HR leaders rate ACA concerns as a lower-tier issue
Originally posted by Michael Giardina on https://ebn.benefitnews.com
New research from a North American sample of HR leaders finds that the Affordable Care Act is not a primary concern among employers, even as the landmark health care law continues to worry the masses.
Roughly half of the 358 individuals surveyed in the Human Capital Institute’s new report disclose being “very much prepared” or “quite a bit prepared” to take on the unknown future environment being forged by the ACA. The participants surveyed include human resource professionals, executive management or those working in a recruiting function.
Forty percent of the sample highlight that they are neutral or cannot judge the ACA, according to HCI’s Talent Pulse, a quarterly research e-book that tracks new talent management trends.
“We found that most HR professionals express neutral attitudes about Obamacare, suggesting that they need more information or time to better understand its impact,” says Jenna Filipkowski, PhD, a senior research analyst at HCI.
Even more peculiar is that only 15% of organizations are worried about cutting employee hours. Previously, the industry was reeling over the most recent employer mandate delay, as many pointed to shifting employee hours could alleviate the law’s restrictions but limit recruitment of needed talent. Other options have been to delay the stiff individual penalties through legislation.
The Talent Pulse report finds that 88% of the surveyed population understands the law, while 91.5% are adhering to compliance and regulations and 88.6% have communicated these changes to employees. However, HCI mandates that HR executives are concerned with the impending excise tax, or Cadillac tax, which will roll out in 2018.
In order to address additional concerns, participants’ surveyed state that they are looking to increase their communication and education, utilize external expert consultations and adding or adjusting their benefits package.
The strategic talent management organization finds that tracking employee hours has been confusing for some and others even question whether the law will be around for the long term.
“What is nerve racking to some extent is the unforeseen,” says one respondent. “Will the Act still be around next year or after the next election?”
IRS Simplifies Employer Reporting Requirements in Final Rules
Originally posted on https://www.the-alliance.org
The IRS has issued final regulations to implement Sections 6056 and 6055 of the Affordable Care Act (ACA) that require employers to report information to the IRS about whether they provide coverage to employees and to whom they offer minimum essential coverage. These reporting requirements that were scheduled to take effect in 2014 have been delayed until 2015 under IRS Notice 2013-45.
Self-funded employers with more than 50 employees must begin reporting under both sections in 2015, although the IRS will now provide a single, consolidated form that employers can use to report both to the IRS and to employees regarding the coverage that is available. The top half of the new form will satisfy Section 6056 reporting, which includes information required to be given to the IRS and to employees about the health care coverage employers have or have not offered to workers. The data elements requested are intended to help the IRS enforce employer "pay or play" penalties and help the IRS verify information provided by consumers as to whether they are eligible for premium tax credits under the ACA.
The bottom half of the form would satisfy 6055 reporting that requires certain information on individuals that are provided minimum essential coverage in order to help the IRS enforce individual mandate penalties and determine an individual's eligibility for premium tax credits. Data elements employers will be required to report include:
- Name, address and TIN of the employer
- The name and telephone number of a contact person at the company
- Certification as to whether the employer offered a group health plan to employees and dependents, by calendar month
- The number of full-time employees, by month
- For each full-time employee, the months that the employee was offered coverage
- For each full-time employee, the employee's share of the lowest cost monthly premium for self-only coverage providing minimum value, by month
- For each full-time employee, the name, address and TIN of each full-time employee during the calendar year, and the months in which each employee was covered under an employer sponsored plan.
Related statements to employees must be provided to workers on or before Jan. 31 of each year (although the first required statement in 2016 will be due Feb. 1 due to Jan. 31 falling on a Sunday). These statements are intended to help employees determine for which months during the preceding year, if any, they can claim a premium tax credit on their tax returns for coverage purchased through the exchange.
In the final rule, the IRS outlines some simplified alternatives for reporting data in certain circumstances, as follows
- Employers can file a shorter form in relation to employees that are offered coverage that meets the 60 percent "minimum value" test where the employee contribution for self-only coverage does not exceed 9.5 percent of the federal poverty line (about $1,100 per year in 2015). The form would require the names, addresses and TINs for employees who receive qualifying offers for all 12 months of the year. For employees that receive a qualifying offer of fewer than all 12 months of the year, employers will be able to enter a code indicating months that the qualifying offer was made.
