Despite the costs and administrative burden, several large employers see advantages to continuing to provide health care coverage and avoiding the health reform law’s “play-or-pay” penalties that go into effect in 2014.
Health care coverage “distinguishes us as an employer. We like the idea of providing a plan and offering wellness to enable employees to improve the quality of their lives,” Pamela French, director of global benefits and integration in human resources at Boeing Co. in Chicago, said at a recent National Business Group on Health conference in Washington.
If coverage is not offered, how does a company continue to be “an employer of choice?” asked Lillian Kandybowicz, vice president of human resources at shipping giant Maersk Inc. in Madison, New Jersey.
“Providing employees with health care plans is extremely important to us,” said Judy Verhave, executive vice president and global head of compensation and benefits at New York-based Bank of New York Mellon Corp.
Whether to continue offering coverage is an issue many employers have begun to analyze due to provisions in the health care reform law that take effect in 2014.
One provision imposes an annual $2,000 per employee assessment on all but small employers that do not offer a health plan. In addition, the law provides health insurance premium subsidies for the uninsured with incomes up to 400 percent of the federal poverty level, or $89,400 for a family of four. The subsidies would be used to purchase policies from insurers offering coverage in state exchanges.
With annual health insurance costs often topping more than $10,000 per employee, employers could come out financially ahead if they folded their plans and paid the penalty. Because of the federal premium subsidies, lower-paid employees would be shielded, in some cases completely, from the financial effects of plan terminations.
But panelists during the March 9 to 11 NBGH conference noted that the financial issues are not cut and dried. “It is a complex question,” Kandybowicz said.
For example, employers pursuing such a strategy would have to analyze the amount of additional compensation they would provide to employees not eligible for federal premiums.
“How do you restructure remuneration?” she asked.
In addition, there is no assurance that lawmakers would not later increase the $2,000 per employee penalty for not offering coverage—which Kandybowicz described as very small compared with employers’ current health care plan costs—if large numbers of employers decide to terminate their health care plans.
While the benefit managers said their companies intend to keep providing coverage, they noted that health care reform will require design changes, particularly to the highest-cost plans.
Boeing’s French said the aerospace giant will make whatever changes are necessary to avoid a 40 percent excise tax that will be imposed on the most costly plans starting in 2018. Under that provision, the tax will be imposed on premiums that exceed $10,200 for single coverage and $27,500 for family coverage.
Avoiding the tax “is an imperative,” Verhave said.
Even without the impetus of the health reform law, employers are taking action to try to hold down health care cost increases to more manageable levels.
For example, Boeing is working to develop programs in which payments made to medical providers would be linked to performance, French said.