Small Business Big World
New episodes every Tuesday discussing the challenges, adventures and fun of being a small business owner. Each week we'll delve into various small business topics, from real-world DEI considerations to selling your business, using video to market your business, unique benefit offerings for your employees and so much more. Curated by the crew at Paper Trails.
Small Business Big World
Benefit Plans for Small Businesses
In this episode of Small Business Big World, we sit down with Conner Kennedy, an expert from Acadia Benefits, to explore the often complex world of benefits for small businesses. From health and wellness programs to employee benefits packages, Conner shares invaluable insights and practical advice to help small business owners navigate the ever-evolving landscape of benefits. Whether you're just starting out or looking to enhance your existing benefits package, this episode is a must-listen for any small business owner.
This is Small Business Big World, our weekly podcast prepared by the team at Paper Trails. Owning and running a small business is hard. Each week we'll dive into the challenges, headaches, trends, fun and excitement of running a small business. After all, small businesses are the heartbeat of America and our team is here to keep them beating. Welcome to Small Business Big World.
Chris Cluff:Another exciting episode this week we have Connor Kennedy of Acadia Benefits. We're going to talk about some really exciting things employee benefits, certainly. I know I get the warm and fuzzies every year. I get to talk to Conor about our employee benefits. Absolutely, thank you, welcome. Very much for coming. We appreciate it. Thanks for having me. Yeah, a couple of quick housekeeping things. Be sure to like, follow, subscribe. We're all over the web. So Instagram, youtube, tiktok, Spotify, apple podcasts, anywhere you get your podcasts. Follow us. Small business big world, visit smallbusinessbigworldcom. Follow us on our small business big world Facebook group. That lets a conversation there. And if you have any questions for us or for our guests, be sure to email us at podcast, at papertrailscom. So you know, certainly, Connor, when we're, you know, you and I get together once a year we talk about our benefits. It's, it's a big cost, right, that's you know. You know what are you guys doing in terms of preparing benefit plans for your clients that are affordable and meet their needs, and and all that kind of stuff.
Conner Kennedy:Yeah, of course it comes down to every specific customer and what their needs are. I'll pull this closer yeah, so it comes down to whatever their needs are, whether they're a small employer or a plus 50 employer, whether they're an experience-rated group. Needs change, sure. Also, budgets change, so it's a little bit different for everyone.
Conner Kennedy:But something that we really like to do, I guess put a plug in for adecated benefits right is really learn the company's culture first, benefits package available to recruit and retain or, you know, trying to provide the best benefits possible, you know, within a budget always. So that's that's kind of our goal and, and the hardest part about it is, is really aggressively marketing what's available. Um, and, as you know, right, in the small group market, and we'll get into it in a little bit but in the small group market and we'll get into it in a little bit but in the small group market, it's all based on where you're located, what's the age of your population and things of that nature. So there's some things you can't change. But with a really aggressive marketing strategy you can really find plans that that best fit your needs. That's great.
Chris Cluff:What kind of benefits are you seeing folks offer? I mean, the health insurance is the big one, right. What else are we seeing people go out there with?
Conner Kennedy:Yeah, absolutely so, something to keep in mind. You know, some small employers come to us and they just think that they can't offer plans. You know, maybe they think they can just offer a medical plan, something like that, but there's tons of benefits available to you, whether it's medical, dental, life and disability, voluntary products, right, right, critical illness, accident, hospital indemnity all these policies go down, you know, to about the four employee count right On a dental plan, you only need two people to elect the coverage and you can have a group plan for as long as you'd like, right. So these are just, and those are low-cost type benefits.
Chris Cluff:I always tell people get a dental Like dental's $35 a month.
Conner Kennedy:Right, it's not generally a huge cost and people love it right, and it's cheaper than buying an individual dental policy for yourself or your family. And on the employer side, right, you can contribute 50% of the premium and really get that cost down. But kind of the elephant in the room is the medical plan. Always it's the most expensive by far of any of the policies available to employers and that's where we spend most of our time.
Chris Cluff:That is the most expensive one, right Certainly I think, when we looked at our stuff, it's $100,000 for just us for our benefit package and that's majority health insurance, and I'm fortunate to have a very seasoned staff, but that also means that the age of my staff is a little older, which drives that cost up, right.