- In 2015 only, an employer that can certify that it has made a qualifying offer to at least 95 percent of its full-time employees and their spouses and dependents can provide a simplified notice to employees describing the coverage provided;
- An employer that can certify that it has made an offer of minimum value and affordable coverage to at least 98 percent of its employees and dependents does not have to determine whether each employee is a full-time employee or report the number of full-time employees.
Additional Resources:
- Final Rules governing Section 6056 can be found here.
- Final rules governing Section 6055 can be found here.
The Alliance does not provide legal advice. If you have questions about your plan's compliance with these requirements or how to implement them, please contact your attorney.
Final Employer Responsibility Regulations Released
Originally posted by Melissa Duffy on https://www.the-alliance.org
The federal government has released final rules governing the Affordable Care Act's Employer Responsibility (aka Pay or Play) provisions that will take effect in 2015 for many Alliance members. Once in effect, the ACA will impose penalties on employers that do not offer "affordable" and "minimum value" coverage to certain full-time workers, currently defined as an average of 30 hours or more per week.
The IRS has posted Frequently Asked Questions to help employers understand the new guidelines and the safe harbors that were created to help employers avoid penalties. Penalties are triggered only when one or more of a company’s full-time workers accesses tax credits to purchase coverage on the public exchange.
The final regulations include some changes to the proposed regulation that were released more than a year ago. Key changes include:
- An exemption from penalties for employers in 2015 that have 50-99 workers as long as they certify that they have not reduced their workforce to fall under the 100 employee threshold. Employers of this size would be subject to penalties in 2016 if their regulations are not changed once again.
- More wiggle room for employers that do not offer all employees coverage. Under the new rules, an employer with 100 or more workers will not be subject to the "4980H(a)" penalty ($2,000 X all FT employees minus 30) as long as they offer coverage to at least 70 percent of employees in 2015. This threshold increases to 95 percent in 2016. However, employers will still be subject to "4980H(b)" penalties equaling $3,000 per year for any full-time employee that is able to access exchange tax credits or cost sharing reductions.
- A new definition for "seasonal employees" to apply to those positions for which customary annual employment is six months or less. For these individuals, the offer of coverage can wait until the end of a measurement period. This is not to be confused with the term “seasonal worker” used for the purposes of determining whether an employer is large enough to be subject to penalties.
Congress Considers Changing the Definition of Full-Time
In a related note, a Congressional committee has approved one of several bills introduced this session to modify the Employer Responsibility provisions in the Affordable Care Act. The bill, which would define full-time as 40 hours for the purposes of the ACA, passed the House Ways and Means Committee on a party-line vote with Republicans on the committee supporting the measure and Democrats opposing it. Similar bills have gained bipartisan support but are stalled in the Senate.
Click here to view testimony from the public hearing held on this issue.
Are employees more satisfied than ever with their benefits?
Originally posted March 17, 2014 by Andy Stonehouse on https://ebn.benefitnews.com
Despite some sense of grumbling out in the working world about the shape of benefits in the midst of further ACA rollouts, one new study suggests employee satisfaction regarding their benefits is at an all-time high.
MetLife’s 12th annual U.S. Employee Benefit Trends Study, released Monday, shows what researchers suggest is a tremendous level of overall satisfaction with workplace benefits – with some of the highest numbers in more than a decade.
According to this year’s study, the overall satisfaction level hit 50%, the most solid self-evaluation of benefits in the MetLife research’s history.
And while voluntary benefits strategies also appear to be paying off, the company says that fewer employers report that voluntary benefits are at the forefront of their overall strategy.
“Employees who are very satisfied with their benefits are more than twice as likely to report being very satisfied with their jobs,” notes Todd Katz, executive vice president, Group, Voluntary and Worksite Benefits, with MetLife. “Because of this, offering a wider variety of benefits pays dividends for both employers and employees.”
Katz says the study indicates that benefits are a strong driver for employee loyalty, with 44% of respondents indicating that having benefits customized to meet their needs would be an even stronger pull to keep them happy and motivated on the job.
