Employer-Provided Health Insurance and the Market
By Casey B. Mulligan
Source: https://economix.blogs.nytimes.com/
The future of employer-provided health insurance is better considered together with the future of total employee compensation, both cash and fringe benefits like health insurance. From that perspective, the likelihood that most employers will continue to offer health insurance is not necessarily good news for employees.
The Patient Protection and Affordable Care Act, President Obama’s initiative, offers large health-insurance subsidies to the majority of the population beginning in 2014, but only if their employer does not offer affordable insurance. The subsidies are frequently much larger than the subsidies coming through the tax exclusion of employer-provided health insurance.
Some economists are predicting that eligible employees, especially those in line for the largest subsidies, will prefer employers who do not offer affordable insurance. As a result, they say, many more employers will not offer insurance.
Others have different expectations, pointing out that employers dropping insurance will pay penalties and throw away the tax exclusion for their employees who are not subsidy-eligible (typically the ones who earn more). Moreover, perhaps because people are comfortable with their existing coverage even if it is not subsidized, employer coverage did not decline in Massachusetts when it began a similar plan (by my estimate, only 5 percent of the people in Massachusetts who could get subsidized individual-market insurance actually receive it, largely because they have coverage through the employer of the head of the household or that person’s spouse). Note that Massachusetts has lower subsidies and a narrower eligible population than the Affordable Care Act and lower employer penalties for dropping coverage.
How many employers will drop their coverage when the new health care law gets under way? The answer makes for a nice headline, but that’s the wrong question. Would it be so bad if many employers dropped their coverage but replaced it with huge cash raises? Or would it be so good if every employer continued to offer coverage but required employees to take big pay cuts?
All sides agree that some otherwise subsidy-eligible employees will work for employers that keep their coverage, and other subsidy-eligible employees will work for employers that drop it. Market forces must be considered, because some employees will be moving between these two types of employers.
Low-income employees will ultimately cost less to employers without coverage (or without “affordable” coverage; the important issue is that their low-income employees are subsidy-eligible) than they cost to employers with coverage. If they didn’t, low-income employees would be better off at employers without coverage and would line up to work there. Meanwhile, the employers with coverage would find it more difficult to retain and attract low-income employees. That situation defies supply and demand.
Another way to see the same result: by getting low-income employees at lesser cost, employers without coverage can, without going out of business, compete aggressively for the high-income employees who are considering positions that offer coverage.
By the same logic, high-income employees will cost more to employers without coverage than they do to employers with coverage. Thus, high-income employees will lose one way or another — either they will lose their tax exclusion because their employer eliminates coverage or they will see their cash compensation fall below what it would have been without the Affordable Care Act.
At the same time, the low-income employees will enjoy the subsidy either way: either their employer drops coverage, in which case they receive the subsidy directly, or their employer increases their compensation above what it would be without the Affordable Care Act to attract them from the employers without coverage. Tax economists will recognize this as the Harberger model applied to the Affordable Care Act; international economists will recognize it as the Heckscher-Ohlin model.)
The same sorts of market competition will ultimately prevent most employers from dropping their coverage and thereby incurring the penalties. Employers keeping coverage will raise the pay of subsidy-eligible employees and get by with fewer of them. Those who remain will typically not want to leave for no-coverage employers because doing so would cut their pay. The same employers will hire a few more high-income employees at lesser pay, because for those employees, the alternative is a no-coverage employer.
2012 Election: PPACA Is Here to Stay
The votes have been counted and the campaign signs are gone from yards and highway medians (at least most of them). Now, employers are evaluating what the election results will mean for their businesses in the coming years.
On the national level, Americans chose to keep the status quo with President Barack Obama's re-election and split party control of Congress. For employers, the most significant and immediate impact of the election will be the preservation and advancement of the Patient Protection and Affordable Care Act (PPACA), according to a Reuters report.
"There's sort of an immediate acceptance that this law will stay in place in some meaningful way," Chris Jennings, who served as an advisor to former President Bill Clinton, told Reuters. "It's sort of like a big barrier has been removed."
Although the survival of the law now seems all but certain, its final form has yet to take shape. A number of provisions still lack guidance from federal agencies, and employers should expect an "avalanche" of regulations in the coming months, Gretchen Young of the ERISA Industry Committee told Business Insurance.
