Tag Archives: health care coverage

Why Employers Should Practice Complying With an Obamacare Mandate

The Affordable Care Act (ACA) requires large employers (those with at least 50 full-time equivalent employees) to provide qualifying health care coverage to substantially all full-time employees and their dependent children or pay a monthly “Employer Shared Responsibility” penalty.  The employer mandate was set to take effect in 2014 but was delayed until 2015.  But, even without the threat of tax penalties in 2014, employers should practice complying with the mandate during the 2014 transition period.

Here is a blueprint for implementing a compliance strategy: 

1. Amend health plans to comply with the ACA requirements that were NOT delayed.  Required changes include eliminating annual dollar limits on essential health benefits; eliminating pre-existing condition exclusions for all enrollees; offering coverage to dependents to age 26 who are eligible for other employer coverage; and limiting benefit waiting periods to no more than 90 days.  Non-grandfathered plans also must prohibit discrimination based on participation in a clinical trial; abide by cost-sharing limits; and prohibit discrimination against any health care provider acting within the scope of that provider's license or certification under applicable state law. 

2. Determine whether the employer mandate applies.  In general, the employer mandate applies to “large” employers that employed an average of at least 50 “full-time” equivalent employees on business days during the prior calendar year.  A full-time employee is one that averages at least 30 “hours of service” per week (or 130 hours per month).  All entities in a controlled group are treated as a single employer to determine large employer status.

3. If an employer is determined to be a large employer, assess financial risks under the employer mandate.  A large employer that chooses not to offer minimum essential coverage (MEC) will be penalized $2,000 per full-time employee (minus the first 30) if one full-time employee receives a federal subsidy for Health Insurance Marketplace coverage.  This is often called the “sledgehammer” penalty.  If a large employer offers MEC, but the MEC fails to provide minimum value (60%+ of total allowed costs) or affordability (employee’s contribution toward the premium is ≤9.5% of household income), the employer will be penalized the lesser of $3,000 per full-time employee receiving a subsidy or $2,000 per full-time employee (minus the first 30).  This is known as the “tack-hammer” penalty.  Most employer-sponsored group health coverage is MEC, including, apparently, so-called “skinny” plans that cover only ACA-required preventive services with no cost-sharing and with no annual or lifetime dollar limits on benefits.

4. For a large employer that wants to avoid the sledgehammer and/or tack-hammer penalty in 2015, rehearse employer mandate compliance in 2014.  Finalize plan designs and amend plans now to conform to MEC, minimum value and affordability requirements.  Offer coverage to employees performing 30 hours of service or more per week during a month and, at a minimum, their dependent children to age 26.  If large numbers of variable-hour or seasonal employees make it difficult to track and manage full-time status, establish ACA-compliant “measurement periods” to determine whether these employees actually work enough hours to be offered coverage.  Maintain detailed records, because informational reporting about the coverage and to whom it is offered must be provided to the Internal Revenue Service beginning in 2016. 

Details of each employer’s situation are unique.  But all employers should accelerate and simplify this complex compliance project.  Many independent, third-party administrators can be an invaluable resource for navigating the employer mandate rules and penalties and other complexities of health care reform.

Myths About Obamacare and Workers’ Comp

The Obama administration has said that the Patient Protection and Affordable Care Act, enacted into law in 2010 and scheduled to take effect on Jan. 1, will reduce workers’ comp claims because so many additional people will be covered under personal insurance policies. But there is reason to think otherwise.

The first issue is that so many companies are reducing the insurance they offer employees or are cutting employees’ hours so much that they fall below the law’s threshold, so employees don’t have to be covered at all. Employees who aren’t covered under corporate policies or who are underinsured are more likely to make workers’ comp claims.

Here are just a few examples from National Review Online:

SeaWorld used to let part-time employees work as many as 32 hours per week, but the company is dropping the limit to 28 hours to keep them under the 30-hour threshold at which it would be required to provide health insurance under Obamacare. More than 80 percent of the company’s thousands of employees are part-time or seasonal.

Carnegie Museum in Pennsylvania scaled back the hours of 48 of its 600 part-time employees to less than 30 hours a week to sidestep the mandate to provide health-care coverage

Virginia Gov. Bob McDonnell decided to limit the state’s part-time employees to 29 hours per week.

Brevard County, Florida told a local television station that the county’s 300-plus part-time employees will be “capped at something less than 30” hours to save the county about $10,000 per employee in health insurance.

Fatburger  announced that franchises had begun making efforts to keep employees under the 30-hour threshold, including some franchises’ engaging in “job sharing.”

As more companies shift to shorter work weeks, you can expect claims under workers’ comp to keep climbing.