That ability to personalize their own benefits choices as part of a workplace package is taking on more appeal, the study finds. Some 78% of workers say they would like a greater variety of benefits to choose from and 80% say it would be valuable to have benefits customized to their individual circumstances, or their age.
Most importantly, 60% indicated that they would be willing to bear more of the cost involved in order to have more personal benefits choices.
Even with strong employee support and enthusiasm, Katz says the survey indicates that employers themselves are less supportive of voluntary benefits being a cornerstone of their benefits strategy, with numbers dropping almost 10% since the 2012 survey.
“This shift in employer focus is somewhat unexpected,” Katz says. “But rather than a change in strategy, this is likely a result of employers being consumed by health care reform and other cost control strategies.”
Katz suggests that employers continue to consider the long-term goodwill and retention benefits of offering a solid array of voluntary choices.
“The employee satisfaction numbers make it clear that voluntary benefit strategies are paying off for employers and that attention should not be shifted from existing plans. Changing course now may have negative effects on loyalty and productivity in the future.”
IRS Issues Additional Final Regulations for Play or Pay Rule
Originally posted on March 05, 2014 on https://www.treasury.gov
On March 05, 2014, the U.S. Department of the Treasury and the Internal Revenue Service (IRS) released final rules to implement the information reporting provisions for insurers and certain employers under the ACA that take effect in 2015.
“Today’s announcement is part of the Administration’s effort to provide certainty and early guidance about major health policies so employers, small business owners and other individuals can plan for 2015,” said Assistant Secretary for Tax Policy Mark J. Mazur. “Treasury’s final rules significantly streamline and simplify information reporting while making it easier for employers and insurers of all sizes to provide the quality, affordable health coverage that every American deserves.”
While 96 percent of employers are not subject to ACA reporting requirements or the employer responsibility provision because they have fewer than 50 employees, in 2015 requirements begin to phase-in for the remaining four percent of employers that are required to offer quality, affordable coverage to employees or make a payment. The final regulations released today on information reporting by those employers will substantially streamline reporting requirements for employers, particularly those that offer highly affordable coverage to full-time employees. Final rules were also released today to provide guidance for reporting by insurers and other parties that provide health coverage under the ACA. Together, these rules respond to feedback from stakeholders and will help employers and insurers effectively comply with their responsibilities.
These additional final rules include the following key provisions:
Single, Combined Form for Information Reporting
Employers that “self-insure” will have a streamlined way to report under both the employer and insurer reporting provisions. Responding to widespread requests, the final rules provide for a single, consolidated form that employers will use to report to the IRS and employees under both sections 6055 and 6056, thereby simplifying the process and avoiding duplicative reporting. The combined form will have two sections: the top half includes the information needed for section 6056 reporting, while the bottom half includes the information needed for section 6055.
- Employers that have fewer than 50 full-time employees are exempt from the ACA employer shared responsibility provisions and therefore from the employer reporting requirements.
- Employers that are large enough to be subject to the employer responsibility provisions and that “self-insure” will complete both parts of the combined form for information reporting.
- Employers that are subject to employer responsibility but do not “self-insure” will complete only the top section of the combined form (reporting for section 6056). Insurers and other providers of health coverage will report only under section 6055, using a separate form for that purpose. Insurers do not have to report on enrollees in the Health Insurance Marketplace, since the Marketplace will already be providing information on individuals’ coverage there.
Simplified Option for Employer Reporting
- For employers that provide a “qualifying offer” to any of their full time employees, the final rules provide a simplified alternative to reporting monthly, employee-specific information on those employees.
- A qualifying offer is an offer of minimum value coverage that provides employee-only coverage at a cost to the employee of no more than about $1,100 in 2015 (9.5 percent of the Federal Poverty Level), combined with an offer of coverage for the employee’s family.
- For employees who receive qualifying offers for all 12 months of the year, employers will need to report only the names, addresses, and taxpayer identification numbers (TINs) of those employees and the fact that they received a full-year qualifying offer. Employers will also give the employees a copy of that simplified report or a standard statement indicating that the employee received a full-year qualifying offer.
- For employees who receive a qualifying offer for fewer than all 12 months of the year, employers will be able to simplify reporting to the IRS and to employees for each of those months by simply entering a code indicating that the qualifying offer was made.
