for your premium than the amount that is being charged by the insurance company," explained McPike. Ironically, that option would have been off of the table for her employees if McMann had decided to continue coverage.
Since McMann was under her own company's group policy, doing what was less expensive for most of her employees and her business also meant she'd be left uninsured. Now she's shopping for coverage before hers expires at the end of the year.
According to McPike, small business owners like McMann often end up paying for their own insurance and also insure their immediate family members through individual plans. Now, many who buy individual plans are saving up for new deductibles and co-insurance which can mean an out-of-pocket expense of more than $6,000 per person and $12,000 per family. McPike says these higher out-of-pocket expenses are typical in both individual and small business health insurance plans.
"I don't think people realize until it comes to your house what might be changing for you, " said McMann who is saddled with finding an affordable individual plan for her family before her current policy expires at the end of the year. And that's not the only expense she's worried about, dropping care for full-time employees means she'll also be subject to paying a penalty to the federal government come 2015.
McMann emphasizes that even though the change will be more expensive for her personally, clients will not see a change in the quality of care her business provides.
If you are looking for more information on health care, McPike's recommendations include:
For tax information and more on the premium tax credit:
For a subsidy calculator to help estimate the premium tax credit :