3 takeaways for employee benefits industry from Obama’s State of the Union address
Originally posted January 29, 2014 by Julie Stich on https://ebn.benefitnews.com
Following President Obama’s fifth State of the Union address, the International Foundation of Employee Benefit Plans closely examined the key takeaways that will affect the employee benefits industry.
No. 1: The Affordable Care Act is here to stay and opponents will face a difficult, if not impossible, task to repeal it legislatively. However, the door is still open to make changes and improvements to the existing law.
No. 2: The ACA still needs many more “young invincibles” to sign up in order to keep costs low for others.
No. 3: Apprenticeship and other job training programs are going to be a major focus for the administration in 2014. Led by Vice President Biden, these efforts will work to mobilize business leaders, community colleges, mayors and governors, and labor leaders to increase funding and the number of innovative apprenticeships in America.
Without a doubt, the Affordable Care Act has had the most significant impact on the employee benefits industry in decades and even though the president’s address maintained a light focus on the issue, it will continue to affect our industry and raise questions with the public and employers for the foreseeable future. In addition, the president’s announcement of a major initiative to support apprenticeship and other job training programs has the opportunity to provide our industry with many benefits and needed resources.
Economists see little effect on hiring from ACA
Originally posted January 27, 2014 by Carolos Torres on https://ebn.benefitnews.com
The vast majority of U.S. companies said the implementation of the Obama administration’s health care law will have no effect on their businesses or hiring plans, according to results of a poll issued Monday.
About 75% of those surveyed said the Affordable Care Act hasn’t influenced their planning or expectations for 2014, according to data from the National Association for Business Economics. Twenty-one percent of 64 respondents said that the law would have a negative impact on business conditions and 5% said it will be positive.
Most, 85%, also said the law wouldn’t prompt a change in their hiring practices, according to the survey. Some 6% said it would lead to more employment of part-time help and fewer full-time staff, while 8% said it would lead to less hiring of all types of workers.
Participants were also sanguine about changes in Federal Reserve monetary policy, with 70% saying tapering of record stimulus would have no effect on profitability, and the remaining split almost evenly between positive and negative implications for earnings. An overwhelming majority of participants, 94%, said uncertainty regarding what direction policy makers would take prompted no change in capital investment plans.
“A significant majority of survey respondents anticipate little material impact on business conditions from the implementation of the Affordable Care Act or from possible changes in the Federal Reserve’s accommodative monetary policy stance,” Jack Kleinhenz, NABE president and chief economist at Kleinhenz and Associates in Cleveland Heights, Ohio, said in a statement. “On net, survey respondents are more optimistic in their economic outlook and, regardless of any changes in monetary policy, expect their firms’ performance in 2014 will be superior to that in 2013.”
Cloud-based HR revolutionizes employee engagement
Originally posted January 27, 2014 by Henry Albrecht on https://ebn.benefitnews.com
It’s undeniable – cloud-based technologies have fundamentally changed how businesses operate. As employers transition from on- to off-premise for HRIS, they are seeing increased productivity and profitability in the obvious ways: lower up-front costs, faster innovation, easier integration, and no nasty upgrade hassles. It’s quite possible, however, that a less-obvious HR cloud revolution may prove to be even more meaningful – one that is more about people and culture.
This revolution, led by firms who bring a consumer-like experience and an understanding of the value of social connections at work, is helping build employer brands, improve engagement, and increase productivity and profits. It is ushering collaboration, innovation, and transparency in new ways. Here are three ways this revolution can change company culture:
1. The cloud allows for employee-driven collaboration and innovation at a new scale. This is particularly powerful with new tools like Brainstorm, created by financial software company Intuit. Brainstorm fosters employee innovation by allowing employees around the world to collaborate on new ideas, from small changes in process to large-scale, innovative business ideas. First created to spark innovation and cross-team collaboration, the tool helped Intuit generate a 1,000% increase in documented new ideas and a 500% increase in innovation in only a few short years. Within this new frontier for employee engagement and innovation, HR teams can also now easily identify the most innovative employees and support their growth.