Conner Kennedy:That's you know one of the challenges Definitely and you know it's not just in the small group market. I mean that's primarily what drives pricing in the small group market is the age of your population. But of course, if you're a large employer and you have an aging, stable workforce, like most companies are here in the state and throughout the country, you can see that your premiums are going to increase with trend and also with the age of your population. But to get into a few types of medical plans and different networks, this is where you can start to play around with price as well. Whether you roll a PPO plan right, you may know a PPO plan. That's national coverage.
Conner Kennedy:You can go in and out of network benefits. You can go anywhere. You can live here in Maine, live in Florida, utilize the PPO plan in network, don't need a primary care physician. Or you can move to an HMO plan. You can offer them together as well. An HMO plan, a narrowed network. You need to have a primary care physician, you have to stay in that network to receive benefits. Then there's kind of the split. We call it a POS plan. Kind of the best of both worlds is where you have national coverage. So you go in and out of network benefits, but you also need to have a primary care physician for referrals.
Chris Cluff:And that's the onset soup, right? I mean, we talk about the PPO, the HSA, the HMO, the HRA, all those kind of different add-ons, right? Absolutely. I know we see a lot of folks that have their health insurance plan but then they're contributing to an HSA health savings account, right.
Conner Kennedy:What's that kind of look like usually? Does that help lower those premiums? Yes, lots of acronyms. So we have HSA, hra, fsa, I call a DCA, a dependent care account. So, starting with an HSA, I think these are awesome and it does require employee education. But a qualified high deductible health plan can be paired with a health savings account and really what that means is that you have a high deductible health plan where all services go toward the deductible. So you have a $4,000 deductible plan. So you go to the doctor, you go to the doctor, you go to pay out of pocket.
Conner Kennedy:You go to the specialist, you go to the hospital, you go to the pharmacy, whatever it is. You're paying up until you hit that deductible. Once you've hit that deductible, the co-insurance kicks in.
Conner Kennedy:And again this is getting the weeds right Every plan gets different, but the co-insurance is going to kick in once you hit that deductible. That's just the cost share between you and the insurance company. So on a high deductible health plan that's the first time the plan starts sharing cost with you. It's when you've hit that deductible. Now they do that because the high deductible health plan is the only plan you're allowed to put dollars away tax-free into a health savings account and I would say the health savings account is the best of all worlds. So you get to payroll deduct tax-free. Those dollars grow tax-free, they roll over every single year in your account tax-free and then you use those dollars on qualified medical expenses tax-free as well.
Chris Cluff:And the employer can contribute to that account on behalf of the employee if they want to right.
Conner Kennedy:Absolutely. That's a great way to recruit and retain employees is by even doing a match program. We've seen a lot right. If you put 100 in, we'll put 100 in Things like that, so you have the employees investing in their own HSA as well as the employer. And again, we call these the healthcare 401ks. They just grow and grow and grow. You can use them to support your family and then down the line, right? Not everyone hits their deductible every year, so it makes sense for a lot of individuals to pay a lower premium, put some dollars away into a health savings account and then, if someday they need to use those dollars to offset medical costs they have it there for them.
Chris Cluff:It's not like I speak out of turn here, but an FSA, those are use or lose right, Absolutely.
Conner Kennedy:So the FSA works a little bit like a health savings account, but there is a cap. So you're only allowed to contribute up to a certain dollar amount Every year. The IRS sets those limits and if you don't use those dollars, you do forfeit those dollars over at the end of the year.
Conner Kennedy:So like an HSA you roll those dollars over. The FSA I always say can only open up an FSA or contribute to an FSA if you know for a fact you have medical expenses during a year. You pick up a prescription, you get contacts, things like that.
Chris Cluff:I remember at the end my parents used to have an FSA and they used to go to CVS and buy Advil and get new contacts and all that stuff all the way at the end of the year because they would lose it. So that's certainly a thing that you need to keep an eye on. You don't want to lose that.
Conner Kennedy:Right, and there's a great place it's the fsastorecom. If you're looking to spend down some dollars, go in the FSA store and they just have hundreds of items that are eligible expenses that you can spend down some of those dollars. You know some employers have a rollover right, you can roll over $500 in a year or something like that. But personally I tend to lean toward that HSA plan just because of the ability to roll those funds over. But of course, if your employer doesn't offer a high deductible health plan, fsa is the next best thing, right.
