Obamacare Carries On … What's Next?
Leaving legal and political hurdles behind, employers still worry there's no clear-cut path to health care reform.
If health care reform taught employers anything in 2012, it's that patience is a virtue.
Since the Patient Protection and Affordable Care Act passed in March 2010, employers have waited through numerous court challenges culminating with June's U.S. Supreme Court decision on the law's constitutionality followed by November's nail-biting re-election of health care reform's chief architect, President Barack Obama. But the wait may soon be over as guidance from Washington emerges.
Just before Thanksgiving, the U.S. Department of Health and Human Services released new proposed regulations addressing several provisions of the Affordable Care Act, including standards related to "essential health benefits" that must be offered to most Americans and an increase in the maximum financial reward employers can give employees who stop smoking or meet other health goals.
The last time employers received clarifications on the law's complex provisions was in August when the Internal Revenue Service issued its definition of a full-time employee.
It appears that the post-election avalanche of regulations and guidance that many predicted is under way. However, the lessons they will present in 2013 may not be clear cut.
"It is amazing how over the past few years since the law was passed how many times we get asked [by clients] what's going to happen," says Dave Almeda, vice president of human resources at Kronos Inc., an HR software firm. "The law is vague enough that it requires a lot of interpretation and rule-making. We were getting a steady diet of that until three or four months ago, and then it stopped. We've been in a hurry-up-and-wait mode for a couple of years."
Employers welcomed the November HHS rules, which includes a provision that gives employers greater flexibility to reward employees who participate in wellness programs designed to help them lose weight or lower their blood pressure.
Under the proposal, the maximum dollar amount of the reward would be increased to 30 percent from 20 percent of the cost of coverage. It would also increase the maximum reward to 50 percent for wellness programs that aim to prevent or reduce tobacco use.
Companies are gearing up for a raft of health care changes in 2013 and 2014. Here's an overview of what's ahead.
- Starting in January, employee contributions to health care flexible spending accounts must be capped at $2,500.
- In March, employers must notify employees about the status of their state health care exchange and their eligibility for federal subsidies if the company plan is deemed unaffordable under the law.
And in 2014:
- Employers with more than 50 employees must offer an affordable health plan or face penalties of up to $2,000 per employee, excluding the first 30 workers.
- Large employers must offer coverage that is defined as affordable and that meets the minimum value standards or face a penalty if just one of its full-time employees receives federal assistance to purchase insurance through an exchange.
- Large employers must offer health plans with a minimum actuarial value of 60 percent.
Like many companies, Kronos has been working toward compliance as regulations emerge but long-term planning is difficult when so much remains unclear, Almeda says. "You shouldn't draw conclusions until we have all the regulations. We've done all the things that are required. We've covered dependents, addressed FSA limits … but beyond that it's hard to come up with an answer on how reform will impact our health care strategy. We're focused on wellness right now. We're in hyperwellness mode."
At Ryan LLC, a Dallas tax consulting firm, compliance has been a priority since the law passed. Despite all their preparations, company leaders are still nervous about what the next two years will bring.
"Are there any surprises? Will it harm us financially? Will it put us in a place that we would have to dramatically decrease what we offer our employees?" says Delta Emerson, executive vice president and chief of staff at Ryan. "We put a huge emphasis on work-life balance. It will be difficult to find ourselves in a situation where we can't meet a need."
Emerson says that Ryan, which employs more than 1,000 workers at 45 locations in the U.S. and abroad, has been proactive in managing health care costs and providing employees with a competitive benefits package. The company began offering a high-deductible, consumer-driven health plan two years ago and recently introduced a health savings account and a supplemental insurance plan. It offers premium reductions to employees who participate in biometric health screenings and maintain their goals. Ryan would like to do more, but right now the company's primary focus is health care reform compliance.
"Before Obamacare, we felt freer to be creative in looking for ways to manage costs and provide comprehensive benefits, but we're not as enthused about what we can do next," Emerson says. "Right now the focus has shifted away from that to survival. It's about avoiding a hit on our balance sheet."
And some employers, especially those with large hourly populations, like retailers and restaurant chains, are finding ways to sidestep costs associated with the reform by cutting hours for full-time employees to less than 30 hours a week. In October, Darden Restaurants Inc., which owns Red Lobster and Olive Garden, announced plans to cut employees' time to 28 hours a week, thus avoiding penalties.
Other companies could follow suit, according to the National Survey of Employer-Sponsored Health Plans conducted annually by consultancy Mercer. More than half of employers who do not currently offer coverage to employees working more than 30 hours a week say that they will "restructure their workforce strategy" creating more part-time jobs.
An overview of the report's findings was released in November, and the full report is scheduled to be published in April 2013.
Small employers and those with a large number of hourly workers will be hit hardest by reform, according to Tracy Watts, national health care reform leader at Mercer.
"2014 is huge to them," she says "They may have hourlies who are not eligible today, so now they have to figure out what to give them and how much it will cost." She cautions employers not to start cutting hours without a thorough analysis.
"There is a trade-off," she says. "If you have a certain number of full-time and part-time employees, there is an optimal mix. And if you move too many into part time, you might save benefit costs but productivity and business potential costs could be five times greater. It's important to know what your optimal staff mix looks like."
Grappling with the cost of health care reform is a key focus for employers large and small. In addition to a host of major provisions in 2014, employers are bracing themselves for the so-called "Cadillac plan" tax that takes effect in 2018 and imposes penalties on employers that offer excessively rich health benefit plans. Those employers will be subject to an excise tax of 40 percent on plans valued at $10,200 for individual coverage or $27,500 for family coverage.
To avoid it, a growing number of employers are offering high-deductible, consumer-driven health plans and pairing them with health savings accounts in order to shift more of the cost to employees. The effort seems to be paying off.
According to the Mercer survey from November, employers this year saw the smallest health benefit cost increase in 15 years—4.1 percent in 2012 compared to 6.1 percent in 2011.
The report cites employer efforts to move more employees into consumer-driven health plans and to beef up wellness programs as key reasons for the decline.
For now, employers such as Ryan will carry on with their efforts to do just that and hope for the best.
"It's scary," Emerson says. "You're looking into the dark. Before you were staring into confusion; health care is always confusing. But now you can't see where anything is, where the stumbling blocks may be."
Rita Pyrillis is Worforce's senior writer. To comment, email firstname.lastname@example.org.