Should veterinary owners continue providing healthcare benefits-or not?
The Affordable Care Act may make it financially sensible for your small veterinary practice to stop providing an employee plan. It may also eliminate a part of ownership that was a headache anyway.
When I bought my first veterinary practice in the 1980s, I was smacked with the same problems that anyone who opens or purchases a clinic faces today. Everybody gets paid before the practice owner, and there are a lot of mouths to feed. Then the septic backs up or the roof leaks. The bookkeeper is laid up with knee surgery, so you have to hire a costly bookkeeping and payroll service. When money seems to be going out faster than it's coming in, you see what you can do to plug the leaks.
The quest for practice profitability hasn't changed over the years, but the nature of outsized expenses has. For me, in the post-Jimmy Carter "stagflation" years, my big problem was the note on the clinic. The interest rate was more than 11 percent (routine at the time).
That boogie man has gone back into hiding, but new financial ghouls have moved in to terrify veterinary hospital owners. The one we'll explore here? Obamacare.
Let's look at the current health insurance situation as objectively as possible. Certainly, there is no shortage of rancor in the debate over the law's value. But the U.S. Supreme Court has had its say, and the Affordable Care Act is law. Only time will tell whether this legislation is the fix for the healthcare crisis, which Congress ignored for decades. For now, it's important to try to understand the impact the law is having on veterinary practices. For our sake here, we'll consider a typical veterinary practice to be one that employs fewer than 50 employees—one of the groups exempt from the requirement to provide healthcare coverage to its workers.
Years ago, veterinary practice owners kept the health insurance budget manageable by employing a fair amount of strategy. The idea was to cover good, long-term staff members with a group health plan without unduly impacting the bottom line. Older readers know what I mean: We had to shop carefully for the coverage, pay a majority of the premium (but not 100 percent) and make sure to hire a couple of workers whose spouses had some Cadillac plan with their labor union.
Obamacare has changed the small-employer health insurance landscape completely. And the consequences have been counterintuitive. I would never be so presumptuous as to claim I have a clear understanding of the nuances of the Affordable Care Act. But I know two things for sure: First, it's well-intentioned. Second, it's really, really long. If you meet somebody who claims to have read the whole thing, he or she is lying or works for a lobbyist.
At any rate, an oversimplified explanation of one key provision is that the law seeks to eliminate plans that fail to include a set of requisite types of coverage. Among these are certain preventive care stipulations, preexisting condition coverage and mental health reimbursements. Is this a good thing? Perhaps. But the net result is that if you had one of those noncompliant policies covering your veterinary practice, it's going ... going ... gone.
You still have employees, however, and some of them still need workplace health insurance coverage. Those staffers are looking to you, the employer, to make health insurance available as a benefit. So you do what responsible business owners do. You look for the most efficacious way to solve the problem for your employees.
At this point it becomes clear that Obamacare has the potential to create a rift in the delicate relationship between the clinic owner and staff. After exhaustive research into the new options available for the animal hospital health insurance program, the practice owner may find herself sitting the team down and explaining that everybody is on their own.
Many small businesses have come to realize that their employees can do better in terms of health coverage, premium pricing and minimization of deductible and copay by purchasing their own coverage through the healthcare.gov website or one of the state-operated insurance exchanges. These small business owners are discovering that they're not doing their employees any favors by providing a blanket health insurance program at work. If such a plan complies with all of the new coverage guidelines, it may simply be too expensive to provide to the rank-and-file workers at a small firm.
As a result, some practices will simply walk away from their existing plan, calculate what they were paying per participant in the old plan and then pay that amount to their workers as a raise. One article on the topic in The New York Times quoted a business owner as saying, "We took the amount of money we were paying for their health insurance and just dumped it into their paychecks."
That result probably is not what the designers of the Affordable Care Act had hoped for when they were putting the legislation together. But isn't that result pretty much predictable? A veterinary hospital, for example, has several workers who are older, others with whole families to be covered, perhaps some who are already ill. It's inevitable that a clinic-paid plan to cover all those employees will cost more than if those workers were to seek their own coverage through one of the exchanges.
If you were to ask a small business owner his top reasons for deciding to abandon health benefits for his staff members now that the Affordable Care Act is phasing in, you might hear about costs, customization of coverage and many other valid points. What he might not mention is that shopping and selecting coverage for a disparate population of employees has always been a headache—and being rid of that job is a welcome relief.
Dr. Christopher Allen is president of Associates in Veterinary Law PC, which provides legal and consulting services to veterinarians. Call (607) 754-1510 or e-mail firstname.lastname@example.org.