For example, the details of the penalty ($2,000 per full-time employee) on some employers that don't offer adequate coverage remain sketchy. Also, employers are still waiting for full guidance on how much they will have to contribute to the federal reinsurance program that is mandated by the law, Business Insurance reports.
In the meantime, employers should focus on the immediate requirements that are known. Some of these include:
- Expanding first-dollar preventive care to include a number of women's services, including contraception, unless the plan is grandfathered
- Issuance of summaries of benefits and coverage (SBCs) to all health plan enrollees
- Reducing the maximum employee contribution to $2,500 if the employer sponsors a health flexible spending account (FSA), beginning with the 2013 plan year
- Providing information on the cost of coverage on each employee's 2012 W-2 if the employer issued 250 or more W-2s in 2011
- Calculating and paying the Patient Centered Outcomes Fee in July 2013 if the plan is self-funded (insurers are responsible for calculating and paying the fee for insured plans but will likely pass the cost on)
- Providing a notice about the upcoming health care exchanges to all eligible employees in March 2013
The issue of the exchanges -- marketplaces that will allow employees and employers to shop for health care coverage represents another question mark for employers. State leaders have until mid-February to decide whether they will set up their own exchange or let the federal government run the show in their state. Nearly a half-dozen Republican-controlled states have already stated they won't set up exchanges, and more may follow. Because the makeup of these exchanges will affect a wide range of employers, companies should keep an eye on what's happening in their state, UBA notes.
Of course, the law still faces dozens of lawsuits, including one aimed at overturning the requirement that church-affiliated organizations must cover contraceptives for their employees, Reuters reports. Yet the reality for employers seems clear: PPACA is here to stay.
"There is no way the law is going to be repealed in the next two years, and Republicans know that," Chantel Sheaks of Buck Consultants L.L.C. told Business Insurance.
Companies Recommit to Smoking Cessation
While workers' waistlines remain a prime target in many employer-sponsored wellness initiatives, companies also are deploying aggressive anti-smoking programs in hopes of controlling health care costs, experts say.
Amy McAllister with Provant Heath Solutions noted in a recent Employee Benefit News report that her company has seen a strong uptick in the use of tobacco cessation initiatives.
McAllister said more employers are shifting their wellness programs to include a "total-body" approach, and that means tackling smoking among the workforce.
Provant's clients are using a mix of "carrot and stick" methods to encourage employees to participate, she said, including higher premiums for workers who refuse to quit.
Although the health benefits of kicking the habit are widely known, employers often overlook some of the legal snags that can occur with a smoking cessation program -- especially if it involves tests to make sure workers remain compliant.
"The issue of nicotine testing is complicated not only by the presence of smokers' rights laws and lifestyle statutes in certain states, which prohibit employer interference in off-duty conduct, but also by questions regarding disability and privacy," said Julie B. Ross of the law firm Lynn Ross Smith & Gannaway, according to Human Resource Executive Online.
Although no court has ruled that nicotine addiction is a disability, recent amendments of the American with Disabilities Act may make it easier for employees who are fired or penalized for failing a nicotine test to win legal battles with employers, Ross said.
Callan G. Carter, a partner at Fisher & Phillips LLP, noted that communication and test administration can further complicate programs that require testing. These challenges often convince employers to limit their scope of testing programs.
"I find that most employers allow employees to self-certify their tobacco use status and only test an employee for nicotine if the employer has a reason to believe the employee may be using tobacco after they have certified otherwise," Carter told HREO.
Still, the pressures of health care costs likely will continue to persuade employers to lean on anti-smoking programs and other initiatives that promise to drive down costs. A recent report by Adecco notes that 55 percent of executives rank health care costs as their No. 1 worry -- beating wages, taxes and talent retention.
That high concern about health care costs means companies should expect the trend of more smoking cessation programs and tobacco testing to continue, experts say.
NYC employees can set aside pay for storm relief
Source: benefitspro.com
By Associated Press
New York City employees who want to contribute to relief efforts after Superstorm Sandy will be able to do it through an automatic payroll deduction.
Mayor Michael Bloomberg and City Council Speaker Christine Quinn announced the program on Sunday.
They said city employees will be able to earmark part of their paychecks to the Mayor's Fund to Advance New York City for storm relief.
The fund has raised more than $35 million for hurricane restoration efforts.
