Restaurants face tough choices in 2014 and 2015 with respect to health insurance, but because of the generous Medicaid expansion provision included in the Patient Protection and Affordable Care Act (PPACA), there is an easy way for restaurants to mitigate their insurance costs.
PPACA mandates that restaurants, and other employers, with more than 100 “full-time equivalent” (FTE) employees will (eventually) have to offer health insurance to most of their employees, and the law requires that employers with more than 200 FTEs will have to auto-enroll employees into health insurance. Like restaurants, employees are mandated to have insurance, so many will say “yes” to insurance. This is guaranteed to squeeze already narrow profit margins.
How are restaurants dealing with this cost?
Some are simply throwing up their hands and daring the government to fine them $2,000 per full-time employee (minus the first 30 full-time employees) for failing to offer insurance. Unfortunately, this will also lead to an IRS audit.
Other restaurants have chosen to offer a minimum essential coverage (MEC) plan. MEC plans are inexpensive because they cover the bare essentials. A MEC plan protects the restaurant against the $2,000-per-employee fine, but it exposes the restaurant to the threat of another fine — a fine of $3,000 per full-time employee found eligible for a PPACA public exchange subsidy. There are also restaurants that are simply offering a barebones PPACA-compliant plan at the cost of up to a few hundred dollars per month per employee, while hoping for low participation rates.
The one underutilized strategy is Medicaid migration, which is available in, and only in, states that have accepted PPACA federal Medicaid expansion funding.
Medicaid expansion is a boon to restaurants because it increases the salary levels at which families qualify for Medicaid, and it may affect millions of restaurant workers. What many people don’t know is that an individual who is enrolled in Medicaid can simply decline insurance offered by the employer, saving your restaurant thousands of dollars in fines (or private insurance premiums) per employee.
The tricky issue is identifying and enrolling employees in Medicaid. Although expansion states have made sending low-wage employees to Medicaid a viable cost-saving measure, Medicaid enrollment is difficult, because it requires adherence to a raft of regulations. Using a professional enroller who works exclusively in the workplace setting is critical. Brokers around the country have begun including this service in their offering because it is both essential to their clients and it’s a commissionable product.
Unfortunately, in states like Texas and Florida, Medicaid migration is unavailable. Restaurants will be forced to shoulder the full burden of rising health care costs because their state governments declined Medicaid expansion. Accepting Medicaid expansion has no impact on individual state budgets, as it is financed 100 percent by the federal government. In fact, by declining coverage, the citizens of these states send tax dollars to Washington, D.C., which will be sent to other states.
See also: Dot’s Diner enters a PPACA donut hole
Ben Geyerhahn is chief executive officer of Benestream, a company in the Medicaid migrations market. He is a member of the New York state Health Benefit Exchange Regional Advisory Committee.