Tag Archives: health insurance marketplace

As Obamacare's 'Compassionate' Reality Sets In, Companies 'Cruelly' Cut Health Benefits

Employees of shipping giant United Parcel Service recently got an unexpected delivery. The company announced that it would stop offering health coverage to the spouses of 15,000 workers.

UPS’s workers and their families can thank Obamacare for this special delivery. And UPS isn’t alone. American businesses are discovering each and every day that the president’s signature law will raise health costs for them and their employees in short order.

In a memo explaining the decision to employees, UPS stated that increasing medical costs “combined with the costs associated with the Affordable Care Act, have made it increasingly difficult to continue providing the same level of health care benefits to our employees at an affordable cost.”

One day before UPS’s big announcement, the University of Virginia announced that it would cut benefits for spouses who have access to health care through jobs of their own. The rationale was similar.

Delta Airlines recently revealed that Obamacare will directly increase its direct health costs by $38 million next year. After taking into account the indirect costs of the law, the company is looking at a 2014 health bill that’s $100 million higher.

Increasingly, large employers who aren’t dropping spousal health benefits are requiring their employees to pay monthly surcharges in the neighborhood of $100 per spouse.

Many small businesses are dropping family coverage altogether because they expect that Obamacare’s new tax on insurers will be passed on to them in the form of higher premiums. One Colorado-based business received notice from its insurer that the tax would increase premiums more than 20 percent.

The story is similar in Massachusetts. One new report concludes that over 45,000 small businesses in the Bay State will see premium increases in excess of 30 percent. In all, more than 60 percent of firms in the state will see their premiums go up.

Last month in California, the largest insurer for small businesses — Anthem — declared that it would not participate in the state’s small-business health insurance “marketplace,” Covered California. Only two years ago, Anthem covered one-third of small businesses in California.

Anthem’s exit represents one less choice for consumers — and a sign that competition may not be as robust in the exchanges as the Obama Administration promised.

Small businesses are responding to these higher premiums by trimming their labor costs in other ways. That’s not good news for workers.

Seventy-four percent of small employers plan to have fewer staff because of Obamacare, according to a recent U.S. Chamber of Commerce survey. Twenty-seven percent are looking to cut full-time employees’ hours, 24 percent to reduce hiring, and 23 percent to replace full time with part-time employees.

One in four small companies say that Obamacare was the single biggest reason not to hire new workers. For almost half, it’s the biggest business challenge they face.

These findings are consistent with a recent Gallup Poll showing that 41 percent of small businesses have already stopped hiring because of Obamacare. Another 19 percent intend to make job cuts because of the law.

All this tumult in the labor market is fueled by more than the increase in premiums engendered by Obamacare. The law effectively encourages companies to cut full-time jobs.

Obamacare requires employers with 50 or more workers to provide health insurance to all who are on the job for 30 or more hours per week. The law originally called for this “employer mandate” to take effect in 2014, but the Administration decided in July to delay enforcement of the mandate until 2015.

Employers are responding by doing just enough to avoid Obamacare’s dictates.

Administrators at Youngstown State University in Ohio recently told adjunct instructors, “[Y]ou cannot go beyond twenty-nine work hours a week. . . . If you exceed the maximum hours, YSU will not employ you the following year.” A week prior the Community College of Allegheny County in Pittsburgh made a similar announcement.

Hundreds of employees at Wendy’s franchises have seen their hours reduced for the same reason.

Meanwhile, companies with fewer than 50 employees are thinking twice about expanding — and thus being ensnared by Obamacare’s requirement that they provide health insurance.

The cost of each additional employee could be staggering. A firm with 51 employees that declined to provide health coverage would face $42,000 in new taxes every year — and an additional $2,000 tax for each new hire. Providing coverage, of course, would be even more expensive.

Meanwhile, as private firms large and small grapple with Obamacare-fueled cost increases, one large employer — the federal government — has been quietly exempting itself from portions of the law.

Top congressional staffers like their current benefits under the Federal Employee Health Benefits Plan (FEHBP), wherein the government pays up to 75 percent of the premiums.

But the law requires those who work in lawmakers’ personal offices to enter the exchanges. And in many cases, staffers  make too much to qualify for health insurance subsidies through the exchanges. So they’d be facing a hefty cut in their compensation.

Fearing a mass exodus of congressional staffers from Capitol Hill, the Obama Administration fudged the law to permit lawmakers’ employees to receive special taxpayer-funded subsidies of $4,900 per person and $10,000 per family.

Yet only three months ago, Senate Majority Leader Harry Reid (D-Nev.) claimed that Congress wouldn’t make exceptions for itself.

President Obama no doubt knows that these congressional favors won’t go over well with ordinary Americans. So he’s called on his most popular deputy — former President Bill Clinton — to try to sell the law to the public once again.

But unless the former president can lower employer health costs with little more than the power of his words, his sales pitch will likely fall flat.

This article was first published at Forbes.com.