Bloomberg says the money is used to address immediate needs including water, hot food, toiletries, baby supplies, warm clothing and blankets.
The funds will also address long-term needs including housing.
City employees' tax-deductible deductions will run for two months spread over four pay periods.
States get more time on exchanges
Source: benefitspro.com
By: Kathryn Mayer
The Obama administration is giving states extra time to decide whether they’ll work on implementing a key feature of health reform.
Health and Human Services Secretary Kathleen Sebelius told state governors in a letter Friday that they can have another three months to decide if they will split the task of running an exchange with the HHS or if they want to leave it entirely up to the government.
Sebelius said she still wants states to tell HHS their intentions by the original Nov. 16 deadline, but they now have until Dec. 14 to submit blueprints showing how they would operate the exchanges. Those who want to partner with the federal government have until Feb. 15 to tell the federal government so.
The move may be a concession to the many states who had said they were waiting until after the presidential election to comply with the PPACA mandates. Many Republicans and opponents of reform hoped that Republican Mitt Romney would win and begin work on repealing the law.
Under the Patient Protection and Affordable Care Act, exchanges would operate in every state to allow individuals to buy health insurance. Exchanges can be run by individual states, by the federal government or by a combination of the two under an arrangement known as a “state partnership exchange.” The exchanges are scheduled to begin operating on Jan. 1, 2014.
“This Administration is committed to providing significant flexibility for building a marketplace that best meets your state's needs,” Sebelius wrote in her Nov. 9 letter. “We intend to issue further guidance to assist you in the very near future.”
Though the law intended that each state run its own exchange, many governors have refused to do so. Others have complained there hasn’t been enough guidance from the government on how to do so. For those that don’t intend to set up an exchange, the government will set up one for them.
Despite the looming deadline, most states haven’t told the government what their plans are for their state exchange. About 15 states are working on setting up their own.
Since last week's election, a handful of states, including Texas and Florida, have said they will not pursue a state-based exchange. Some conservative groups have been encouraging states to not take action on exchanges, telling them that resistance shows the government their dissatisfaction with health reform.
Small businesses don’t understand health reform requirements
Source: benefitspro.com
By: Kathryn Mayer
Most small businesses either incorrectly believe or aren’t sure whether they must provide health insurance to employees in 2014, according to a recent survey of small business owners by eHealth.
Beginning in 2014, the Patient Protection and Affordable Care Act requires businesses with the equivalent of 50 or more full-time employees to provide health insurance coverage for their workers. Businesses with fewer than 50 employees are exempt from this requirement, although employees may be required to purchase their own coverage.
The eHealthInsurance survey was conducted in August and received responses from 439 small businesses.
Based on their size (fewer than 50 employees), only two of the businesses surveyed would be required by the PPACA to offer health insurance coverage to employees in 2014. But one-third incorrectly believed that they were required to buy insurance for employees in 2014, while 35 percent weren’t sure. Nearly 70 percent either incorrectly believed or were not sure whether they would be required to pay a tax for not providing health insurance in 2014. Only 31 percent of respondents correctly said that the reform law does not require them to pay a tax if they don’t offer insurance.
Another main part of health reform—health insurance exchanges—isn’t factoring into employers’ strategies. Most small business owners (78 percent) said they weren’t familiar with health insurance exchanges and how they could impact their business. Exchanges, which are slated to come online by 2014, would make subsidized health insurance available to individuals who don’t have access to health insurance through an employer.
The eHealth poll is yet another survey reporting similar findings: Health reform is confusing both employees and their employers.
Though the Supreme Court upheld the PPACA in June, many employers continued their wait-and-see approach until after the presidential election. Republican Mitt Romney had promised that he would work on repeal of the law if elected.
The survey also found that nearly a third of small businesses (29 percent) said they would consider dropping coverage for their employees in 2014. The majority, at 68 percent, said they don’t have plans to do so, while 3 percent said they planned to stop offering coverage.
The survey also addressed their willingness to adopt new cost-cutting strategies.
To reduce costs, more than half (51 percent) said they would increase employees’ share of premiums. Nearly 40 percent would consider increasing employees’ deductibles. Nearly half of the employers surveyed (44 percent) felt it would be fair to impose penalties on employees who don't participate in wellness programs.
