The staid, uneventful world of health insurance is being turned on its head by the reforms within the Affordable Care Act. The legislation has so many moving parts that its trajectory simply can’t be predicted, it can only be prepared for. The next few years of ACA implementation will be a fascinating study of economics, government, human nature and the American culture.
But as business owners, you’d like to cut to the chase. You want to know exactly where this ride is taking your organization, and what you’ll need to do to get ready. While we may not have a view of every inch of the roller coaster track, we can nonetheless help you get positioned for the experience. Here’s how to prepare to approach the gate, ticket in hand.
1. Relax and smile. It’s not all bad.
For small employers (defined in this article) the ACA legislation may be welcome. If the decision is right for you, your organization can consider eliminating medical insurance for your employees without facing a penalty, nor dooming your workforce. Even the sickest employee will be guaranteed the right to purchase their own health coverage without discriminatory pricing due to health status.
If you do offer a health coverage benefit, your pricing will be more consistent with other employers in your area. While premium pricing for your group used to be based on health status and medical underwriting, it will now be based on the cost of care in your particular geographic region. Within each community, small employer groups will pay the same premium for employees of all ages and both genders without regard to health status and health history (more details here).
If your medical plan is “grandfathered” or if you have the fortitude to consider partial self-insurance, a small employer may avoid huge price increases. Some insurance carriers may allow early renewals in 2013 to provide greater time to sort out options and compare plan and coverage alternatives.
And if you employ fewer than 25 full-time equivalent employees, you may be eligible for tax credits that will help you purchase your coverage on the Small Business Health Options Program (“SHOP”), the Public Exchange for small employers.
Large employers, even you have reason to relax and smile. Take solace in knowing that you are not alone in facing the hurdle of complying with the ACA. Your competition, suppliers, customers, and every other U.S. employer are all subject to the same law, and face the same costs and constraints. In that way, the ACA at least offers a level playing field.
2. Examine your choices. There are costs to every decision.
Only large employers must answer the question, “Play or pay?” by evaluating the threat of a non-compliance tax. Those who “play” will continue to negotiate healthcare premium pricing that will, in part, be influenced by group claims experience, albeit in a guaranteed issue environment. The community ratings do not affect premium pricing for large employers.
But every employer has a coverage decision to make, regardless of size. Even small employers have to discuss the consequences of failing to offer health coverage. Analysis, modeling, philosophical discussion, defining corporate values, and then more analysis should be engaged to make this determination. It can’t be made for you. But the trends show that a primary consideration ought to be evaluating your ability to attract talent.
Many employers report that they now face a workforce skills gap, a struggle to find people with the specialization and experience needed by their businesses. They are using every tool in their box to attract the few who can be found. Those who face this situation are looking at their ACA options in a different light. Some have determined they must find a way to afford employee health coverage to aid recruitment and retention, because they simply can’t afford the alternative – and they don’t mean a tax.
3. Get help with navigation. The data will give you some answers.
Much of your ACA legwork should be done by the Human Resource professionals who delve into your workforce issues every day. They should be able to provide some context so that you can build a decision-making framework. A sample human resources “to do” list might include:
• Choose how to measure hourly and non-hourly work for employee count purposes, and choose a measurement period and a stability period. (more on “look back” here);
• Determine whether you are a small group (< 50 employees) or a large group (50+ employees)
• Review your current plan’s eligibility guidelines, and employee premium contribution requirements;
• Find out if there are controlled groups or discrimination issues;
• Calculate the impact of HRA and HSA contributions, and wellness plan risk-based premium contributions;
• Update your documents: Summary Plan Description, Plan Document, HIPAA Privacy Notice, and Business Associate Agreements.
4. Buckle up. It’s going to be a long and twisty ride.
Right now you’re focused on the changes for 2014, but this multi-faceted law doesn’t stop there. The consequences of the ACA will continue to evolve.
Regulations that clarify the ACA are expected to be repeatedly issued, and the law will be further interpreted. For instance, it’s expected that non-discriminatory rules will be extended to fully insured plans. And keep in mind that parts of the legislation as written are slated to take effect down the road.
Later this year, each state must provide a healthcare marketplace, called an exchange, either on its own or through a federally facilitated exchange (more on this here). But effective January 1, 2016, states may form “compacts” under the law to allow for the sale of health insurance across state lines. It remains to be seen if this will change the marketplaces of the future in large or small ways.
Today, only small employers can look forward to purchasing coverage for their group in an exchange, called the Small Business Health Options Program (“SHOP”). But as of 2017, states may allow large employers to participate in exchanges.
Businesses should watch with interest to see the evolution of these exchange marketplaces. With slow starts, many federally facilitated exchanges, such as the one under development in Ohio, are likely to be relatively rudimentary at first, possibly offering small groups only one plan option through the SHOP in 2014. But your options are likely to grow from there.
And take heed that in 2018, employers providing high-cost health plans may be subject to a “Cadillac Tax.” With the potential of a one-time health cost adjustment, the initial annual actuarial dollar value assigned to a high cost health plan is $10,200 for single coverage and $27,500 for family coverage. The penalty will be a 40% excise tax on amounts greater than the threshold.
5. Have your parachute handy. Or just a phone.
There are skilled advisors available to help you with difficult operational decisions like these. We’d be proud to count ourselves among them. For your Clark Schaefer Hackett representative’s contact information, click here. To learn more about Scheller Bradford, click here.
This article is the fifth in a series authored by Clark Schaefer Hackett and The Scheller Bradford Group to provide guidance on implementation of The Affordable Care Act (“ACA”). Read the first article here, the second article here, the third article here, the fourth article here, and review these definitions that are crucial to understanding the ACA.