POSTED: Monday, April 19th, 2010 at 1:00 am

BY: dmc-admin

Increasing health care costs are making it harder for small and midsize law firms to use medical benefits to attract attorneys.

Tim Byrne, vice president of M3 Insurance Solutions Inc., annually sets up health insurance plans for 50 small and mid-size law firms in the Madison area and said for the most part companies try to get by “on the skin of their teeth in medical.

“Law firms can still take advantage of opportunities to recruit and retain good employees by having a vibrant benefits package, but not in medical,” Byrne said.

The sweeping national health care reform bills signed last month add more uncertainty for firms.

Kevin P. Russell, executive director at Davis & Kuelthau SC, said the firm endured a 10 percent increase when it renewed premiums on January 1 with a new provider. He said that while the percentage charged to employees for coverage remained the same, the cost increased because the firm had to pay more for premiums.

“Attorneys take a little bit of the hurt, but the firm takes a great deal more,” Russell said.

Several years ago the firm switched to a high deductible health plan in conjunction with a Health Savings Account. Russell said the firm still has success in attracting attorneys based in part on its health care coverage.

But when making an offer, he said, the firm lays out the entire benefits package, rather than singling out one aspect, like health insurance.

Some attorneys may value vacation days or long-term disability over health insurance, noted Russell, which is why the firm doesn’t showcase individual benefits.

“If we recruit, we let people know what the value of our benefits package is and it has swayed some people to think it’s not a bad deal,” he said.

Bruce A. Wichmann, firm administrator at Axley Brynelson LLP, said the firm has no immediate plans to increase or decrease the employee contribution percentage for health care.

Like other firms, he indicated that employee costs will rise accordingly if premiums skyrocket. Wichmann said it is hard to speculate on the long-term impact that the new health care reforms will have on the legal industry.

The Patient Protection and Affordable Care Act (PPACA) and the Health Care and Education Reconciliation Act of 2010 signed by President Obama last month will affect almost everyone, from employers and employees to insurance providers.

“If there is an increase because of the bill, like every other year, we will take a look and decide whether we should change our percentage or not,” Wichmann said.

Russell agreed and said he has heard some people say the changes are going to be “doom and gloom,” while others expect them to have a positive impact.

Among the changes firms with more than 50 employees can expect is a minimum coverage requirement. Companies which fail to offer a “minimum essential coverage” could face penalties of $2,000 per year, per employee.

However, firms with 50 or fewer employees won’t have to pay a $750 employee tax for failing to offer coverage. In addition, some small firms with fewer than 25 employees and average annual wages of less than $50,000 will be eligible for a tax credit.

Also, starting in 2013, many large and small firms will face $2,500 caps in health flexible spending arrangement contributions per year.

While the changes will likely impact all firms to a degree, in the short term, most are still struggling to keep costs down.

In an effort to reduce dramatic coverage increases, all of the law firms Byrne represents in the Madison area are filtered into “risk pools” among several insurance carriers, so a handful of adverse claims won’t result in a rate spike for a few firms. Rather, the impact is spread out to minimize cost increases.

“With 50 firms, it flattens the impact so a small group of claimants goes into a larger premium pool and it levels out,” Byrne explained.

He suggested that once the majority of health care reforms take shape, more small and midsize firms may opt for a “health care exchange” system should premiums spike.

This could alter how firms compete for prospective employees based on medical benefits, given that many firms may in essence be offering similar plans.

“Clients are happy when they can share that exposure and are just pleased with good news,” Byrne said. “It’s not so much a matter of competing with one another.”

Jack Zemlicka can be reached at jack.zemlicka@wislawjournal.com.

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