Chris Cluff:How do you explain this to small businesses? This is super complicated. We talk about even regular insurance. Most people are familiar with their car insurance and their home insurance, but health insurance is a whole different. All in-play benefits are a whole different game. How do you explain that to small business people?
Conner Kennedy:Not everything at once, probably Over time, building a relationship with the customer and having meetings and talking through their options, right? Something I do want to bring up is that HRA Health Reimbursement Arrangement so that's a really cool program. That's an employer-funded benefit and I have a note here that says shrinking deductible and what that really means is say you could put put in a um, a 3000 PPO plan, for example, or even higher. You know, say a, a, a 4,000 PPO plan, and what you tell your employees is like hey, you know, we, we, we have this higher deductible health plan, but we have this health reimbursement arrangement on the backend. So we will pay, you know, the last $2,000 of your deductible out of pocket, right, the employer will and, as the employer knows, not everyone hits their deductible every year. So you're saving on premium costs and you're kind of self-funding a health reimbursement arrangement for folks that do hit their deductible and it really makes everyone else's your employees' deductible down to a $2,000 plan when you're paying for a $4,000 plan. So those are ways to tweak.
Chris Cluff:I'd never heard about doing it at the end. I've heard people say hey, I'll give you money towards your HRA right.
Conner Kennedy:But I guess.
Chris Cluff:I've never heard of it. They have to prove that it's the end right. You have to use half of it and we'll give you half of it Exactly.
Conner Kennedy:That's an interesting way, and there's tons of vendors that will support that. You know this automatic claim feeds between carriers and.
Conner Kennedy:HRA vendors. That is seamless for the employee, which is great stuff. So there's tons of different options to support an HRA. And just one last piece on the HRA mostly for larger employers is to build a wellness platform that by completing wellness goals the employer contributes to an hra for them. Right, so you can earn up to 500 and in a year in an hra and say that rolls forward for the employee, right. So there's different ways to kind of craft wellness programs um, with an hra. You can do that with an HSA too, but we do like the HSA educated benefits. I mean the HRA, sorry, the health reimbursement arrangement. It's a good way to really shrink that deductible.
Chris Cluff:So, going back to how do you manage this with small businesses, right, I mean, we're all overwhelmed with everything we've got going on. I mean you talked about really identifying the culture, which I think is great. Yep, you know, understanding is again is it check in the box, is it just hey, my employees need something? Or is it really? You know you want to make sure you're taking care of your employees, and certainly I think I've probably fallen into that bucket and you know it costs an awful lot to do that. So you know what strategies I know you talked about the HSA FSA. I know you talked about the HSA FSA Are there different plans that you can offer different levels, things like that? What does that all look?
Conner Kennedy:like yeah, absolutely. I mean in all market spaces, whether it's small or large, you tweak cost really by changing deductible levels, changing coinsurance, changing co-pays and then really tweaking the pharmacy benefit. Now, as you know, in the small group market there's a bunch of canned plans, so we call that a really rigid market. There's not a ton of strategy that can go into place there besides an aggressive marketing strategy. So every year your broker brings you a spreadsheet that shows what your current plan option is and everything else that's available to you. Right, and if we know you right saying you know I love the gold plans, you know we might not look at bronze plans or something like that.
Chris Cluff:But you can also say, hey, we want to look at the gold plan, but we also may want to offer a bronze plan. Right, and say, hey, I'll cover the majority of the bronze plan and if you want you as the employee, you want the better coverage. It's going to cost you a little more right, absolutely.
Conner Kennedy:I think offering dual options or even triple options is a great tactic for employers to, I guess, one, make your employee population happy and then, two, control your employer costs. So, for example, you could put in a bronze option which is a low-cost premium to the employer. You could fund the employee tier at 100%, for example.
Conner Kennedy:You could pair that with a silver or a gold option and say you know what? We have this core bronze option available to you. We pay that at 100%, but if you'd like to buy up to a silver or a gold you pay the difference. So it gives employees a choice and an option to kind of give them whatever fits their needs. If they know they're hitting their deductible because they have ongoing medical expenses, they may not want that gold. If you're a young employee that says I just need kind of some catastrophic coverage versus if something horrible were to happen to me, then and a physical once a year.
Conner Kennedy:Exactly, the bronze is a great way to go.
Chris Cluff:So you, you said you know keeping your employees happy right. When was the last time you went to an employee meeting and all the employees were happy when you showed up to talk about benefits?