- To provide for a phase-in of the simplified option, employers certifying that they have made a qualifying offer to at least 95% of their full-time employees (plus an offer to their families) will be able to use an even simpler alternative reporting method for 2015. Those employers will be able to use the simplified, streamlined reporting method for their entire workforce, including for any employees who do not receive a qualifying offer for the full year. Those employers will provide employees with standard statements relating to their possible eligibility for premium tax credits.
The final regulations also give employers the option to avoid identifying in the report which of its employees are full-time, and instead to just include in the report those employees who may be full-time. To take advantage of this option, the employer must certify that it offered affordable, minimum value coverage to at least 98 percent of the employees on whom it is reporting.
For more information, see sections 6055 and 6056 final regulations here.
Despite Delayed Key Provision, Health Care Reform Triggers Benefits Action Among Employers
Originally posted March 03, 2014 on https://www.voluntary.com
Employers report impact on benefits funding, opening opportunity for voluntary benefits
NEWARK, N.J.--(BUSINESS WIRE)--With Affordable Care Act deadlines imminent in 2014 and 2015, employers are reporting the increased impact of health care reform on various aspects of employee benefits. According to Health Care Reform: Full Steam Ahead, the first in a series of five research briefs based on The Prudential Insurance Company of America’s (Prudential’s) Eighth Annual Study of Employee Benefits: Today & Beyond, nearly half (49%) of employers report they are extremely or very likely to make a high-deductible health plan their only health insurance option.
“The Affordable Care Act could very well usher in a new era for and emphasis on voluntary benefits. More employers are utilizing them for recruiting and retaining talent and employees increasingly view them as a cost-effective way to protect their families’ financial futures.”
“Although employers anticipate scaling back benefit offerings due to cost considerations, there’s great opportunity for them to offer voluntary benefits in order to continue providing attractive benefits to their employees,” said Vishal Jain, vice president, Strategy, Planning and Business Insights, Prudential Group Insurance. “The Affordable Care Act could very well usher in a new era for and emphasis on voluntary benefits. More employers are utilizing them for recruiting and retaining talent and employees increasingly view them as a cost-effective way to protect their families’ financial futures.”
According to the report, 73% of employers say the law is having an impact on benefits service and support and 69% report there is an impact on benefits communications. “With a shifting benefits landscape, carriers are now focused on being a trusted resource for employers while offering a full spectrum of services such as enrollment communications, benefits education, record keeping, and administrative services,” Jain said.
In addition to highlighting the law’s potential impact on voluntary benefits, health insurance exchanges central to the legislation are top of mind for employees surveyed. Key findings include:
Employees are increasingly confident more Americans will be covered under the Affordable Care Act (43%, up 7 percentage points from 2012). An expanding number feel fewer employers will offer health insurance (44%, a 13 percentage point increase from 2012), and 38% of those employees believe their employer will drop coverage.
Most employees report having neither a favorable nor unfavorable opinion toward both public and private exchanges.
About one-third of employees report they have heard of but know little about public or private exchanges while one-in-five say they have never heard of either before the survey.
“As employers evaluate the implications of public and private exchanges, the importance of their partnerships with carriers will continue to grow. Employers will look for carriers that provide value, make benefits administration easier, help employees make better benefit decisions, and provide excellent customer service,” said Jain. “We’re poised to support our customers with innovative and cost-effective benefit solutions, coupled with a full array of services designed to improve employees’ financial wellness.”
Feds Post PPACA Risk Program Regs
Originally posted March 05, 2014 by Allison Bell on https://www.lifehealthpro.com
Only the commercial health plans sold through the new public exchanges -- and some very similar plans -- will be able to participate in a new underwriting profit protection program.
The Centers for Medicare & Medicaid Services today ruled that only "qualified health plans" -- and plans that are "substantially the same as a QHP" -- can either make payments to or get cash from the federal "risk corridors" program.
The drafters of the Patient Protection and Affordable Care Act created the risk corridors program to protect QHP issuers against the possibility that all of the underwriting rules and benefits mandates PPACA is imposing could flood some insurers with claims.
Carriers with high operating profits are supposed to reimburse carriers with profit margins of less than 3 percent. If all health insurers do poorly, PPACA calls for the federal government to chip in.