Sandy Stirs Toxic-Site Worry
(From THE WALL STREET JOURNAL)
By Rob Barry, Dionne Searcey and John Carreyrou
Hurricane Sandy's environmental impact is still being assessed, but the worries for residents of New York and New Jersey are crystallized by one fact: Of the two states' 198 Superfund toxic-waste sites, 45 are within a half-mile of coastal areas vulnerable to storm surge.
The Environmental Protection Agency, which oversees cleanup of those sites, was unable to say how many of them flooded on the night of Oct. 29. But the agency said its initial appraisals show that several "were impacted by the storm," including a site contaminated by lead near Sayreville, N.J., and the Gowanus Canal and Newtown Creek sites in New York City.
The 45 Superfund sites vulnerable to coastal flooding were identified by The Wall Street Journal using data from the EPA and the U.S. Army Corps of Engineers. Many of the sites are concentrated in northern New Jersey in a blighted industrial zone west of Manhattan, 11 flank the Delaware River and a half-dozen are scattered across New York's Long Island.
Superfund sites are generally considered the most hazardous toxic-waste sites in the country. Congress established the program in 1980 following the Love Canal environmental disaster, which ravaged a community of several hundred families that had settled over a former chemical dump in Niagara Falls, N.Y.
Once the EPA has given a site the Superfund designation, the agency has the power to force the sites' polluters to pay for its cleanup costs. Today, there are 1,313 active Superfund sites nationwide on the EPA's so-called National Priorities List. New Jersey has the most, at 111. New York is fourth, at 87.
The EPA said it tested water samples from Brooklyn's Gowanus Canal and nearby flooded buildings, but found only "low levels" of potentially cancer-causing pollutants, which it said may be "related to spilled fuel and runoff from asphalt." New York state officials say they think the floodwaters probably traveled over the Gowanus and Brooklyn's other Superfund site, Newtown Creek, without disturbing the pollutants that line the bottoms of both waterways.
But Thomas Burke, a professor and associate dean at Johns Hopkins School of Public Health, said the Gowanus and Newtown Creek -- whose cleanups haven't begun in earnest yet -- are more vulnerable to flooding risks than sites in more advanced stages of remediation, where caps and liners have already been placed over bottom-lying toxic material.
"There really has to be a careful evaluation of whether there has been any disturbing of the waste," Mr. Burke said.
New Jersey officials downplayed any problems. "There was no major flooding in North Jersey. Superfund sites were not inundated by tidal surges," said Larry Ragonese, a spokesman for the state environmental agency.
In Sandy's wake, one New York neighborhood group is taking matters into its own hands. Kate Zidar, a member of the Newtown Creek Alliance, said her organization hired a consultant to do some testing after the EPA declined to take samples of the floodwater inside buildings close to the creek. "There's an information gap that we need to fill," she said.
In the Gowanus neighborhood of Brooklyn, which lies between the gentrified enclaves of Carroll Gardens and Park Slope, residents and business owners said water overran several blocks.
In New Jersey, one site may have been affected by the storm: the Raritan Bay Slag Superfund Site in Sayreville. A seawall and jetty along the bay's southern shore were contaminated with lead slag, a byproduct of metal smelting, which has tainted the surrounding area with lead and other heavy metals. On a flyover to survey damage, a U.S. Coast Guard member spotted an overturned 10,000-gallon fuel tank near the sea wall, but it didn't appear to harm it.
The EPA said it is collecting samples from the site "to determine the extent of flooding damage and its impacts on lead contamination."
Most small businesses don’t offer health coverage
Source: www.benefitspro.com
By Kathryn Mayer
A new study finds only 49 percent of workers in small businesses with fewer than 50 employees were offered and eligible for health insurance through their employer in 2010, down from 58 percent in 2003.
Larger firms are much more likely to provide health benefits. About 90 percent of workers in firms with 100 or more employees were offered and eligible for health insurance in both 2003 and 2010, according to the report from the Commonwealth Fund.
Low-wage workers in small businesses were the least likely to be offered and eligible for coverage: Just one-third of workers making less than $15 an hour in small firms were both offered and eligible to enroll in their employer’s health plan, compared to 70 percent of small firm workers making over $15 an hour.
Report coauthor and Commonwealth Fund Vice President Sara Collins says the report “highlights a nearly decade-long trend of declining health insurance coverage and rising costs for workers in small businesses, particularly those who make less than $15 an hour.”