Since its development a few years ago, the tool has expanded as a way for Intuit to foster inter-company collaboration, such as solving shared problems between themselves and the Red Cross. And after a partner asked Intuit to license Brainstorm, the company realized how valuable the software could be for other enterprises. Now, companies like General Electric and Lockheed Martin are using the tool with great success.
2. The cloud increases executive visibility of employee happiness.Historically, layers of reporting and infrastructure hindered executive visibility of everything from finances, operations, and even employee satisfaction. While financial and operational reporting does exists, (albeit expensive and often on-premise due to security) gauging employee morale at regular and consistent intervals has proven to be much more difficult.
Cloud-based technologies now allow for a new layer of instant visibility and transparency. TINYhr, a Seattle-based company, createdTINYpulse to collect employee feedback in one-question (i.e., “tiny”) weekly surveys. The instant feedback gives company leaders a constant pulse on employee happiness, so they can quickly (and cost-effectively) identify major issues along with superstar employees who can lead morale.
3. The cloud elevates the social power of community. Traditional employee wellness programs have been limited to one-time biometric screenings, sporadic events, or one-to-one or one-to-many communications.Cloud-based solutions open the door for many-to-many connections, fostering broad, social employee engagement versus individual task completion. Gamification, points systems, and both individual and team challenges energize the experience while still addressing compliance-based elements. By tracking goals, issuing challenges, and aligning engagement, health, performance, culture, and talent strategies, cloud-based products and technologies help HR departments think bigger, build internal brands faster and reach new engagement heights.
As the cloud-based revolution unfolds and newer technologies come to market, it’s imperative for HR and executive teams to adopt tools that align with business goals and will actually be used. And while these tools allow for a new layer of transparency, they will shine a light in the darkest corners of your company. So be ready to act on what you learn. Democracy is floating on a cloud.
Top 3 voluntary products poised for takeoff in 2014
Originally posted January 06, 2014 by Caitlin Bronson on https://www.ibamag.com
As small businesses and individuals consider their healthcare strategies within the context of the Affordable Care Act, several industry research bodies suggest voluntary benefits and services will emerge as a boom market for producer sales in the next five years.
According to the Towers Watson 2013 Voluntary Benefits and Services Survey, the importance of voluntary products in a company’s rewards strategy will grow 27% in that timeframe, while nearly 90% of producers surveyed by Eastbridge Consulting Group said they expect sales of voluntary benefit plans to increase.
While the most common voluntary products like vision, dental and disability will continue to see stable sales, however, Towers Watson said the following three are the ones to watch in 2014.
If you’re not already offering these plans, now may be the time to make a concentrated push for clients looking to expand their rewards strategy in a cost-effective way.
Critical Illness
Small businesses with fewer than 50 employees are not required to offer employee medical coverage under the Affordable Care Act, but many are looking to provide some sort of benefit plan to attract and retain quality workers.
As such, Towers Watson expects affordable medical benefits like critical illness or accident insurance to increase in sales in the upcoming two years. In a survey of small business employers, Towers Watson found 8% plan to introduce a critical illness plan in 2014 and another 13% are considering such a plan in 2015.
Accident plans are already popular, but another 9% of survey respondents said they are considering adding one by 2015.
This tallies with the experience of Tye Elliott, vice president for core broker sales with Aflac.
“Critical illness and accident plans have been thought of as secondary, but that’s not the case anymore,” Elliot said. “Small businesses want to invest in their employees, but they want to do it practically. At a very small out-of-pocket cost, [critical illness benefits] are amazing in terms of the loyalty that builds among your clients.”
Financial Counseling
Nearly 20% of small businesses told Towers Watson they were considering adding financial counseling benefits within the next two years, particularly during this fall’s 2014 enrollment season.