CMS talks about the risk corridors program and many other PPACA provisions in the same 335-page anthology of PPACA final regulations that lets consumers keep non-PPACA-compliant individual policies for two extra years, if insurers and state regulators permit that, and that keeps the current March 31 PPACA individual QHP enrollment deadline.
Commenters on a draft of the regulations asked CMS to let all health plans that comply with PPACA rules, including non-exchange health plans, participate in the risk corridors program.
Limiting the program to QHPs and very similar plans will preserve the intent of the program, which is to stabilize QHP premiums, officials say.
Other sections of the new CMS regulations deal with everything from whether agents and brokers can use their own websites to enroll employers in small-group exchanges' QHPs to whether short-term medical plans have to pay for another PPACA risk-management program, a temporary reinsurance program.
CMS officials say they are comfortable with the idea of a state-based exchange letting brokers enroll businesses in exchange plans, but it's probably not going to make that feature available through the public exchanges it runs for HHS in 2015.
Short-term medical plan issuers might have to pay reinsurance program assessments, if the plans offer a minimum level of coverage value.
Elsewhere in the batch, CMS says.
- Connecticut is the only state taking advantage of a PPACA provision that lets states run their own reinsurance programs.
- The 2014 attachment point, or deductible, for PPACA reinsurance for health plans will be cut to $45,000, from $60,000, and the 2015 PPACA reinsurance premium will be $44 per enrollee per year.
- The HHS exchange user fee for 2015 will be 3.5 percent of premium.
CMS is preparing to publish the new PPACA regulations in the Federal Register March 11.
The IRS, meanwhile, is preparing to publish PPACA employer coverage mandate reporting final regulations for large employers and minimum essential coverage (MEC) regulations March 10.
In the IRS MEC regulations, for example, the IRS gives details about what address a reporting entity should use when it's sending workers' MEC statement.
In the final MEC regulations, the IRS says it will offer short-term relief for companies that get taxpayer identification numbers, dates of birth or other information wrong on returns filed in 2016 for the 2015 tax year.
But the relief is only available for employers or other reporting entities that make a good faith effort to comply with the regulations, officials say.
"No relief is provided in the case of reporting entities that do not make a good faith effort to comply with these regulations or that fail to timely file an information return or furnish a statement," officials warn in the preamble to the MEC regulations.
The IRS also is stating that sending a notice to a recipient's last known permanent address, or, if no permanent address is available, a temporary address, discharges the requirement to furnish a statement, even if the statement is returned.
People may keep old health insurance another year
Originally posted March 05, 2014 on https://www.usatoday.com
WASHINGTON — Americans can buy insurance policies that don't meet the requirements of the Affordable Care Act for another year, if their states' insurance regulators allow them to renew their policies this year, administration officials said Wednesday.
The change represented another midcourse correction for the law, which is still recovering from the flawed opening of the federal and state health care exchanges last Oct. 1 and the delay of several key provisions. Last July, the administration delayed the requirement that businesses provide health insurance for their employees, and President Obama said in November that those with pre-ACA insurance plans could keep them if they wanted.
"These policies implement the health care law in a common-sense way by continuing to smooth the transition for consumers and stakeholders and fixing problems wherever the law provides flexibility," Health and Human Services Secretary Kathleen Sebelius said Wednesday.
The law originally required that everyone buy a policy that complied with its requirements in 2014. That meant skimpy plans, which sometimes cost more in premiums than the coverage they provided, had to be replaced by plans that included hospital stays and prescription benefits, as well as other basic benefits. The change came following political backlash after Obama told people that they would be able to keep the same health care plans after the law was enacted.
Obama offered insurers the option to continue to offer the old plans, though some states chose to mandate ACA-compliant insurance. The new rule states that individuals and small groups may continue to renew old policies up to or beginning Oct. 1, 2016.
The number of people in those policies is dropping, Sebelius and other officials said, but they wanted to give insurers time to make sure consumers knew about the options they have through the state and federal exchanges. Officials said that applies to about only 500,000 people.
It's still hard to determine how many people have moved to compliant plans because people are buying insurance both through the exchanges and through insurance companies, Sebelius said.
The delay should be made permanent, said Sen. Mary Landrieu, D-La.