Proponents of Obamare still say it will decrease workers’ compensation costs in several ways, including through the elimination of lifetime caps on medical insurance coverage. The argument is that these caps on employees’ private policies pushed them to file workers’ compensation claims. Really? Many of the leading cost drivers for work-related injuries are Musculoskeletal Disorders (MSD), better known as soft tissue injuries.  According to the Bureau of Labor Statistics (BLS), soft tissue injuries (sprains and strains) accounted for 40% of all work-related injuries that resulted in lost days of work. I do not believe that these types of injuries would affect the lifetime maximum for health insurance, which is typically $1 million.

Proponents also note that a healthcare insurer can no longer refuse to provide coverage because of preexisting conditions, conditions they claim were often not covered by private healthcare and thus encouraged employees to seek coverage under workers’ compensation. While this is a good point, the National Review’s examples show that many people are losing healthcare coverage or will see it reduced, meaning that there will be a greater likelihood of workers’ compensation claims. Yes, there are penalties for not securing healthcare coverage, but they are modest, especially in the early years of Obamacare, and there is no real mechanism for enforcement. The IRS has the responsibility for collecting penalties but has no true powers to do so.

How are people supposed to afford care if their hours have been cut?  You guessed it: workers’ compensation.

Is It Better To Pay The PPACA Penalty Or Continue Offering Health Coverage?

When 2014 arrives, employers and their workers must be prepared for the changes brought by the Patient Protection and Affordable Care Act (PPACA). New regulations will require larger employers to offer medical coverage to employees or pay a penalty for not doing so. This is why it is important for employers to start analyzing their options and developing a strategy sooner rather than later.

Many employers have reported that the PPACA law will increase their expenses, which will result in the need to reduce workers' hours or lay off employees. Many employers are favoring the idea of eliminating their health insurance offerings, in part because the penalty appears to be much cheaper than the cost of the coverage they are currently providing. Although paying the penalty may seem like the right answer for some employers, there are several reasons why this may not always be the best choice.

Reporting Requirements
If employers eliminate their health coverage offerings, they will be subject to federal reporting rules to determine the amount of the company's penalty that applies. In addition to collecting more data from employees, employers may have to deal with the hassles of inquiries from the state insurance exchanges about whether coverage is available to employees.

Losing Tax Breaks
Employers offering health coverage qualify for several tax breaks. For example, employee premiums paid through Section 125 plans are not counted as taxable wages, which reduces the payroll taxes paid by the employer and employees. Employers who do not sponsor coverage will lose some of these tax breaks.

Difficulty Recruiting And Keeping Top Talent
If employers make too many cuts to their health programs or choose not to offer coverage, they could make their companies less attractive to the best potential employees. Workers who are considered top talent may start looking elsewhere for employers offering health benefits. In addition, the costs of hiring new workers, compensating for lost productivity and paying the costs associated with business disruptions could cost more than offering reasonable coverage.

Variable Financial Complications
If employers decide to drop coverage, they will likely see employees start demanding other forms of compensation, since they will be expected to use their own money to pay for coverage in the state insurance exchange. Furthermore, the penalties are not deductible as a business expense for the company, and the penalties may increase over time.

Counting Difficulties
It will be difficult for most employers to form a final count of their staff. Classifying part-time and full-time employees is not an easy process. In 2012, the Internal Revenue Service released a set of rules that are not completely clear about what constitutes part-time status. If employers miscalculate how many part-time workers they have, this mistake could be costly.

The Patient Protection and Affordable Care Act will bring big changes for both employers and employees. As employers develop their plans for 2014, the impact on both the business and the employees over the next several years should be considered.

All Employers CAN Reduce The Cost Of Health Care

What health plans and brokers don't want you to know….

Sometimes it's humbling to admit what you don't know. It's even worse to realize that you don't know what you don't know (YDKWYDK – pronounced, yidick-widick). Well, last fall I was hit square in the face with an embarrassing case of YDKWYDK. Silly me, I presumed that within certain boundaries, actuarial science is, well, a science. Based on the experience/characteristics of a population, and the design of a plan, there was a narrow range within which premiums would be assessed. Not exactly.

Informed Purchasers Can Get Better Coverage And A Lower Cost
I advise employers about how to manage health care costs. That's what I do for a living. Well, I discovered there is a process for uncovering available savings of which I've been unaware. Let's call it the informed purchaser discount. It turns out if you:

  • Learn more about how rates get set (not necessarily based on actual claims risk), and
  • Discover where fees might be hidden (many places), and
  • Inform yourself on calculations health plans use to forecast cost and protect themselves from exposure (quite conservatively), and
  • Partner with someone who has the data platform and predictable process to uncover available savings, and
  • Design a new plan that aligns patient and provider interests,

You can pay a lot less for coverage.