“As a result, many people who work for small businesses can’t afford the health care they need or have medical bills they are unable to pay,” she says.
About half small business employees (45 percent) reported trouble paying medical bills in 2010, and 46 percent reported that they skipped needed medical care because of cost, the report says. That’s about ten percent higher than those workers working in larger firms.
Small business workers were also more likely to be dissatisfied with their health insurance, with 29 percent rating it fair or poor, compared to 16 percent of those at larger businesses. They also don’t have as much choice when it comes to health plan options.
But Commonwealth researchers say health reform should help address and solve some of these problems by offering premium tax credits to certain small businesses and by granting subsidies to many uninsured workers toward their purchase of health insurance beginning in 2014.
“The Affordable Care Act should mitigate this trend by improving the affordability and comprehensiveness of health insurance both for small-business owners who want to offer health benefits and for workers in small businesses who can't get coverage through their jobs.”
The Commonwealth Fund is a nonpartisan research foundation that supports PPACA. Though they argue the law will help small businesses, opponents say the law will burden small businesses while raising taxes.
Obama Now Faces New Urgent Task
President Barack Obama faces a new urgent task now that he has a second term, working with a status-quo Congress to address an impending financial crisis that economists say could plunge the country into further recession if not resolved.
"You made your voice heard," Obama said in his acceptance speech, signaling that he believes the bulk of the country is behind his policies. It's a sticking point for House Republicans, sure to balk at that.
The same voters who gave Obama four more years in office also elected a divided Congress, sticking with the dynamic that has made it so hard for the president to advance his agenda. Democrats retained control of the Senate; Republicans kept their House majority.
House Speaker John Boehner, R-Ohio, spoke of a dual mandate. "If there is a mandate, it is a mandate for both parties to find common ground and take steps together to help our economy grow and create jobs," he said.
Senate Republican Leader Mitch McConnell of Kentucky had a more harsh assessment.
"The voters have not endorsed the failures or excesses of the president's first term," McConnell said. "They have simply given him more time to finish the job they asked him to do together" with a balanced Congress.
Obama's more narrow victory was nothing like the jubilant celebration in 2008, when his hope-and-change election as the nation's first black president captivated the world. This time, Obama ground it out with a stay-the-course pitch that essentially boiled down to a plea for more time to make things right and a hope that Congress will be more accommodating than in the past.
The most pressing challenges immediately ahead for the 44th president are all too familiar: an economy still baby-stepping its way toward full health; 23 million people out of work or in search of better jobs; civil war in Syria; a menacing standoff over Iran's nuclear program.
Sharp differences with Republicans in Congress on taxes, spending, deficit reduction, immigration and more await. While Republicans control the House, Democrats have at least 52 votes in the Senate and Republicans 45. One newly elected independent isn't saying which party he'll side with, and races in Montana and North Dakota were not yet called.
Votes also were being counted Wednesday in the Montana and Washington gubernatorial races.
Obama's list of promises to keep includes many holdovers he was unable to deliver on in his first term, such as rolling back tax cuts for upper-income people, overhauling immigration policy and reducing federal deficits. Six in 10 voters said in exit polls that taxes should be increased, and nearly half of voters said taxes should be increased on incomes over $250,000, as Obama has called for.
"It's very clear from the exit polling that a majority of Americans recognize that we need to share responsibility for reducing the deficit," Maryland Rep. Chris Van Hollen, the top Democrat on the House Budget Committee, told CNN. "That means asking higher-income earners to contribute more to reducing the deficit."
Even before Obama gets to his second inaugural on Jan. 20, he must deal with the threatened "fiscal cliff." A combination of automatic tax increases and steep across-the-board spending cuts are set to take effect in January if Washington doesn't quickly reach a budget deal. Experts have warned that the economy could tip back into recession without an agreement.
Newly elected Democrats signaled they want compromise the avoid the fiscal cliff.
Sen.-elect Tim Kaine, a former Virginia governor who defeated Republican George Allen, said on NBC's "Today" show that voters sent a message they want "cooperative government." But he also says the election results show that the public doesn't want "all the levers in one party's hands" on Capitol Hill.