"The administration's action today is a step toward keeping the promise that was made to the American people that if they liked their health plan, they could keep it," said Landrieu, a supporter of the law who faces a tough re-election fight this fall. "And I intend to hold the administration to that promise."
Officials also announced that employers that self-insure would be able to report insurer and employer provisions in one stream-lined form, as well as allowing the option of reporting which employees "may be" full-time, as opposed to "are" full-time.
"Today's announcement is part of the administration's effort to provide certainty and early guidance about major health policies so employers, small business owners and other individuals can plan for 2015," said Assistant Secretary for Tax Policy Mark J. Mazur. "Treasury's final rules significantly streamline and simplify information reporting while making it easier for employers and insurers of all sizes to provide the quality, affordable health coverage that every American deserves."
This affects 4% of employers officials said, but comes in response to concerns that the process was time-consuming for those employers.
HHS also announced more protections for insurers who based premium prices on the assumption customers would shift from old plans to newer ones that met the law's requirements. It simplified reporting requirements for employers. The changes are part of a review of regulations required to implement the law, officials said, and reflect the experiences from earlier changes.
They also announced:
• Open enrollment for 2015 will begin Nov. 14, 2014, and end Feb. 15, 2015, so that insurers have more time to prepare.
• States have until June 15, rather than Jan. 1, to have a approved blueprint in place to transition to a state-based marketplace.
• That the cost-sharing limits for individuals for 2015 will be $6,600 and $13,200 for families.
• Allows federal SHOPS to offer stand-alone dental plans or a choice of plans, and allows employers to provide different contribution rates for full-time and part-time employees after 2015.
Changes to the enrollment period will give people more time to sign up after the holidays, said Brian Haile, senior vice president for health policy at Jackson Hewitt Tax Service Inc. It will also give them a chance to see how not having insurance in 2014 will affect their taxes, assuming they file early. Beginning in 2014, people who don't have health insurance must pay a fine when they file their taxes in early 2015.
Officials said they expect no more major announcements for the rest of the year, and that March 31 will remain the last day people may sign up for health insurance in 2014.
Budget proposal phases out some PPACA funding
Originally posted March 04, 2014 by Allison Bell on https://www.lifehealthpro.com
Managers of some new Patient Protection and Affordable Care Act (PPACA) programs will have to wean themselves off of PPACA startup funding.
The Obama administration has included cuts in several sources of the PPACA grant money that has been flowing into state government and state public health insurance exchange offices the past few years.
The administration posted the proposal on the White House website today.
The budget would affect spending in fiscal year 2015, which starts Oct. 1.
An appendix that gives some details on the U.S. Department of Health and Human Services (HHS) funding proposal shows that outlays on state regulators' commercial health insurance premium review operations would fall to $50 million, from $80 million this year.
Gross spending on the Pre-existing Condition Insurance Plan (PCIP) program -- a "risk pool" program for people who could not qualify to buy conventional major medical coverage before the PPACA ban on use of personal health status information took effect -- would fall to 0, from about $1 billion this year.
Total new budget obligations for PPACA public exchange construction would fall to $836 million, from $1.3 billion, and gross outlays would fall to $1.9 billion, from $2.4 billion.
New budget obligations for Consumer Operated and Oriented Plan (CO-OP) carriers -- the new member-owned, nonprofit carriers created by PPACA -- would drop to zero, from $221 million this year.
Elsewhere in the administration's budget proposal:
- Obligations for tax credit subsidies for private PPACA exchange plans -- "qualified health plans" (QHPs) -- and for QHP cost-sharing subsidies could increase to $60 billion, from $38 billion for 2014 and from nothing last year.
- Spending on a new, temporary, PPACA "risk corridor" program -- a program that's supposed to protect QHP issuers against underwriting losses -- could total $5.5 billion. The risk corridors program is supposed to be funded mainly by health insurers in the commercial individual and small group markets that earn underwriting profits, but the federal government may have to chip in if the entire individual market and the entire small-group market do poorly.
- Two of other PPACA "3 R's" risk management programs -- the temporary PPACA reinsurance program and a permanent risk adjustment program -- are supposed to get their money solely from insurer contributions. The reinsurance program would get $20 million for administration and pay out about $10 billion in reinsurance payments. The risk administration program would start with $3.4 billion in budget authority.