Towers Watson expects employers will want to increase workers’ retirement and personal finance knowledge as the burden of financial planning falls increasingly to individuals, who pay as little as $5 to $20 a month for such benefits.
Financial counseling can even be paid solely by employees through payroll deferral, meaning no cost for employers and increased ease and peace of mind for workers.
Identity Theft Protection
With widely publicized cyber breaches like the ones that afflicted Target and Snapchat this holiday season, identity theft protection is going to be a hot item in 2014.
In fact, a recent poll from LifeLock indicated nearly 60% of producers have fielded requests from commercial clients on identity protection benefits.
Like other voluntary packages, identity theft protection is available at a generally low cost to employers. Average coverage ranges from $7 to $20 a month, with most policies offering coverage of up to $1mn.
Greg Meyer of N.C.-based Worksite Benefit Advisors said the real market for producers is in small- to medium-sized businesses, as larger employers are often targeted directly by vendors. An effective pitch from an educated agent could do wonders.
“Brokers really need to show employers the impact that ID theft plays on lost productivity caused by ID theft of an employee,” Meyer said. “If you have an employee whose identity is stolen on the road, this not only impacts that company’s corporate credit card account, it impacts productivity because the road warrior will be off the road coping with the stress and drama that goes along with trying to recover and recoup his or her credit.”
According to Towers Watson, 20% of small businesses are considering adopting identity theft protection policies by 2015.
Most workers happy with their benefits, salaries
Originally posted December 20, 2013 by Amanda McGrory-Dixon on https://ebn.benefitnews.com
When it comes to their health benefits, most employees say they’re happy with their current offerings and lack interest in altering their balance of benefits and wages, according to a new survey by the Employee Benefit Research Institute.
Specifically, 12% of respondents say they are extremely satisfied with their plans, 39% of respondents say they are very satisfied, and 37% of respondents say they are somewhat satisfied. Just 10% responded in a negative fashion. Since the survey was first initiated, the number of respondents who report feeling happy with their benefits has generally been high.
“By far, health insurance, in particular, continues to be the most important employee benefit to workers,” says Paul Fronstin, director of EBRI’s Health Research and Education Program and author of the survey.
The survey also finds that there is uncertainty whether employers will still offer health insurance for employees in the future because of the Affordable Care Act; however, benefits are a key factor in choosing a job.
“While there may be a lot of questions about the future of the American health insurance system, the majority of those who have health coverage like the plan they have,” says Ruth Helman of Greenwald and Associates, co-author of the report.
If changes to tax preferences for employment-based health coverage were implemented, making benefits taxable, 39% of respondents report that they would keep their current amount of coverage. This is nearly at the same level of 40% in 2012, though up from 31% in 2011.
According to the survey, most respondents agree they would like more choices in health plans; however they are not sure that they could choose health insurance, much less the best plan, using an objective rating system, which is included in the exchange system.
Instead, 35% of respondents say they prefer to keep receiving health insurance from their current plans while 45% of respondents report that they would rather choose their insurance and have their employers pay what they are paying now for that coverage. Another 21% say they would prefer their employers give them money to spend on health insurance as they please.
DOL issues FAQs on ACA's implementation
Originally posted January 23, 2014 by Ilyse Wolens Schuman on https://ebn.benefitnews.com
The Department of Labor’s Employee Benefits Security Administration (EBSA) has issued the latest in its series of Frequently Asked Questions (FAQs) on the Affordable Care Act’s (ACA) implementation. The latest guidance (Part XVIII) addresses questions on coverage of preventive services and limitation on cost-sharing requirements under the ACA. The FAQs also provide guidance on expatriate plans, wellness programs, fixed indemnity insurance and the Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA).
