The Minimum Wage is Rising: What It Means for Group Benefits

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It’s always been important for businesses to control group benefits costs. Now, with minimum wage changes, it will be more important than ever. In what the Los Angeles Times called a “historic measure,” the California Governor just signed a bill into law that raises the minimum wage to $15 an hour by 2022, using incremental increases of roughly a dollar a year. “Businesses with fewer than 26 employees would get an additional year to comply,” the LA Times said. By 2024, the changes would apply across the board.

Meanwhile in New York, Reuters reported that the minimum wage is set to rise from $9 to $15 an hour over the next three years. As in California, the plan provides a “slow lane” for some: small businesses and surrounding counties will have extra time to come into compliance.

In fact, increases like these are appearing across the U.S. There are seven states now aiming for the $15 mark, and no fewer than 16 are making minimum wage increases of some amount, CNBC reported.

What do wage increases mean for group benefits?

A recent survey by Arthur J. Gallagher & Co found that despite ACA reforms, 90 percent of employers are facing premium increases on employee health plans for the current plan year. Twenty-five percent are seeing rate increases in the double digits.

In this climate, paying for healthcare poses a difficult riddle. Minimum wage increases make that riddle all the more significant. With rising numbers on both fronts – employee healthcare and wages – it’s imperative to control costs wherever possible.

“While the increase will help struggling workers, businesses and their customers will ultimately have to pay for it,”said the Sacramento Bee.

We should add that there is an important bright spot to be found amid these changes. If the minimum wage is slated to rise in your area, and if you’re using the Rate of Pay or W-2 safe harbor that the ACA provides, you are entitled to reduce your employer contribution to health insurance.

Do other bright spots exist? We believe they do. If you’d like to ensure that your approach to group benefits plan is the best, most cost-effective fit for your situation, contact us. And, if you haven’t already done so, make sure to subscribe to our blog to receive all the latest group benefits developments.

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