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Benefits turning into a detriment

By William and Janine DiPaula Stevens

We recently ran across a cartoon with President Barack Obama showing a citizen the ins and outs of the Affordable Care Act on a white board. The citizen’s only question was where it said that healthcare would be cheaper.

During the past few months, we have been gearing up for the looming changes to the healthcare landscape. We have become certified, we have read countless opinions and have created our own tool to help clients make informed decisions.

For example, we compiled one of our client’s census data, captured the health care premium and payroll deductions and analyzed its scenarios three ways to Sunday. The good thing was that out of their 767 employees, only 27 would find their current plan unaffordable. Another good thing for the client was that in order to make it affordable to those folks it only would cost $53,000 to increase wages to a point that it would be affordable for all.

I know that some of you might look at $53,000 and say that is a lot of money. It is not, though, when you consider that if all of their employees elect coverage it will cost our client another $3.3 million in premium dollars. (The big brains at our firm have been able to lighten that blow using a predictive modeling tool to project the effect of healthcare reform and develop a plan that will lessen the burden to a little more than $2 million.) While we feel pretty smart with our ability to find ways for our clients to spend their employee benefits dollars wisely, we also recognize, and have communicated, that the decision to continue to offer health care to employees might not be good for the employees.

At first sight that might sound like a cop out, but it is not. Let me give you an example: One of our client’s employees, let’s call him Bob, makes $25,000 and is a single parent to two kids. The current plan would cost Bob $8,000 a year (the premium is $2,000 a month or $24,000 a year). Does that sound affordable to you?

The way the health care reform bill was written, companies are responsible for providing employees with individual coverage that costs less than 9.5 percent of their annual wages. The bill does not address family, parent-child, or husband-wife coverage. In this particular situation, Bob is eligible to go to the state exchange (when it is up and running) and receive a credit because his wages put him in range for a credit. Oh, wait; Bob is not allowed to get a credit in the exchange because the employer offers affordable care.

Now, all the tax people out there will raise their hands and say that the $8,000 medical cost results in an itemized deduction of $5,500 ($8,000 – [$25,000 x 10 percent]). But, you see, Bob is head of his household and rents his home and he was claiming the standard deduction of $8,700. So no help here.

(Cue picture of President Obama pointing to the white board. “Where does it say it is going to be cheaper?”)

The sad truth is that the word “benefit” is leaving the employee benefits industry. It no longer will be a benefit to the employee if companies offer healthcare. It will be a detriment to the hardworking soul of this country just trying to make ends meet.

William and Janine DiPaula Stevens operate Vircity, a small-business resource center for entrepreneurs and nonprofit groups in Baltimore.

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