Preventive Services
With respect to preventive services, the ACA requires non-grandfathered group health plans and health insurance coverage offered in the individual or group market to provide benefits for, and prohibit the imposition of cost-sharing requirements with respect to, the following:
Evidenced-based items or services that have in effect a rating of "A" or "B" in the current recommendations of the United States Preventive Services Task Force (USPSTF) with respect to the individual involved, except for the recommendations of the USPSTF regarding breast cancer screening, mammography, and prevention issued on or around November 2009, which are not considered current;
Immunizations for routine use in children, adolescents, and adults that have in effect a recommendation from the Advisory Committee on Immunization Practices (ACIP) of the Centers for Disease Control and Prevention (CDC) with respect to the individual involved;
With respect to infants, children, and adolescents, evidence-informed preventive care and screenings provided for in the comprehensive guidelines supported by the Health Resources and Services Administration (HRSA); and
With respect to women, evidence-informed preventive care and screening provided for in comprehensive guidelines supported by HRSA, to the extent not already included in the current recommendations of the USPSTF.
On September 24, 2013, the USPSTF issued new recommendations with respect to breast cancer. Accordingly, the FAQ explains that for plan or policy years beginning one year after September 24, 2014, non-grandfathered group health plans and non-grandfathered health insurance coverage offered in the individual or group market will be required to cover such medications for applicable women without cost sharing subject to reasonable medical management.
Cost-Sharing Limitations
The FAQs include a number of questions about the application of the ACA’s cost-sharing limitation. For plan years beginning in 2014, the annual limitation on out-of-pocket costs applicable to non-grandfathered group health plans and group health insurance coverage is $6,350 for self-only coverage and $12,700 for coverage other than self-only coverage. For subsequent plan years, the annual limitation on out-of-pocket costs will increase by the premium adjustment percentage described in the ACA. A previous FAQ provided guidance on out-of-pocket maximums for the first year of applicability where a group health plan or group health insurance issuer utilizes more than one service provider to administer benefits that are subject to the annual limitation on out-of-pocket costs. This latest guidance explains that for plan years beginning on or after January 1, 2015, non-grandfathered group health plans and group health insurance coverage must have an out-of-pocket maximum that limits overall out-of-pocket costs on all essential health benefits (EHB). In addition, plans and issuers are permitted to structure a benefit design using separate out-of-pocket limits, provided that the combined amount of any separate out-of-pocket limits applicable to all EHBs under the plan does not exceed the annual limitation on out-of-pocket maximums for that year. The FAQs clarify that a plan that includes a network of providers is not required to count an individual's out-of-pocket expenses for out-of-network items and services toward the plan's annual maximum out-of-pocket limit. A plan is not required to count an individual's out-of-pocket costs for non-covered items or services (such as cosmetic services) toward the plan's annual maximum out-of-pocket limit either.
Expatriate Plans
The FAQs include clarification of the temporary transitional relief exempting expatriate health coverage from certain ACA provision. For purposes of the transitional relief, an insured expatriate health plan is an insured group health plan for which enrollment is limited to primary insureds for whom there is a good faith expectation that such individuals will reside outside of their home country or outside of the United States for at least six months of a 12-month period and any covered dependents, and also with respect to group health insurance coverage offered in conjunction with the expatriate group health plan.
Wellness Programs
Final regulations regarding nondiscriminatory wellness programs in group health increased the maximum permissible reward under a health-contingent wellness program from 20% to 30% of the cost of coverage, and further increased the maximum permissible reward to 50% for wellness programs designed to prevent or reduce tobacco use. The DOL explains that the FAQs address several issues that have been raised since the publication of the final regulations.
If a participant is provided a reasonable opportunity to enroll in the tobacco cessation program at the beginning of the plan year and qualify for the reward (i.e., avoiding the tobacco premium surcharge) under the program, the plan is not required (but is permitted) to provide another opportunity to avoid the tobacco premium surcharge until renewal or reenrollment for coverage for the next plan year.