Conner Kennedy:Probably two years ago, when rates were nice across the state of Maine here, but we've since seen that change. Yeah, benefits isn't something that people love to talk about, right, because we'll get into it a little bit later. Like everything else. I mean, there's a trend, obviously on medical and dental expenses that continues to skyrocket and what we try to do for our customers is maintain the control of that cost. But there's a lot of things that are out of everyone's hands, and by having the right structure in place like we were talking about HRAs, hsas to support employees when they have medical expenses but maybe pay lower on premium is a great strategy.
Chris Cluff:What are you seeing in general with your employers, your clients? What are they paying towards these benefits? Right, I mean, I think it's certainly dependent on the business, but are people seeing a fixed amount and then you know the employee pays the difference? Are we splitting it? You know 80-20 or 50-50? I mean, what are you seeing with most of your clients?
Conner Kennedy:How are they managing that? So a couple of things there. If you're a small employer and you're trying to start a group health plan, carriers have participation requirements that you need to fulfill. So you can't just say, hey, you know what, I'm going to contribute 30% to the medical premium and think that you're going to start a group health plan, no one's going to take the plan.
Chris Cluff:It's going to be too expensive, which that we've seen a lot of our clients say hey, I want to offer benefits but I can't afford it. I want to give them something, but then they'll be in roles and then you can't get it. Even if you have three people that want to get in, the other 30 won't go in, and it's a lot of small businesses.
Conner Kennedy:That 75% participation requirement doesn't count employees that have coverage elsewhere. But if you have a group of employees that doesn't have coverage today and they decide not to take your plan, that counts against you and you won't be able to kind of jumpstart a group health plan. So what we're seeing in the small group market is for employers. You know we do have employers do the 50-50 cost share but we squeak by on participation and I hate telling people how much they need to pay towards something. But just from looking at our block of business it's 65% and up on the employee tier in the small group at block and then if you want to bring on dependent, you pay the difference. That's the cost to you. So we see that a ton as a strategy. I think 65% is a great landing point and starting point for a small employer I'm talking sub-30, sub-50 employees.
Chris Cluff:So if you're looking at, say, it's $500 or $600 a month total, the employer is paying probably $400 of that, four fifty, something like that and the employee is going to pay the difference. If that's the, that's the category and certainly, again, those premiums that I just threw out are totally wild guesses, you know, and it's changes, you know, all the time depending.
Conner Kennedy:It's different for everyone. It really is. You know, you could have a young, a young brewery right and then you could have a retirement home right. The same plans, completely different structure and cost. Yep, I know, and that's.
Chris Cluff:I think that's one of the hard things is, you know, when we talk to our clients, they say well, I talked to joey and he's got 300 bucks a month. He pays for his employees and he pays all of it. Why are you telling me it's 750 for my employees? And uh, you know, certainly it's I. I have no expertise in this and I say call Connor Right.
Conner Kennedy:Right.
Chris Cluff:But it's hard because-. Location, age yeah, it's all those factors that come into it Absolutely and that's a killer, and I think we all I mean, I feel. When I grew up I guess not that long ago, but I feel like my father worked for the town. We had good benefits. It was never anything we had to worry about, and then I became self-employed and everything changed.
Conner Kennedy:My mother worked for the school system.
Chris Cluff:Right, it was the same thing. So we had good benefits growing up. We went to the doctor and we didn't pay anything. And those were the good old days where you went to the doctor, you paid your $20 copay and you came home.
Chris Cluff:And I think the health insurance companies have probably tried, or have been trying, to change our buying habits, just as we shop for anything, maybe shop for I know there's places here where you can get an MRI for a quarter of the cost of going to the hospital. So it's trying to shop for your health care rather than.
Conner Kennedy:Yeah, absolutely, and carriers design plans based on who they have the best contracts with and that's really getting into the weeds. But you know, by going to stay exactly what you're saying instead of getting an MRI at a hospital, going to a freestanding facility, you may pay a whole lot less by going to an urgent care facility instead of the emergency room right, Urgent care is most likely a copay, Emergency room is most always deductible.
Chris Cluff:And there's urgent care in every corner. Now Exactly exactly.