Built For Reform: Third Party Administrators And The Affordable Care Act

The Affordable Care Act (ACA) is considered the most significant, albeit poorly written, law that Congress has passed in the last 50 years. As regulators devise the details needed for the law to be fully implemented, unprecedented new administrative and compliance burdens are looming for employers. Independent Third Party Administrators (TPAs) have decades of experience guiding employers through the pitfalls of government rules and requirements. This expertise makes independent Third Party Administrators invaluable to employers trying to mitigate the impact of health care reform.

A Brief History Of The Third Party Administrator Industry
Most employee benefit plans are highly technical and difficult to administer. Those complexities gave birth to the Third Party Administrator industry.

While there are reports of a Third Party Administrator operating as early as 1933, the modern Third Party Administrator concept is rooted in servicing mostly pension plans codified in the 1946 Federal Taft-Hartley Act. Such plans are typically comprised of several employers whose employees belong to a single union.

By the late 1950s, there were also a few Third Party Administrators specializing in servicing medical plans sponsored by single employers. The industry boomed after the enactment of the Employee Retirement Income Security Act of 1974, as employers began exploring the option of self-funding when traditional insurance coverage failed to meet their cost expectations. Today, the administration of self-funded medical plans is the primary line of business for many independent Third Party Administrators.

Employers that self-fund assume the financial risk of paying claims for expenses incurred under the plan. Medical, dental, vision, and short-term disability plans, as well as Health Reimbursement Arrangements (HRAs), can all be part of a self-funded program.

Most employers sponsoring self-funded medical plans purchase stop loss coverage to limit their risk. An insurance carrier becomes liable for the claims that exceed certain pre-determined dollar limits.

The Value Of A Third Party Administrator-Administered Self-Funded Program
Employers can choose to administer their self-funded plans in-house. However, few have the experience to do it well. Considering the heavy penalties for regulatory non-compliance, self-administration is generally ill-advised.

Some insurance carriers offer Administrative Services Only (ASO) contracts to employers that wish to self-fund but rely on the carrier to do the paperwork. Unfortunately, most insurance carriers have benefit administration systems that are too inflexible to accommodate the unique plan designs that are the hallmark of self-funding. In addition, they are more attuned to the legal requirements applicable to fully insured products, which differ dramatically from those for self-funded plans.

Insurance carriers may assume financial risk under an Administrative Services Only contract by providing the stop loss coverage. Conversely, Third Party Administrators are not risk-taking entities so they are clearly in a position to act in the best interest of the plan and its members.

The independent Third Party Administrator industry was built on change. Never having settled for the “one-size-fits-all” approach of the fully insured model, independent Third Party Administrators maintain sophisticated information technologies that adapt easily to new demands, as well as professional staff accustomed to responding to regulations that continually reshape employee benefits in profound ways.

Independent Third Party Administrators usually provide a broad range of à la carte services to self-funded employers: plan design, claims processing, placement of stop loss coverage, case management, access to networks and disease management, wellness, and utilization review vendors, eligibility management and enrollment, subrogation, coordination of benefits, plan document and summary plan description preparation, billing, customer service, compliance assistance, ancillary benefits and add-ons such as Section 125 plans, consulting, and COBRA and HIPPA administration. Independent Third Party Administrators are best at customizing their services and plans to suit a client’s specific needs including benefit philosophies, demographics, risk tolerance, and compliance requirements.

A fully insured arrangement cannot compete with a thoughtfully designed, Third Party Administrator-administered self-funded program. Employers that self-fund enjoy increased financial control, lower operating costs, flexibility with plan design, a choice of networks, detailed reporting of plan usage and claims data, and effective cost management.

The Challenges Of The Affordable Care Act
When small employers (those with fewer than 50 full-time equivalent employees) offer health benefits, the coverage is usually fully insured. However, self-funding has gained momentum among small employers.

In 2014, large employers (those with 50 or more full-time equivalent employees) will be subject to the Affordable Care Act’s “pay or play” requirements. A large employer must offer its full-time employees (working at least 30 hours per week or 130 hours total in any given month) and their children minimum essential coverage that is affordable and provides minimum value. Otherwise, the employer will be subject to a penalty if any of its full-time employees obtains health coverage through a Health Insurance Exchange (now called a Health Insurance Marketplace) and is certified as eligible for a premium tax credit.

The premiums for fully insured coverage are expected to rise significantly due to the Affordable Care Act imposing an annual fee on most insurers, modified community rating in the individual and small group markets, and expensive mandates for essential health benefits. Self-funded plans are exempt from these requirements. In addition, while Affordable Care Act requirements will likely inflate insured premiums, stop loss premiums remain competitive (even for small employers).

Self-Funding As A Strategy For Overcoming The Affordable Care Act’s Challenges
Depending on size, employers must make important decisions about managing the costs associated with health care reform. They can provide coverage or not provide coverage (and possibly pay a penalty), reduce hours, eliminate jobs, or find a way to offer a cost-effective and compliant plan.

Independent Third Party Administrators are the experts at self-funding. A Third Party Administrator can custom design a high quality, Affordable Care Act-compliant, self-funded program that a small or large employer can offer at a controlled cost. For employers looking for flexible solutions to manage costs while continuing to recruit and retain talented employees, a Third Party Administrator-administered self-funded program with medical stop loss coverage is a viable solution.