The FAQs describe a scenario in which a plan participant's doctor advises that an outcome-based wellness program's standard for obtaining a reward is medically inappropriate for the plan participant and the doctor suggests a weight reduction program (an activity-only program) instead. The FAQs explain that the plan does have a say with respect to how a weight reduction program is selected. The plan must provide a reasonable alternative standard that accommodates the recommendations of the individual's personal physician with regard to medical appropriateness. Many different weight reduction programs may be reasonable for this purpose, and a participant should discuss different options with the plan.
The final wellness regulations provided sample language that may be used to satisfy the requirement to provide notice of the availability of a reasonable alternative standard. The FAQs state that plans and issuers are permitted to modify this sample language to reflect the details of their wellness programs, provided that the notice includes all of the required content.
Mental Health Parity
With respect to mental health parity requirements, the guidance states that the ACA builds on the MHPAEA and provides that mental health and substance use disorder services are one of 10 EHB categories. Under the EHB rule, non-grandfathered health plans in the individual and small group markets are required to comply with the requirements of the parity regulations to satisfy the requirement to provide EHB.
Making HSAs and wellness work together
Originally posted January 13, 2014 by Rose Rosa on https://ebn.benefitnews.com
Maximizing the positive impact of a wellness program is a goal of many employers. Much of the discussion around wellness focuses on how to increase employee participation. Doing so remains a challenge for many employers, but there are some innovative approaches employers are exploring.
One concept we’re seeing is tying wellness to health savings accounts. With a HSA, employees can use tax-free dollars to pay for qualified out-of-pocket healthcare expenses, typically including items such as eyeglasses or prescription medications. Now, some employers are expanding use of HSAs to drive wellness participation.
Combining wellness and HSAs is a long-term strategy. However, there can be some immediate benefit for the employer, which typically begins by going from a traditional fully insured plan to a high-deductible plan with a HSA, thereby saving the employer some money right out of the gate.
Here’s how tying a HSA to wellness can work: The employer funds or partially funds a HSA, which is the “carrot” to get employees interested in the account. Over time, some employers introduce the so-called “stick” to maximize participation by requiring employees to meet certain health-related criteria.
Here’s one possible approach:
• In the first year, the employer contributes to the employees’ HSA account (typically, a 50% contribution).
• To receive the 50% contribution in year two, employees are required to complete a health risk assessment.
• In year three, the employer will increase the requirements, perhaps including completion of another HRA, plus biometric testing.
By increasing the conditions that must be met, it creates a natural progression that helps employees become more aware of their health and to do something about any issues identified by the screening. It also demonstrates to employees what they need to do to control their personal health care costs; those who make progress get discounts on their plan, so they become more responsible for their own health and ultimately their own savings. As employees control their costs, they help control the employer’s costs as well.
In the end, it’s a win-win scenario; the combination of HSAs and wellness programs can provide value to both employees and employers. It’s also an effective way to guide beneficial behavior since employees who follow the program are more likely to take steps to become (or stay) healthy. Using this type of program can also be a good opportunity to tie in other health initiatives, such as smoking cessation. One approach is to apply a smokers’ surcharge on the employee contributions (the stick) while also offering smoking cessation programs to help the employee quit smoking (the carrot to avoid the stick).
To make this combined strategy work, education is a vital. HSAs are most effective if employees understand how the program works, so it’s the employer’s duty to teach them. With this approach, employees have greater risk and higher deductibles, but they also have greater control and choice, coupled with an incentive to be healthy. Essentially, this spurs the employee to become a more educated consumer of health care services.
But it’s up to the employer to make the first move.
Why you can’t afford not to offer health benefits
Originally posted January 14, 2014 by Larry Boress on https://ebn.benefitnews.com
The debate continues on the future of employer-based health benefits as employers continue to be challenged by the economy, the health care delivery system and changes resulting from the Affordable Care Act. There are some who believe this is the beginning of the end for employer-based health care benefits. I’m not one of them.
Why are employers still offering health care benefits and increasing worksite wellness activities? It’s not rocket science. Employers don’t offer benefits because they are altruistic. They do so primarily to recruit and retain talent and to ensure workers have the mental and physical capacity to perform their best on the job.
