Lawley Insurance, a Buffalo-based brokerage firm, started with five employees in 1955; it now boasts over 300. It’s operated by the family’s third generation, and has 18 non-family owners within its several locations.
Lawley has taken what it feels are innovative steps in navigating health care with the passage of the Affordable Care Act. It recently rolled out the Lawley Marketplace, a private exchange that lets businesses and individuals shop for health benefits from multiple providers.
Although the Obama administration announced last week it is delaying until 2015 the mandate for large employers to provide health care or pay a penalty, the state and federal insurance exchanges will still open Oct. 1.
T.J. Revelas and Brian M. Murphy of the Lawley Benefits Group discussed the ACA’s affect on Lawley and the act’s general ramifications.
Q: How does the passage of the Affordable Care Act change your operations?
Brian Murphy: Our clients are really looking for us to provide the answers of what the Affordable Care Act means to them and we need to incorporate that into our day-to-day service. Not only are we dealing with their insurance policies, but we’re getting proper rates and making sure they have the right benefits in place. But now, we also have to help them understand the passage of the new law – that it’s going to affect everything from the benefits that they offer, but also how they look at their employees, how they’re classified. Do they have full-time employees, or do they have part-time employees? Are there risk of penalties or are there not risk of penalties? It’s kind of a whole different skill set that we really had to incorporate.
Q: Is the ACA a threat to insurance providers or an opportunity for them to grow?
BM: Well, it’s certainly opportunity for them to grow. There’s a mandate. Everybody has to have insurance. There is a significant portion of uninsured [people] who will have to get insurance. So, the insurance carriers will benefit from having those new folks come in. The questions is whether or not it could profitable.
Q: Why did you develop the Lawley Marketplace?
T.J. Revelas: Under the Affordable Care Act there are going to be public exchanges where individuals and small groups can go and purchase insurance with subsidies. We said, ‘Why don’t we come up with a model so we can develop a private exchange for companies and employees, that are not subsidy-knowledgeable, as a way to deliver benefits?’
BM: Basically, the act created an opportunity for us, because of the public exchange, to create a new product... We’re looking at it as, there are a lot of these online portals that folks are using whether it’s to shop for travel or to go online and buy clothes or whatever the case may be – Amazon is a great example. [In the Lawley Marketplace] folks can log into a system, answer a few questions about themselves, about their financial situations, about their family, and through the technology it is able to help them determine what plan of benefits are going to fit best for them. Ultimately, it’s a portal that will help them better spend the benefit dollars their employer is giving them.
Q: What exactly does this private label benefit exchange do for companies?
TR: Basically, companies can come up with a defined contribution, so they can set a certain dollar amount for their employees. With that, those employees can purchase insurance that best meets the needs of either themselves or their families.
So the traditional way benefits were delivered, HR would basically sit down with a consultant [and] they designed the products and the plan offerings and they would distribute that to everybody that works in the company. This model is a little different. It looks more like a 401K, where basically you’re getting defined contributions, which is a set dollar amount.
Employees can then answer questions online, and the answers to these questions basically guide them to a set of products that would best meet their needs. So, it might be somebody single that’s never needed any health care and maybe they end up with a high-deductible plan and they purchase different products that they might want – they might want more life insurance or something like that, so it provides employees choice, provides employers with the ability to budget correctly. It provides some administrative ease, as well, for the employers because they’re going to have this online platform.
Q: What is important for small business to understand about the ACA?
BM: I think it’s really important for them to understand if they’re a small business or not, because they may classify themselves – or an insurance company may classify them – as a small business, but the federal government has certain rules on wether or not you’re really considered a small group. And there are rules surrounding part-time employees and control group rules that never really applied. They have to pay attention to all those things.
They’re probably going to see costs go up, by how much we don’t know yet. But when you’re adding benefits you can assume the costs are going to increase.
Q: Do you foresee some businesses dropping insurance for employees and accepting the penalties as a way to save money?
TR: That’s a little more wait and see.
BM: I haven’t talked to any of our clients where that’s their strategy. I think a lot of people made it sound like it would be a good strategy, but you really don’t know what the cost of the individual is going to be yet, through the exchange. There’s too many unknowns for a large employer that’s been offering coverage to do that at this point.
TR: Underlying all this, companies really care about their employees and recruitment and retention are key components. They are going to be very careful and very judicious in making that kind of decision.
Q: What is the difference between a public and private health care exchange?
BM: In a public exchange you have two different classifications. You’re going to have the individual exchange, that’s where anyone off the street can walk in and purchase their insurance. If they’re eligible to receive a subsidy, then through that individual exchange they can receive a subsidy and that’s based on the income requirements.
Then you have the other grouping [which] is going to be the shop, or small business exchange. That’s really companies from two to 50, they can purchase their insurance through the shop. If they’re eligible for the small business tax credit, then they can go and get that through the shop as well. They’ll have access to multiple carriers, so they’ll have the ability as a group to enroll in insurance. They can set up a defined contribution through the technology New York State has in the shop. It’s a medical and dental only enrollment process, that’s the shop.
When you look at a private exchange, like what we’re offering, you have access to the products and services, medical, dental, similar to what may be offered through the state.
We have a little more flexibility in the plans that we can offer, and then we’re going to offer a complete benefit package on top of that. We’re going to also offer life insurance, disability insurance, flexible spending accounts, HSAs, all of those different things that make up a real benefits package are going to be complete through a private exchange, where a public exchange was created to get folks medical options and to get subsidies.
So, if I’m an individual, and I qualify for subsidized coverage, you have to go through that individual exchange.... A private exchange would not have been created to low income individuals, that’s not where we’re looking to compete. Or even a very small business, probably the Lawley Marketplace, or any private exchange isn’t a good fit, they’re probably better off going through the shop.