Conner Kennedy:So it's those types of things. It's being knowledgeable of where you should seek care before just saying I'm going to go get care. Of course, if it's an emergency, go to the emergency room, right. But if you have a sore throat, a pink eye, rash, fever, have a small cut. Those are urgent care. And you start there. You'll start to save some dollars on your plan. The last thing I want to talk about for employer contribution is in the large group market we see a 70-30 cost share split across all tiers. That's really the landing point for a large employer and it only kind of goes up from there. You know, maybe a little bit more to the employee tier, but there's more often than not there is some sort of contribution, whether it's 50-50, to the employee, spouse, employee, child, family tier.
Chris Cluff:Yeah, that's where the big dollars come in and I know on our plan. That's, you know it's triple the cost to put everybody on there. So put the kids on there and everything, so say we can't get into health insurance right away. That's the big elephant in the room. It's expensive, we're not ready. What kind of lower cost or unique benefits are people doing? We talked about the dental. That's an inexpensive one, but is there anything else out there that people are doing?
Conner Kennedy:Yeah, an expensive one, but is there anything else out there that people are doing? Yeah, so, like you said, dental vision, voluntary products these really aren't going to break the bank for an employer and we even see most employers especially on the vision right, you've seen those rates pick up 100% of the cost of some of those policies. So, dental vision, we've seen some employers pick up 100% of the cost on an accident or a critical illness or a hospital deputy plan. So that's kind of interesting to think about. Right, those policies are very, very low dollar.
Chris Cluff:Most of those policies are less than an hour of work. Right, they're $10, $15 a month.
Conner Kennedy:They're probably less than what you're paying monthly for one of your single employees on the medical plan.
Conner Kennedy:Right, right. So those are plans that one your employees are going to really value by working at your, you know, at your company to have. And again, they're not. They're not going to be anywhere close to the medical plan. We we kind of call these low no cost benefit solutions, and there's there's a few other items I'd like to talk about.
Conner Kennedy:You know, lifestyle benefits are interesting. There's a program called Compt and it's basically kind of like an enhanced employee stipend program. So it's an app you can give your employees, say, $500 a year. It's tax-free. They can use those dollars to go to use them on wellness or, you know, to get their tires changed, coffee, food, whatever. But it's just kind of a little perk program that your employees appreciate. And again, these are low, low, low dollar items, like we were just talking about low no cost insurance plans. Home and auto insurance is an interesting one, mostly for large employers. But if you can implement a group home and auto policy, again it's no cost to the employer but it's cheaper for the employee. Anything you buy in a group is cheaper. So that's kind of an interesting program.
Chris Cluff:That's an interesting choice. So you're saying, put everyone together and say, hey, we're going to pool all of our car insurance and we want 30 cars in the parking lot, we want to get coverage on.
Conner Kennedy:Absolutely. And then you have you know PNC agent go out in group and group.
Chris Cluff:That's an interesting kind of Yep.
Conner Kennedy:So there's group group home and auto Emergency savings accounts is an interesting one. So it's basically a financial safety net for so employees don't have to dip into their retirement. You know, just have a little emergency savings account built up for each employee that you bring on. So that's kind of a low, no-cost option. And then no-cost remote care. This is kind of interesting. There's a program called Ally Health which employees can take voluntary. You can offer voluntary or employer-paid. It's 100% remote care. So you can talk to a doctor, you can get a prescription. You can talk to a doctor, you can get a prescription. You can talk to a psychiatrist, all through your smartphone or on your computer. Super, super low dollars. And it's not a benefit, it's a service. So say, if you have a large part-time population like a restaurant or a resort, something like that, you can roll out these types of virtual care programs.
Chris Cluff:So it's a Teladoc Doc in a Box Exactly, and it's an interesting model for sure. I'm always used to hey, I've known my primary care physician, I have this rapport with them, so it's interesting to have those conversations kind of with somebody gosh knows where, but it's an interesting kind of model.
Conner Kennedy:It's different. It's a different type of model. It doesn't replace your healthcare, but it's a way to offer some sort of benefit that's extremely low cost to the employer or no cost to the employer and something that your employees will truly value.
Chris Cluff:That's really interesting. Those are good, inexpensive benefits. And they're in the healthcare world right? I mean, that's a health benefit, is having access to that kind of thing. It's not like you can do that any other way. Yep Most of those folks that are uninsured are probably going to the ER right, which is costing them 100 times more than anything else, right?