With benefits being the second highest expense after payroll, and the foreboding 2018 excise (“Cadillac“) tax on benefits above a certain dollar level, there is a great need for employers to reduce their outlay for medical expenses. Businesses are addressing this in multiple ways, including increasing programs to identify disease and health problems early in their progress and to reduce the risks for those with chronic conditions.
Employers have increased deductibles and co-pays of their health benefit programs, with close to 30% now offering only health savings accounts and health reimbursement accounts. In a new development, according the Private Exchange Evaluation Collaborative, close to half of all employers will be considering using private health insurance exchanges to offload their benefit administrative costs, while still offering benefits to their employees.
Increasingly, we also find employers are taking a deeper dive into providing direct health programs and services to their covered populations to respond to a health system that fails to offer easy access, effectively focus on prevention or management of chronic conditions and one that doesn’t incentivize individuals to take responsibility for own their health.
The nonprofit National Association of Worksite Health Centers found that close to a third of employers today make medical services available onsite so they are easily accessible to their employees. This allows them to reduce costs while minimizing lost work time due to absenteeism
The existence or even the unlikely repeal of the ACA does not change the value of offering benefits for employers. When you look at Europe, where many countries do not offer health benefits to their citizens, you still find companies offering wellness and preventive services to keep people safe, healthy and productive.
In surveys conducted by the Midwest Business Group on Health, the vast majority of employers agree that there is a link between an employee’s health and their productivity. They believe that health benefits are a necessary cost of doing business and view health benefits as an investment in human capital with measurable outcomes, not just an expense against the bottom line.
If employers are to remain attractive to new talent and retain their existing human capital, they will need to continue to offer health benefits to their workforces. But to do so, businesses must develop comprehensive, integrated strategies that reduce their costs and make employees more responsible for decisions they make about their medical care.
Many employers have already begun to move in this direction by increasing use of outcome-based incentives to motivate lifestyle choices, encouraging use of preventive care, and paying only for high quality providers and high-value, cost-effective treatments and services.
At the end of the day, dropping health care coverage is not an option, especially for employers who are focused on the health and productivity of their workforce. An employer-based system can and should continue if we recognize the value of our human capital being as important as the technology, machinery and plants that develop our products. Regardless of a company’s size, in a global marketplace, a business can’t afford to lose its most important assets – its people.
CFOs say they’ll increase health plan cost-sharing, blame PPACA
Originally posted January 09,2014 by Dan Cook on https://www.benefitspro.com
The old employee health care cost pass-along is going to heat up considerably this year. And guess who’s getting the blame for it? Yep, the Patient Protection and Affordable Care Act.
At least that’s the consensus from an in-depth survey of 96 corporate CFOs executed by Deloitte Consulting. Respondents told Deloitte they’ll be asking employees to kick in more for company coverage and, when asked why they have to, they’re going to point to Obamacare as the cause.
Health insurance trends were just part of this much broader survey. In general, the companies sampled are optimistic about 2014 and seem to feel their employers have done a good job of getting the ship in shape for this year. While they are forecasting relatively low sales increases in 2014 vs. 2013, earnings expectations actually increased slightly, and 54 percent expressed “rising optimism” about quarterly returned compared to 42 percent last quarter.
When it comes to health insurance costs, containment is the key word. These CFOs have been told to rein in health costs and they’re going to do so by shifting costs to those covered.
That this is the preferred option over reducing coverage was made clear when just 10 percent said they would offer employees less robust coverage packages. Instead, 60 percent have raised or will raise the employee portion of cost, keeping benefits where they’re at. (Only 10 percent said they’d beef up the health benefits package.) Another 28 percent are considering doing so.
When asked about health care cost controls, Deloitte said nearly two-thirds of companies have taken at least one major cost-control step, usually either implementing wellness programs or raising employees’ financial responsibility. About 45 percent plan to take a second cost-control step in the next 12 months. For cost pass-along employers, most choose higher premium contributions and deductibles.
