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By Richard Asinof
By Richard Asinof
Now that President Barack Obama has won re-election – and with it, defeated candidate Mitt Romney’s pledge to repeal health care reform on day one has fallen by the wayside – attention is now focused on full implementation of health care reform in 2014.
For many businesses, many of whom had hedged their bets, waiting to see who won, there is renewed emphasis on determining what health benefit solutions will work best for their employees.
Providence Business News asked James Moniz Jr., senior vice president and employee benefits practice leader at Starkweather Benefits Solutions, to offer his insights into the choices that now face businesses.
PBN: Now that health care reform is the law of the land and its repeal is no longer on the table, what is the most important thing for businesses to be aware of as we move toward full implementation in 2014?
MONIZ: It’s always difficult to take something complex like health care reform and try to reduce it to “one thing.”
But I would say that, above all, businesses should do their best to understand how the 2014 reform provisions will affect their own organization, specifically the “Employer Shared Responsibility Rules,” which trigger penalties). Because of several variables, these provisions may affect otherwise similar entities differently.
As many people know, certain health care reform changes have already been implemented, such as preventive services without a co-pay, extending dependents coverage to age 26, and elimination of annual and lifetime coverage limits.
Up to now, most of these changes have been beneficial, certainly to consumers and to some extent, employers.
This will change in 2014, as the penalty phase begins for employers and, to a limited degree, consumers.
PBN: The R.I. Health Benefits Exchange is scheduled to begin operation in October of 2013. What are the ways that small businesses can participate in the exchange?
MONIZ: The formation and development of state based exchanges varies, in some instances, dramatically state by state. Rhode Island claims a distinction of being among the states at the forefront.
Yet, it’s too early to tell exactly how small businesses can participate in the Exchange. The functionality of the Exchange is still being determined in several key areas.
For example, decisions will need to be made or clarified on the size cutoff of eligible employers that can purchase through the Exchange, such as for groups less than 50 employees, as well as the specific menu of plan benefit offerings.
Some of these answers may not be known until well into 2013 as the Exchange must engage and reach agreement with the health insurers in this process.
The RI Benefits Exchange has a management team assembled and you will likely see updates in the coming months.
PBN: What are the employer penalties for not participating versus the potential benefits from participation in providing health benefits to employees?
MONIZ: The employer penalties, which apply only to groups with 50 or more full-time employees, fall into two broad categories. The first is an annual $3,000 penalty assessed for any employee who qualifies for a subsidy (based on income and family size, plus an “unaffordable” employer plan offering) and subsequently purchases coverage through the public exchange.
The second penalty is a broader based employer assessment if the employer does not offer health benefits (or the benefits offered are not rich enough).
In this circumstance, organizations must pay $2,000 annually for every FTE (excluding the first 30 employees), even if just one employee qualifies for a subsidy.
The second penalty is sometimes known as “pay or play.”
That’s about as simply as I can describe it; these are not easily digested sets of rules, especially as you take a deeper dive.
Employers can implement strategies to minimize their liabilities stemming from these “shared responsibility rules.”
Conversely, employers may choose to purposely trigger these penalties, depending on several factors. Their philosophy regarding providing health coverage in the future should be a driving factor. Over the next several months, we’ll be holding these specific discussions with our clients as we help them prepare for 2014.
PBN: How important a factor are health insurance benefits and wellness programs in attracting and retaining talent in the workforce?
MONIZ: Overall, employer sentiment surrounding this question has shifted somewhat over the past two years. Earlier in this period, one survey of larger employers reported that nearly one in three employers would opt out of employer-sponsored coverage and pay the penalty.
Yet, more recent surveys indicate a significant shift in attitude, with 95 to 98 percent of employers indicating they will continue to offer employer sponsored coverage.
It’s interesting to note that certain organizations privately hold the view that they will drop employer sponsored coverage in 2014 and just pay the penalty, yet they offer coverage today when there is no penalty for dropping it.
Certainly, access to reasonable individual market plans and rates is important, but for many organizations, though not all, dropping employer sponsored health benefits may be an ill-suited solution.
When asked in surveys, employees continue to rank the value of their health benefits higher in importance than salary increases.
An employer offering a well-designed health benefit package, including wellness initiatives, will likely have a strong advantage in recruitment and retention over those that do not. Also, the tax efficiency of health insurance as an employer provided benefit vs. compensation in lieu of, is powerful. This extends to payroll taxes, and thus also applies to tax-exempt organizations.
PBN: What tools are available for employers to help calculate the costs and benefits under the new health care reform law?
MONIZ: The tools run the gamut from basic online calculators with few input variables to very sophisticated models that can be very difficult to understand…and would confuse many people.
At Starkweather, the analysis tool we use is a middle ground approach. It was developed in partnership with a nationally known health care actuarial/compliance firm. It utilizes key employer-specific information, broad databases and algorithms to produce a tailored report which projects the likely impacts of the 2014 reform provisions on employer benefit costs.
The results of these analyses are sometimes surprising. We can then model this outcome by altering certain assumptions to help our clients understand how to maximize their position under the reform rules of 2014. This is depicted with charts and graphs for ease of understanding.