- Families in the top 3 percent in terms of taxable income would face a 28 percent cap on their ability to use itemized deductions and some other tax breaks to reduce tax liability. The cap would apply to employers' group health and retirement plan contributions.
Is PPACA a Threat to Employer-Sponsored Plans?
Originally posted February 27, 2014 by Linda Bergthold on https://www.healthinsurance.org
If you are among the 60 percent of Americans who have health insurance coverage through your workplace, you may be worried about how the Affordable Care Act (aka Obamacare) is affecting your coverage.
There are so many rumors circulating about the impact of the new law on private companies that it is not surprising you may be concerned. First, there was a threat that employers would drop their full-time employees to part-time to avoid penalties in the law. Then we heard that they might drop your coverage altogether or raise your premiums because of the law. A few weeks ago, the Obama Administration delayed the implementation of the law forsome employers even longer.
Should any of this keep you awake at night?
To address some of these concerns, I asked Larry Levitt, the Senior Vice President for Special Initiatives at the Kaiser Family Foundation, to respond to some questions about employer-sponsored coverage. Larry has been working in health policy for over 25 years and was a Senior Health Policy Advisor in the Clinton Administration.
Are employers dropping health benefits?
Linda Bergthold: Despite all the dire warnings about medium- or large-size employers dropping their health insurance benefits or making significant changes, does it look like the Affordable Care Act is having that impact? Other than pure political pressure, why did the Administration delay the mandate for employers between 51 and 100 employees to provide insurance?
Larry Levitt: I always believed that the fear of larger employers dropping health benefits now or in the near future was highly exaggerated. The vast majority (93 percent) of firms with 50 or more employees already offer health coverage to their workers. They do so voluntarily to attract a quality workforce. That’s not likely to change anytime soon.
Over time, a small number of firms may drop health benefits. This is consistent with what the Congressional Budget Office has projected, showing a modest decline in employer coverage over time. Those that do drop benefits are likely to be smaller businesses not subject to the requirement to offer coverage or pay a penalty, and lower-wage firms where the tax exemption for employer-provided health benefits is lower and the availability of premium tax credits in exchanges under the Affordable Care Act (ACA) provide greater subsidies for their workers.
Ultimately, employers will likely make economic judgments about whether to offer benefits or not, balancing a variety of factors such as:
- The value of the tax exemption for employer-provided insurance, which is greater for higher-wage employees whose desires are likely to carry the most weight.
- The penalty for not offering coverage for medium and large firms.
- Perceptions about the attractiveness of insurance in exchanges vs. employer coverage.
One consequence of the problematic rollout of the exchanges is that employers are likely to be even more cautious about making changes in their offering of health benefits until they see how the new marketplace works over time.
For a variety of reasons, regulations for the employer requirement were issued very late, and there were some complicated details to work out around employer reporting. That led to a delay in the coverage requirement for one year, and a subsequent phase-in of the requirement for another year. This provides for a gradual transition in much the same way that the law phased-in the individual mandate.
Are they changing hourly requirements?
Linda Bergthold: There has also been a lot of hype about employers reducing employees to part-time status to avoid requirements of the ACA. Are you aware of any data that shows employers changing hourly requirements? If you are an employee working 35 hours a week, what can you expect?
Larry Levitt: The aggregate data show no systematic shift to part-time work, and the recent CBO report on the labor effects of the ACA said there is no compelling evidence that such a shift is occurring.
That should not be surprising. The employer requirement was delayed, so there has been no economic incentive to reduce worker hours. And, reducing hours is not always so easy. The work still needs to get done, so it could mean more disruption and greater costs associated with hiring and training.
That said, there have been anecdotal reports of some employers reducing work hours of some part-time workers in anticipation of the requirement to offer coverage to those working an average of 30 or more hours per week. That will no doubt continue to occur, though it’s unlikely to add up to many people in aggregate terms.
It’s also important to put all this in context. Employers that offer coverage have always had hour thresholds that determine eligibility for health benefits. All the ACA did was make those thresholds uniform. Any time you require such uniformity, there will be some amount of movement and change on the margin.