From Massachusetts, Elizabeth Warren said on "CBS This Morning" that those who voted for her opponent, Republican Sen. Scott Brown, expressed a desire for lawmakers to work together. She says: "I heard that loud and clear."
Obama repeated his campaign slogan of moving "forward" repeatedly in a victory speech early Wednesday in his hometown of Chicago.
"We will disagree, sometimes fiercely, about how to get there," he said. "As it has for more than two centuries, progress will come in fits and starts. It's not always a straight line. It's not always a smooth path. By itself, the recognition that we have common hopes and dreams won't end all the gridlock, or solve all our problems, or substitute for the painstaking work of building consensus, and making the difficult compromises needed to move this country forward. But that common bond is where we must begin."
Former Obama adviser Anita Dunn told "CBS This Morning" that the president made it clear in his acceptance speech that he will be reaching out, and she warned GOP House leaders, representing Ohio, Virginia and Wisconsin, to keep in mind that their voters also wanted to keep Obama.
"Clearly there's a lot of momentum and a lot of incentive for people to work together to really find answers to the challenges," she said.
The vanquished Republican, former Massachusetts Gov. Mitt Romney, tried to set a more conciliatory tone on the way off the stage.
"At a time like this, we can't risk partisan bickering," Romney said after a campaign filled with it. "Our leaders have to reach across the aisle to do the people's work."
Obama won at least 303 electoral votes to 206 for Romney, with 270 needed for victory, and had a near-sweep of the nine most hotly contested states.
But the close breakdown in the popular vote showed Americans' differences over how best to meet the nation's challenges. With more than 90 percent of precincts reporting, the popular vote went 50 percent for Obama to 48.4 percent for Romney, a businessman-turned-politician. Romney had argued that Obama failed to turn around the economy and he said it was time for a new approach that combined lower taxes and a less intrusive government.
Obama's re-election means his signature health care overhaul will endure, as will the Wall Street overhaul enacted after the economic meltdown. The drawdown of troops in Afghanistan will continue apace. With an aging roster of justices, the president probably will have at least one more nomination to the Supreme Court.
A second term is sure to produce turnover in his Cabinet. Treasury Secretary Timothy Geithner has made it clear he wants to leave at the end of Obama's first term but is expected to remain in the post until a successor is confirmed. Secretary of State Hillary Rodham Clinton, Obama's rival for the presidency four years ago, is ready to leave. Defense Secretary Leon Panetta isn't expected to stay on.
Obama won even though exit polls showed that only about 4 in 10 voters thought the economy is getting better, just one-quarter thought they're better off financially than four years ago and a little more than half think the country is on the wrong track.
But even now, four years after George W. Bush left office, voters were more likely to blame Bush than Obama for the fix they're in.
Some Americans were hopeful for progress in Obama's second term.
"He may not have done a great job in my mind but I kinda trust him," Jerry Shul said Wednesday morning in Times Square. "And I feel like he's gonna keep trying and I feel like when people keep trying in you favor things work out. I have faith in him, I have faith he will get with the Republicans and get something done."
Elsewhere on the ballot, voters in Maine and Maryland became the first to approve same-sex marriage by popular vote while Washington state and Colorado legalized recreational use of marijuana.
The most expensive presidential campaign in history, at $2 billion plus, targeted people in the nine states that determined the outcome, and the two sides drenched voters there with more than a million ads, the overwhelming share of them negative.
Obama claimed at least seven of those states, most notably Ohio, seen as the big prize. He also prevailed in Iowa, New Hampshire, Colorado, Nevada, Virginia and Wisconsin. Romney got North Carolina.
Florida was too close to call Wednesday morning. The unofficial count had Obama with a 46,000-vote lead, but Florida historically has left as many as 5 percent of its votes uncounted until after Election Day.
Overall, Obama won 25 states and the District of Columbia. Romney won 24 states.
It was a more measured victory than four years ago, when Obama claimed 365 electoral votes to Arizona Sen. John McCain's 173, and won 53 percent of the popular vote.
Preliminary figures indicate fewer people participated this time. Associated Press figures showed that about 118 million people had voted in the White House race, but that number will rise as more votes are counted. In 2008, 131 million people voted, according to the Federal Election Commission.