Conner Kennedy:Yeah, that's what the virtual care platforms will say. Is the return on investment? Is that, you know, I don't know if it's actually there, right, but they'll say, you know, by pushing employees to using the virtual care apps, it will save on your overall experience. And again, I'm talking large, large customers. But you know, I don't know if that's 100% true. But what I do value about those virtual care programs is that they're a service, not a benefit, and it can be offered to anyone. So temporary, seasonal, part-timers, it's just people are always looking for something to offer to that employee group, employer paid, it's really low dollars and you can automatically enroll and it's one flat rate and you're, you know the, the, the seasonal employee, their entire family can utilize the app for, about gosh, I don't know, I think it was like $10 a week or something like that, right, right. So it's a low, low, low dollars.
Chris Cluff:So those low cost kind of things are really great tools in the toolbox for employers. But you, you know what are employers doing to educate their clients or their excuse me, their employees about. You know the different plans and how do you manage those and that kind of thing.
Conner Kennedy:I would say I would lean on your broker and I'll talk about that in a second but I'd also lean on the carrier apps and their websites. But I'd also lean on the carrier apps and their websites. They've all invested tons of money into their websites and they're all pretty slick. At this point, whether you need to find, like we were talking about before, virtual care in-network providers, there's so many programs that are available to you.
Conner Kennedy:Whether you enroll with UnitedHealthcare, harvardetna, anthem, blue cross, cho right, signa, they all have a specific wellness program tied to you know whether it's um reimbursement for fitness classes, things like that right, that you may not really know about, but but it's included in your plan exactly. You're already kind of paying for it. So you, you got to take advantage of these programs, that these add ons, that they have available to you. And when I first said, lean on your broker, you know really they can do educational sessions for your employees, whether it's at open enrollment or sometime throughout the year. Say, hey, you know we'd love to build a slide deck that just talks about the value adds of our programs. All that stuff's available to you. And at Acadia Benefits, of course, we've done recordings for customers, new hires. Say, hey, we have this new hire, you send them a link talks through all the benefits. It really educates them on what's available to them, as opposed to you know you trying with everything else that you're doing, trying to educate them on what benefit package is available to them.
Chris Cluff:That's great. Yeah, I think that's really important. It's certainly educating the employee population. You know, I think everyone says what am I paying for? This is so expensive. I go to the doctor, I still have to pay, I have to pay, I have to pay. But I think trying to create that value is really important, Absolutely. So, what kind of you know trends are you seeing in the industry when? Where are things headed? What's? You know? What's new, what's, what's old, what's? Where are things going?
Conner Kennedy:Yeah, so I don't want to speak specifically to Maine, but of course throughout the country we have inflation on everything. The cost of care goes up every single year.
Conner Kennedy:I would probably put medical and pharmacy trend between 9% to 11% every single year. So when customers come to us and say, why am I getting a 10% increase every single year? It's the cost of pharmacies, it's the cost to get your to receive care, it's the cost of everything that they have at the hospital. Right, it's. Everything is increasing every single year.
Conner Kennedy:And I would kind of start to think of the insurance companies as the middleman, to think of the insurance companies as the middleman. They're taking a cut of of the of of profit, of course, but remember they they're insuring what you're covering, right? They're paying out claims. So if you go to the doctor, the doctor is filing that claim with the insurance company. They're paying out that cost and you're paying for that as well, right? So they are the middleman between that. So as things increase around the world, they're going to up their charges to cover their expenses as well. And state mandates, I think, is a big one as well, right? We've seen that here in Maine. When you start to introduce different programs that have to be covered by the medical plan.
Conner Kennedy:It's great, it's a better benefit for employees and the population as a whole, but someone has to pay for it the cost goes up, the cost goes up, so you may be getting a greater benefit, um, but you're gonna be paying more in premium over time. And state mandates, federal mandates they really end up driving a ton of the increases that we're seeing.
Chris Cluff:You talked a lot about the virtual care, but one of the things I think we've seen a lot here in Maine particularly is kind of the introduction of direct primary care, and certainly you know there are doctors that just don't take insurance anymore. Yep, right, hey, pay me my monthly fee, pay me when I come. Right, keep me on retainer. Are you seeing clients kind of go that route and try to pair a higher deductible plan for those catastrophic things and use those? Have you seen a lot of that?
Conner Kennedy:Yeah, you know it's for specific employers. You know some companies that have had their core benefit in place for a long time. It's tough to make that change. We see some new kind of startup companies, startup companies utilizing those types of different programs. As you know, Maine is slow to react to things, so a lot of our out-of-state customers are doing some different things. But Maine as a whole, the Northeast as a whole change is slow. So we see most things happening in other parts of the country. They will be trickling into the Northeast, for sure, but we still see a lot of our employers offering those core offerings.