Perhaps fearing a slump in morale or an increase in negative gossip, these CFOs weren’t about to let the company take the blame for higher employee cost sharing.
Deloitte said “42 percent of (U.S.) chief financial officers who have shifted additional healthcare costs to workers cited the Affordable Care Act as their impetus. The number blaming the healthcare law rose to 63 percent for CFOs planning to shift costs in the next year. The statistics suggest that Obamacare is aggravating the trend of employers charging staff higher healthcare costs in order to contain spending, and came as most CFOs expressed rising optimism about their companies’ prospects.”
The PPACA served as whipping boy on other fronts. The survey said:
- About 13 percent blamed reduced their earnings forecasts on the act;
- 8 percent cited the act for constrained hiring;
- 4 percent said the act forced them to shift toward part-time staffing.
Second wave of health-insurance disruption affects small businesses
Originally posted January 11, 2014 by Ariana Eunjung Cha on https://www.washingtonpost.com
When millions of health-insurance plans were canceled last fall, the Obama administration tried to be reassuring, saying the terminations affected only the small minority of Americans who bought individual policies.
But according to industry analysts, insurers and state regulators, the disruption will be far greater, potentially affecting millions of people who receive insurance through small employers by the end of 2014.
While some cancellation notices already have gone out, insurers say the bulk of the letters will be sent in October, shortly before the next open-enrollment period begins. The timing — right before the midterm elections — could be difficult for Democrats who are already fending off Republican attacks about the Affordable Care Act and its troubled rollout.
Some of the small-business cancellations are occurring because the policies don’t meet the law’s basic coverage requirements. But many are related only indirectly to the law; insurers are trying to move customers to new plans designed to offset the financial and administrative risks associated with the health-care overhaul. As part of that, they are consolidating their plan offerings to maximize profits and streamline how they manage them.
“If they do it one way, the word canceled gets attached to it. If they do it another way, they say they are amending the policy. It sounds more gentle but it’s the same thing,” said Gary Claxton, an expert in private insurance at the Kaiser Family Foundation. “The basic point is, for many people in the small-group market at some point soon their coverage is going to change.”
The transformation of the small-group market is just one of the many ripple effects of the Affordable Care Act that will reshape the insurance industry in coming years. With millions of previously uninsured people getting coverage, the insurance industry’s business model is being upended, and that’s leading to changes involving all sorts of products, not just those sold through the online marketplaces to individuals.
The impact of cancellations in the small-group market is expected to be less dramatic than in the individual market, partly because a higher percentage of small-business policies provide more generous benefits. Still, the changes being made by the insurance industry are leaving some small-business owners confused and disillusioned about the law — whether it is directly to blame for the changes or not.
Stephen Lohman, owner of Allegheny Plant Services, a trucking company in Pittsburgh, said the Aetna PPO plan he offers his 38 employees will be discontinued at the end of this year. He said he has been offered a new Aetna policy with premiums that are 40 percent higher, and that other insurers’ rates are similar.
“We were very surprised,” he said, adding that it is “important to me personally” to offer insurance to his employees, but he is not sure he can afford the premium increase.
Now that insurers aren’t able to charge more to people with preexisting conditions, companies with sicker workers may see lower premiums, while those with a healthier workforce may see higher premiums. Many small businesses are also discovering that the new plans have more restrictions on access to specific doctors, hospitals and prescription drugs.
The reason, said Robert Zirkelbach, a spokesman for America’s Health Insurance Plans, the industry’s main trade group, is that the law requires small businesses to purchase coverage that is more comprehensive than what some buy today, and that drives up costs.
Some small businesses are eligible for new tax credits to partially offset the cost of insurance. Also, firms no longer have to worry about the possibility of large premium increases if too many of their workers fall ill.