Shifting from a 30-hour threshold to 40 hours would largely undermine the employer requirement to offer coverage. It would be a relatively simple matter for employers to reduce work hours for employees not offered coverage to just below that 40-hour threshold with minimal disruption to their businesses. It’s certainly a reasonable debate as to whether employers should be required to offer coverage or pay a penalty, but such a significant change would have economic consequences, significantly reducing revenue to the federal government and raising costs.
Are mandated benefits driving up costs?
Linda Bergthold: Most employer-sponsored health benefit packages are quite comprehensive and already include almost all of the essential benefits required by the ACA. The exception might be rehabilitation and MH/SA (Mental Health/Substance Abuse) benefits that are not always included in every benefit plan. Is there any evidence that requiring essential benefits has driven up employer benefit costs?
Larry Levitt: With a few minor exceptions, such has habilitationand mental health parity in some cases, the essential benefits in the ACA are very similar to what employers already provide. In fact, states had a variety of options for setting benchmarks for the essential benefits, and in the vast majority of cases chose one of the largest existing small-business plans in the state, so the package is based in large part on what most employers were already providing.
There is some confusion, though, about what benefit rules apply to employers. Medium and large employers do not have to offer the essential benefits (although many already do, per above). Small-business insurance does have to include the essential benefits, but again, the effect is likely to be modest. And, small businesses that self-insure, which may be a growing trend — are not subject to the benefit requirements.
The private exchange trend
Linda Bergthold: Large-employee benefit firms like Mercer, Aon Hewitt and Towers Watson are all offering “private exchanges” to their large-employer clients. These exchanges give employees or retirees more choice of carriers and plans and ultimately propose to lower costs. How do you view the “private” exchange trend? Do you see a two-track exchange landscape – one for individuals and low -income citizens and the other for middle and upper class people with job-based benefits? What would the impact on the public exchanges be in that case?
Larry Levitt: These new private exchange share a name with the ACA but are really quite different. For example, there are nopremium subsidies for low- and middle-income enrollees in private exchanges.
These efforts are more part of a long-running discussion about the potential for employers to move towards a defined contribution approach for health insurance, much the way they did for pensionsthrough the shift to 401(k) plans. This may – with an emphasis on “may” – finally be happening for a variety of reasons. Maybe it’s the semantic similarity to the ACA exchanges. Maybe it’s a response to the long-term trend of health insurance costs rising faster than inflation and wages (even though we are at this moment in a period of historically low increases in premiums). Or, maybe it’s in anticipation of the so-called Cadillac plan tax, which will impose a40 percent tax on high-cost plans beginning in 2018 and will provide a strong incentive to reduce the cost and growth of employer-sponsored health benefits.
Private exchanges, like ACA exchanges, provide individual employees with a choice of health plans, though they also facilitate employers turning their contributions towards coverage into what is in effect a voucher, shifting the risk of rising costs to employees.
I don’t think private exchanges represent a two-track landscape any more than the reality that most people of working age will still get their insurance through employers, while some will be covered through Medicaid or ACA exchanges. And, the ACA will significantly equalize coverage across the population, so what kind of insurance people have access to will vary much less than it did historically.
The future of employer-based benefits
Linda Bergthold: What do you see as the future of our employer-based benefit approach? Will the economics of health reform ultimately force employers to drop this benefit and send employees to the public exchanges, which may turn out to provideless costly coverage?
Larry Levitt: There’s nothing inherently advantageous to our employer-based health insurance system, which is mostly an accident of history. Proposals from the right and the left have both advocated moving away from it.
However, employer-based coverage does do a remarkable job of pooling risk and facilitating people to sign up for coverage. And, any significant dropping of coverage by employers – which I don’t think is likely – would increase government expenditures for premium subsidies.
While the ACA does not require a shift away from employer-sponsored insurance, it does provide some of the same benefits as breaking the tie between employment and health insurance coverage. People who lose their jobs will no longer lose their insurance in most cases, with expanded Medicaid coverage, guaranteed access to private insurance, and premium subsidies in exchanges.
This will largely eliminate the problem of “job lock” where people stay in a job simply because they fear losing their insurance. (Note that some people are still left out, in particular many poor adults in states that choose not to expand Medicaid.)
So, while there is some uncertainty around the future of employer-based health insurance under the ACA, there is now a safety net that didn’t exist before, if the availability of employer coverage declines.