Chris Cluff:And I think for me, it's what your employees expect Exactly. I think it's been for so long health insurance in particular, has been tied to the employer. For so long health insurance in particular has been tied to the employer and it's our responsibility. We see, from a payroll perspective, we see a lot more clients offering a QSERA, which is a qualified HRA for under 50 employees. That allows them to give them a stipend every month to go buy the insurance on the marketplace, which sometimes is cheaper. Certainly, that's not allowed in the larger group settings, but definitely with the smaller groups that's an option that's out there.
Conner Kennedy:Yeah, we've seen a lot of employers consider the ICHRA and those two.
Conner Kennedy:The ICHRAs, yeah Right, and I would say in the small group market, the ICHRA over time really won't save you a ton of dollars. You're still going to have to raise your contribution as the individual marketplace raises their rates. What I've seen is for a large employer that's experience rated with the ICHRA what you can do is that there's a bunch of different rules where you can class out certain portions of the population, whether it's hourly, hourly, by location, different items like that. So if you had a population that you identified that was really driving claim costs with the ICHRA, you can move that population back into the individual marketplace, thus kind of taking them off of your experience. So we've seen large employers utilize that tactic to help lower claims costs. It's aggressive, right, but these are types of different tactics that you can use as a large employer to really lower your overall spend while still offering a great benefit for your employees. Right, you still keep that employer contribution high for that ICHRA, but they aren't on your claims experience anymore.
Conner Kennedy:It sounds like a puzzle, it's like how do we keep this all squared away, right, I mean?
Chris Cluff:it gets more and more complicated as things get more and more complicated, right? I think you know one of the trends that we've talked about in all of our you know, most recent podcasts is it's just harder and harder to do business as a small business owner because things are getting more and more and more complicated, where we just have to focus on everything. You have to focus on making the widget and you have to focus on taking care of your people and everything that goes along with that. So it's definitely been a challenge, of course.
Conner Kennedy:The last part about trends is really pharmacy costs. So pharmacy costs is exploding and the trend is much greater than your medical spend. So you know what it costs for you to go visit your primary care physician really hasn't changed in 15, 20 years. It's gone up slightly, right, but it really hasn't changed a ton. Pharmacy costs have skyrocketed. What the cost is to get a prescription is extremely expensive to what it used to be and you know, for a small employer you're not experience rated but it will still affect your premiums. In the overall scheme of things. The overall trend and increase.
Conner Kennedy:Again, we've talked about that. Small employers, you have canned plans available to you. It's rigid and what you've probably seen the past couple of renewals is that every year the carrier tweaks your plan right and some of the major tweaks that you'll see is to that pharmacy benefit right. The past couple of years we've seen tiers three and four are subject to deductible now when they used to not be right, or they've added a deductible coinsurance with a script max of, say, $300 or $500. What that's doing is that the insurance companies are trying to protect themselves as much as they can from those tier three, tier four, tier five drugs that are extremely expensive Tier one, tier two generic medications. They're still at your copay. You can still use coupon codes to get those drugs cheaper. You can still use coupon codes to get those drugs cheaper.
Conner Kennedy:These high-tier prescription drug costs that we've seen on experience reports running, say, $85,000 a month. Right, these drugs are saving people's lives, so we have to remember that. So that's why they're there. It's great You're providing a benefit for your employees that's really saving someone's life. On the flip side as well is that these drugs are driving a ton of cost on your plan. They're increasing premium rates every single year. So by designing a program say having a specific drug deductible, you have to meet $1,000 before you pay that co-pay, things like that that can kind of start to tweak your rates to help save employer dollars as well.
Chris Cluff:Interesting. That's crazy, just the prescription stuff.
Conner Kennedy:The prescription drug is a rabbit hole, again in the small group market. It's rigid. There's not a lot you can do strategy-wise as you get into the large group market. You can tweak plan design. You can tweak, you know, the the formulary that you offer, whether it's a premium formulary or a value formulary, um, kind of covering different sort of drugs, and then we're not going to go down this rabbit hole. But if you're a large self-funded employer, there's tons of options available to you, whether you kind of carve out your own prescription drug benefit manager, your own PBM to manage claim costs, things like that. But again, primarily Now you need someone to manage your house right, absolutely.