‘Ending discrimination’
An estimated 18 million to 24 million people in the United States have insurance through employers with fewer than 50 workers, and about 40 million have coverage through firms with fewer than 100 workers. The Department of Health and Human Services estimated in 2010 that up to 80 percent of small-group plans, defined as having fewer than 100 workers, could be discontinued by the end of 2013. But many small employers bought themselves extra time by renewing policies early through the end of 2014.
Jonathan Gruber, a key architect of the health law and a professor of economics at the Massachusetts Institute of Technology, said the number of people covered by small-group policies that will be discontinued is “not trivial.”
“We’re ending discrimination [against people who are sick, and as a result] the people who were previously benefiting may now suffer,” Gruber said. “That’s sad for them, but it does not mean we should continue discrimination.”
He said the change for most small businesses will simply be a “labeling issue,” with companies able to switch to similar plans at similar prices with the same carriers, although the plans themselves may have different names. A smaller group will have to pay more for a more generous plan. Gruber said the number of genuine “losers” under the health-care law — those who will have to pay more for the same or inferior coverage — is “very, very small.”
In November, President Obama, responding to criticism about widespread cancellation of individual policies, said insurers could extend policies that do not meet the law’s requirements for an additional year, if state regulators agreed. His announcement applied to small-group plans as well.
There is substantial turnover in individual and small-group policies every year, even without the health law. But insurers say the change that’s starting to occur is significantly larger than before.
In New Jersey, the state’s association of health plans says 650,000 people with small-group coverage have had their plans disrupted. In Colorado, regulators said small-group plans covering 143,000 people are being discontinued in 2014.
In New Hampshire, the state’s largest insurer, Anthem Blue Cross Blue Shield, is moving all of those in its small-group plan — 60,000 to 70, 000 people — to plans that are similar to those sold on the marketplace created by the health-care law. These plans have drawn fire from consumers because they include only 16 of the state’s 26 acute-care hospitals.
In Pennsylvania, Delaware and West Virginia, Highmark Blue Cross Blue Shield is discontinuing all its small-group plans for those who did not renew early, and offering new policies with different coverage and premiums. The company says 99.5 percent of the 5.3 million people it covers through its individual and small-group plans will be affected, but it declined to break out the number under small-group plans for competitive reasons.
Business for marketplaces
In Vermont and the District, regulators are making other changes in the small-group market. They are requiring small businesses and associations with fewer than 50 employees to purchase new policies through the government-run online marketplaces. The rules go into effect in 2014 in Vermont and 2015 in the District. About 39,300 people in Vermont are being affected, according to state regulators. The District requirement will be extended to employers with up to 100 employees in 2016; it could affect as many as 125,000 people.
Regulators took the step to try to ensure that the exchanges — the smallest in the country, by population served — would have enough young, healthy enrollees to offset the cost of older, sicker participants.
Judith Kennedy, president of the National Association of Affordable Housing Lenders, based in the District, recently received a notice informing her that the group’s small-group plan was being discontinued. She said she worries about the consequences as both an employer and as a parent.
“The notion that the plans on the exchanges may or may not limit providers scares a mom who has lived through chronic illness with her child,” she said.
Also facing disruption are people who purchase insurance through professional or trade associations and don’t have any employees. This includes some doctors, lawyers and accountants in solo practice. Under the health law, that type of association plan is not allowed; sole proprietors must purchase coverage on the individual market.
Cynthia Rutzick, 49, who has her own law practice in Oak Hill, Va., said that the policy she had been buying for years through the state bar association was already offering the benefits mandated by the health law.
But the policy, which cost $1,500 a month for herself, her husband and their two children and included 94 percent of the physicians in her area, was canceled. The new one, which costs $1,600 a month for her and her two children (her husband is going on Medicare next year) includes 82 percent of area physicians. Her broker said plans like her old one don’t exist anymore.
“So I had a blue car, but could not go out and buy another blue car,” she said. “I have to buy a red car, and it’s not as good and way more expensive.”