Why Don't You Already Know About This?
Well, it turns out there are incentives built into the system such that:

  • Most brokers — who are paid by the plans — are reluctant to push back on plans for better prices, and
  • Brokers who do push back may get penalized by the plans with worse quotes or slower service, and
  • The timing of quotes are manipulated to rush decisions and leave less time for deliberations, and
  • Because it's a hassle to price many different designs, the plans and brokers often choose a favorite and don't bother to tailor it to specific client needs, and
  • All plans tend to operate this way, so you won't detect over-charging by simply comparing among them.
  • Thus, benefits managers are left reporting to the executive team, honestly: “This is the best I could find.”

Sigh. In other words, circumstances are stacked against the individual employer, especially small ones that are fully-insured. The traditional industry process is meant to keep us in the dark.

Worse yet, as traditional benefit professionals, we don't know what we don't know. There are many reasons not to rock the boat. Perhaps there is a long-term, trusted relationship with the broker; they've become our friends. Brokers won't tell you that they think you can get a better deal — otherwise you would question why they aren't getting it. Perhaps there is fear that getting a different broker or an outside advisor will be looked upon as a sign that we have made poor choices in the past. Perhaps it is simply easier to do what we always do. Perhaps we assume we will get the best deal through the competitive bidding process. Perhaps we assume that because we are smart and capable in other areas, the same approach applies in health coverage. Whatever the reason, the vast majority of businesses don't have the insight to demand and get the informed purchaser discount.

So, you ask, how much can that discount be? (Are you sitting down?) $1,000 to $3,000 per employee, every year. For a 500 person company, that equates to overpaying between a half a million and 1.5M dollars on health care over the past five years. It's shocking, it's appalling, it's something I would not have believed … but folks, it's real. And you can do something about it.

I have spent my professional benefit career advising employers about plan design, corporate policy, health care quality, and health interventions. All the while, I should have been encouraging them to partner with an experienced purchaser who knows the process and can share understandings of risks and incentives.

Stop Paying A Penalty Simply For NOT Being Informed
The only way to get an informed purchaser discount is to make the process transparent and work with someone who only has a financial incentive to save you money. This doesn't mean you fire your broker (unless you want to), only that you insist on having a broker who will partner with an independent plan reviewer/designer. You want someone who is not threatened by complete transparency — something you will learn is not welcomed by plans or most brokers. (If your broker resists, I can recommend a few who do advocate transparency and are open-minded).

What should the independent party do?

  1. Review your current plan and experience at no charge.
  2. Assess the savings opportunity at no charge.
    Explain your design options and confirm you are comfortable with specific types of changes. The savings should not be solely derived from making the plan less desirable, such as:

    • restricting access to providers
    • shifting large increases in cost to employees
    • design changes that discourage employees from choosing coverage
  3. If savings are not likely, state that fact, shake hands and part ways.
  4. Charge a reasonable fee, most of which is contingent upon meeting a minimum savings (e.g. $1000 per employee).

In other words, there should be no cost or risk to assess your opportunity, and the group who guarantees savings should get paid after the savings are achieved.

Does such an organization exist? Yes. It's not a brokerage, but a small, independent consulting group called Incenta, that is saving its clients a lot of money. Do I work for them? No, but I am introducing them to my clients because it feels bad not to. Will I be partnering with them in the future to bring this solution to more employers? Absolutely.

What Now?
This article is a stark departure from my usual analytical or policy-oriented discussion. Readers who know me know that I investigate topics thoroughly and thoughtfully. Despite this, all of us encounter situations where yidick-widick, and we discover new solutions to old problems. It's not a sin to find out we didn't know — but I've decided it's inexcusable to ignore it now that I do know.

Never have I been more convinced that a different sort of expert is needed. Plus, in this case it happens to be very low risk — no cost to assess potential savings, and the vast majority of fees contingent upon achieving $1000 to $3000 of savings per employee.

So, I encourage every benefits manager to become one of the (few) informed purchasers. Don't wait until your renewal is approaching. And don't be afraid to admit YDKWYDK — better to learn this now than continue paying the penalty for remaining uninformed. Call or email me or the others listed at the bottom of this article. Become informed. Your bottom line, and your company executives will thank you.

For those interested in following up, talking it though, or getting started toward a better process of getting health care coverage, feel free to contact:

Wendy Lynch
Send Email to Wendy

Dennis Kelly
Send Email to Dennis

Dave Dias (one of the transparency-advocating brokers I know)
Send Email to Dave