Chris Cluff:You know those are way bigger than most. You know most of our clients and things we're thinking about. But yeah, no, I think there's a lot to this and I've just my brain's kind of spinning just thinking about all the different kind of ways to manage benefits for small businesses.
Conner Kennedy:Yeah.
Chris Cluff:You know we didn't even talk about some of the other ones. You know disability plans, life and those kind of things. There's so many options out there, and again some of them are relatively low cost, absolutely. You know, certainly we talked about you and I talked a little bit about, you know, the paid family medical leave stuff kind of sweeping the country and that's certainly something that's going to change the landscape, you know, coming across too and we'll have to get back together to talk about that.
Conner Kennedy:Yeah, yeah, we can talk about that. We're going to talk about that again at some point, because there's the rulemaking progress process is still happening now, today, but there's a few things that we do know and still subject to change. Right, everything's subject to change, but the maximum contribution per employee is going to be about 1% of the individual wage rate, and it's going to be. That's going to change depending on your employer size I believe it's, was it 15 employees size I believe it's. Was it 15 employees, 15 employees.
Chris Cluff:It's all going to change. That's the thing and I think you know. Really what's going to happen is is businesses are going to have to figure out if it's worth going into a state plan like that. Or I know there's a lot of exclusions that potentially could say hey, if you have a plan, a short-term disability plan in place already, you may be able to exempt yourself from kind of the state plan, but but term disability plan in place already you may be able to exempt yourself from kind of the state plan, but certainly that's a whole different conversation for a whole different day and how that's going to all work.
Conner Kennedy:Yeah, I would say timeline wise, right? We're saying November of 24 is when employers need to decide whether they'd like to jump into the state pool or decide if they want to stay in a private carrier setting. If you have a short-term disability policy in place already, I would lean on that carrier and your broker to make sure we kind of design your STD policy that meets the criteria. What the state is asking you to do and the good thing about that about waiting is that payroll tax starts in January, right? So if you go with the private plan, you know your premiums due for the employers is not going to start till May of 26. Right, right. So there's going to be a big gap there where you can save some dollars. Of course, depending on what that carrier is going to charge you to manage the plans. There's a lot of stuff up in the air. Still. We know that a lot of our customers with short-term disability policies in place today are probably going to lean on their private carriers, but it remains to be seen.
Chris Cluff:Still so much to know about that. Still much to learn for sure. Well, good, well, thank you very much, carter. This has been really good. We covered a lot of ground and so, well, good, well, thank you very much, connor. This has been really good. We talked, we covered a lot of ground and, like I said, my head's spinning for sure. So how do we, how do people find you if they want to get in touch with you? Instagram, you know, facebook or anything like that?
Chris Cluff:Yeah you know Email. How do people get in touch with you?
Conner Kennedy:if they have questions to follow up.
Chris Cluff:You can go to Connor.
Conner Kennedy:Kennedy right. Connor Kennedy at.
Chris Cluff:Acadia Benefits.
Conner Kennedy:Right. So Acadia Benefits is just a little bit about us. We've been managing benefit plans for over 32 years. We're based right in Portland, Maine. We're independently owned and operated and we have a lot of long-term customers. We've been doing this for a long time. We think we do a great job, so feel free, Absolutely Reach out to me LinkedIn through our website, and we'll get back to you and see what we can do for you.
Chris Cluff:Awesome, great, well, thank you. So again, be sure to like, follow, subscribe to all of our channels Instagram, youtube, tiktok, Spotify, apple Podcasts. Wherever you listen or watch, we're there. I promise Don't forget to email us any questions. If you have questions about future things you'd like to hear podcast at papertrailscom. Otherwise, we will see you next week. Thanks so much. Thanks for listening to this week's episode of Small Business Big World. This podcast is a production of Papertrails. We are a payroll and HR company based in Kennebunk, maine, and we serve small and mid-sized businesses across New England and the country. If you found this podcast helpful, don't forget to follow us at at Paper Trails Payroll across all social media platforms and check us out at papertrailscom for more information. As a reminder, the views, opinions and thoughts expressed by the hosts and guests alone. The material presented in this podcast is for general information purposes only and should not be considered legal or financial advice. By inviting this guest to our podcast, paper Trails does not imply endorsement of or opposition to any specific individual.