What Does the Election Mean for Employers and PPACA
Maintenance of the status quo in Washington, D.C. (the re-election of Barack Obama, with a Republican majority in the House of Representatives and a Democratic majority in the Senate) means that implementation of the Patient Protection and Affordable Care Act (PPACA) will move forward largely as the law was passed in 2010.
The law left the task of working out many of the details to the regulatory agencies (the Department of Labor, the IRS and the Department of Health and Human Services), and with many questions remaining unanswered, employers can expect that an enormous number of regulations and other types of guidance will be issued between now and the end of 2013.
Of greatest interest to many employers is the employer shared-responsibility ("play or pay") requirement. As of Jan. 1, 2014, employers who have 50 or more full-time or full-time equivalent employees must offer "minimum essential" (basic) medical coverage for their full-time (30 or more hours per week) employees or pay a penalty of $2,000 per full-time employee, excluding the first 30 employees. Employers who offer some coverage but whose coverage is either not "affordable" or fails to provide "minimum value" must pay a penalty of $3,000 for each employee who receives a premium tax credit. (Coverage is not "affordable" if the employee's cost of single coverage is more than 9.5 percent of income. Coverage does not provide minimum value if it is expected to pay less than 60 percent of anticipated claims. Regulations are still needed to provide details on how the penalty will be determined and collected for employers who do not provide health coverage to their full-time employees, what exactly is the "minimum value" coverage that must be provided to avoid the penalties, and when dependent coverage is "affordable.")
The health insurance exchanges are also scheduled to begin operation in January 2014. (While PPACA is a federal law, the health insurance exchanges were designed to be operated by the states.) A number of states have delayed work on the exchanges pending the outcome of this election, while a few have affirmatively decided not to create a state exchange. If a state is unable or chooses not to create an exchange, the federal government will run the exchange on the state's behalf.
According to the Kaiser Family Foundation, as of Sept. 27, 2012, the following have established exchanges: California, Colorado, Connecticut, District of Columbia, Hawaii, Kentucky, Maryland, Massachusetts, Nevada, New York, Oregon, Rhode Island, Utah, Vermont, Washington and West Virginia. Arkansas, Delaware and Illinois were planning for a partnership exchange with the federal government. Alaska, Florida, Louisiana, Maine, New Hampshire, South Carolina and South Dakota have stated that they will not create an exchange (meaning the federal government will run the exchange on the state's behalf). The remaining states are studying their options but could well end up with a federally run exchange at least for 2014 as the deadline to submit the state's plan for implementing an exchange is next week (Nov. 16).
It remains to be seen whether the federal government will be able implement so many exchanges on behalf of the states by the 2014 target date. It also remains to be seen whether a change of governor, insurance commissioner or control of a state legislature or political realities, will change a state's stance on the exchanges. Because employees may choose to obtain coverage through the exchange even if they have access to coverage through their employer and because the exchanges likely will request information from employers when determining eligibility for premium tax credits, all employers will want to have an understanding of the status of their state's exchange.
In addition to deciding whether to "play" (provide health coverage) or "pay" (the penalties), employers (including those with fewer than 50 employees) have a number of compliance obligations between now and 2014, including:
- Expanding first-dollar preventive care to include a number of women's services, including contraception, unless the plan is grandfathered
- Distributing medical loss ratio rebates if any were received from the insurer
- Issuance of summaries of benefits and coverage (SBCs) to all enrollees
- Reducing the maximum employee contribution to $2,500, if the employer sponsors a health flexible spending account (FSA), beginning with the 2013 plan year
- Withholding an extra 0.9 percent FICA on those earning more than $200,000 beginning in 2013
- Providing information on the cost of coverage on each employee's 2012 W-2 if the employer issued 250 or more W-2s in 2011
- Providing a notice about the upcoming exchanges to all eligible employees in March 2013
- Calculating and paying the Patient Centered Outcomes Fee in July 2013 if the plan is self-funded (insurers are responsible for calculating and paying the fee for insured plans but will likely pass the cost on)
- Working with the exchanges to identify those employees eligible for premium tax credits
- Removing annual limits on essential health benefits and pre-existing condition limitations for all individuals, beginning with the 2014 plan year
- Limiting eligibility waiting periods to 90 days, beginning with the 2014 plan year
- Reporting to the IRS on coverage offered and available (the first reports are actually due in 2015 based on 2014 benefits)
If you have questions or would like additional information about your options and obligations under PPACA, please contact us.