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In 2013, the Wall Street Journal wrote a scathing article about the New York community rating regulation, creating a way for every person to have the same insurance rates as their peers; no matter their age or condition of health.   Like most regulations of this kind, the intentions were good. It was difficult for mature adults who were not ready for retirement and those who had chronic medical conditions, otherwise known as pre-existing conditions, to find affordable health insurance.   It certainly was and continues to be a huge burden on those who were affected by it. The issue of getting insurance is no longer the problem, thanks to the Affordable Care Act. How come it doesn’t solve the expense conundrum as well?

Community Rating And How It Affects Your Wallet

The idea of allowing the masses help those less fortunate is not a new thing. In fact, most people are agreeable to helping their fellow man. Usually though, they want to decide when and how to do that.   In the case of community rating, everyone in the pool, regardless of age or health status, is put into a common group with the premium rates equally divided amongst them. No matter who you are, no matter how often you require medical care, you pay what everyone else does.   According to the Wall Street Journal article though, the community rating system has ruined New York’s insurance market. Why, you ask? This actually causes premiums to go up, not down. In the case of New York’s installation of community rating, well ahead of Obamacare, premiums went up for everyone in a community rating system by 30% to 40%. Affordable health care? Not in New York.   To the healthy, younger swathe of people who work out regularly, eat well, avoid tobacco and excessive alcohol use, they are paying almost 3 times what they would pay under the traditional insurance models where individuals pay based the insurance company’s anticipated risk. When the pool reaches a max of premiums versus expenses, the rates go up for everyone involved.   What is also happening, as it has in Massachusetts, is the scenario where uninsured persons are avoiding having to pay for health insurance until they need it. When they do sign up, it is only to treat their condition before they stop paying their premiums, leaving the rest of the pool to absorb the costs. When that happens, and it happens all the time, everyone loses.  

Why Community Rating For Small Business Owners Matters So Much

  To the small business owner seeking to offer health insurance to their employees, they may be surprised by what is in store this year for options. Under the old community rating system in New York, any small business of 50 employees and under was required by law to use the community rating insurance plans. There was no other option.   Under the new provisions of the regulation in New York however, any small business with 100 employees or less is required to use community rating insurance plans. For those who grew out of the old regulation, they are now right back into it again unless they are over 100 employees.   What most small business owners might find rather unattractive about being forced to choose from an insurance pool determined by the state is the lack of competitive rates that they must pay under this regulation. Most small business owners find this a binding and worrisome prospect.  

Why PEOs Are Able To Provide A Way Where There Is None

Many small business owners, out of desperation to avoid the community rating debacle, are finding that PEOs are an affordable and amicable option to having to participate in the government mandated plans. PEOs, even with their services fees, are coming under what a small business owner would be paying per month for their employees to be in the community rating system.   For those who may have thought about PEOs as a viable solution to HR and health insurance needs before, now may be the best time ever to look at PEOs again as a way to avoid having to participate in NY once again making small business owners participate in community rating plans when they don’t want to.   Because PEOs co-employ, they have a very large base of employees to ensure, thus giving them maximum leverage in obtaining very attractive benefits rates that small business owners can take advantage of. Enterprise grade benefits for a small business at a rate they can afford. What could be better?   If you have looked into PEOs before, you have likely noticed there is an overwhelming amount of options. The choices can be mind blowing to try and wade through. Thankfully, PEO brokers can be a very valuable resource in getting to what the needs of your business are first and then presenting you with the few PEO options that would be work for you and your employees. They will even work with you to negotiate your contract so you can feel confident in your selection the first time around.   If you are not happy with New York  and their new redefining of the community rating terms for small businesses this year, you are not stuck. Talk to a PEO broker like PEO Spectrum today and find out what you can do to get the right benefits at an attractive rate.

If you’d like to find out more about how PEOs can help you provide great benefits and payroll management at less than you are paying now, contact us today for a free consultation.

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