Seventy-five percent of small employers renew their health plans in the fourth quarter, meaning insurers like Blue Shield of California face the bulk of their work later in the year.
Consequently, the San Francisco-based insurer said last week it will take a four-day hiatus following Labor Day to cut its payroll expenditures.
David Reid, founder and CEO EaseCentral — a San Francisco-based company providing software to manage employee benefits — said the closure avoids time off during the busy period. Since the majority of California employees make more than the new overtime income threshold of $47,476, employers can require exempt employees work overtime during the busiest season without sustaining additional labor costs.
Here are four thoughts Mr. Reid had about BS of California's closure.
1. Businesses like BS of California are using creative measures to minimize cost, like forcing employees to take vacation before busy months commence. "From their perspective, it makes total sense," he told Becker's Hospital Review.
2. Large companies, for the most part, have always used these types of strategies to minimize cost. Increasingly, "these options are going to be used by small businesses to react to costs," Mr. Reid said. BS of California's closure then "sets a new precedent in our industry. All carriers would like this to be the standard," he said.
3. Mr. Reid said the natural reaction for employees will be negative. To mitigate this reaction, companies "need to do something to compensate it. When you ask an employee to do extra, you have to do something for them."
4. Mr. Reid said businesses and insurers expected the Affordable Care Act would affect premium increases, and as a result tried to postpone large cost increases as long as they could. "We are now seeing the results of huge cost increases and many exchanges becoming insolvent after spending hundreds of millions being set up," he said.
More articles about payer issues:
Feds to make push for ACA enrollment amid exchange withdrawals
Scott & White Health Plan to exit ACA exchange
15 things to know about who makes up America's uninsured