Health Care

Affordable Care Act

By
From the November 2013 issue of Columbus CEO

Some of its provisions are already in place, others have or soon will come online and still others like Pay or Play have been delayed. Pay or Play refers to the act’s employer mandate called the Employer Shared Responsibility Requirement that stipulates companies with the equivalent of 50 or more full-time workers that don’t provide health-care coverage could face financial penalties. It was supposed to go into effect Jan. 1, but was postponed until January 2015 to give employers more time to prepare for it.

National health-care reform continues to confound employers who are just really beginning to come to grips with what it all means, what kind of costs they will incur and how it is going to affect their workforces.

Their questions subsequently also have created new business for those professional services such as law firms and health-benefit consulting companies that have been inundated with requests for help in understanding the national policy.

Attorney Edward Redder in the Columbus office of Thompson Hine says since the act became legal three years ago, his time is dominated by counseling clients on compliance issues related to health-care reform versus company retirement plans, which had been his practice’s bailiwick.

“I’ve seen a shift with the main focus now on health care,” he says.

Redder says there is still a lot of confusion among employers about what they must do and how everything is going to work.

“Confusion is just one word I would use to describe it,” says CEO Tom Heiby of Columbus-based FrazierHeiby, a public relations and strategic marketing firm, “but it just smells like a rat to me.”

A critic of Obamacare from the get-go, Heiby says regardless of his personal stand, he began meeting with the company’s insurance benefits counsel in January with the hope of creating a plan by Oct. 1. On that date, all employers had to notify their staffs about the availability of a public health-insurance exchange in their states and whether their existing health insurance plans meet minimum coverage levels outlined in the federal law.

Interviewed in late August, Heiby says many of his questions went unanswered. He blamed that on the government’s moving compliance targets. He says he was having difficulty budgeting for health insurance next year because of the confusion and uncertainty associated with reform.

“There’s a lot of things (our counsel) couldn’t share with us, because they just didn’t know,” he says.

Bruce Davis empathizes with the angst employers like FrazierHeiby are experiencing. But the employee benefits consultant says businesses have got to get past whatever hang-ups they might have with health-care reform and start planning for the future.

“Whatever the laws are, we are advising our clients that they just can’t sit on their hands and do nothing,” says the principal and health and group benefits consulting national practice leader at Toledo-based Findley Davies Inc. “When the Supreme Court ruled it constitutional on June 28, 2012, it created a degree of certainty about what was going to happen and gave employers some clarity in their planning.”

Two separate surveys published over the summer by two consulting firms outline the readiness of private employers for health-care reform: PwC reported that 56 percent of private company respondents said their businesses are already compliant with Obamacare requirements that will take effect in 2015; 35 percent said they were well prepared; and of those, 19 percent named steps they’ll take to comply with the requirements, while another 21 percent were unsure of the actions they will employ.

A survey of 900 private employers by the global consulting firm Mercer illustrates how attitudes have changed about whether health-care reform will cost them more. Responses showed only 9 percent thought reform would have little or no impact on their expenses, which was significantly lower than the 25 percent who answered the same question two years ago.

“I think employers in earlier surveys didn’t have a true grasp about how health-care reform was going to affect their costs,” says Chrissy Knott, a senior consultant for Mercer and its health and benefits practice leader in Columbus. “More of the employers we’re talking with today have a much clearer understanding.”

The plan was to phase in health-care reform over an eight-year period, and so far that is what’s happening. The goal is to outfit every American with some sort of basic medical coverage by expanding Medicaid eligibility and creating insurance exchanges where people can shop for a policy.

However, the nervousness among employers is palpable, experts say, and they are engaging consultants to explore everything from cutting staff, complying with Obamacare or keeping their insurance package exactly as it is. In other words, they want concrete answers.

“Anybody who tells you that they have all the answers, they are lying,” says Tom Hadley, senior vice president at Wells Fargo Insurance Services in Columbus.

And there is no cookie-cutter solution because each client’s needs are different. “The starting point is getting the client to understand all the deadlines and go from there.”

For instance, attorney Redder says he sat down with a group of employers over the summer and asked them how the employer mandate delay was going to affect their plans. Two-thirds of the group planned to wait until the new deadline in 2015 to worry about it, while the rest planned to comply right away to keep ahead of the game.

Hadley says a company’s size does matter when examining a course to pursue. Big companies have more capabilities to develop a path that’s best for the employee and company. And, despite the idea of major health-care reform, medical insurance will continue to be an employee benefit businesses cannot afford to offer.

“I think there is still a consensus that American employers providing (competitive and affordable) health benefits is a key provision to their strategy,” Davis says.

In the case of really big companies such as Cardinal Health and its 3,500 employees, generous benefit packages make it likely they will be able to comply with health-care reform guidelines. 

“As part of our overall benefits package, Cardinal Health will continue to provide health-care coverage to our employees. For the majority, if not all of our employees, it will not make sense economically to go to the health-insurance exchanges,” says spokeswoman Stephanie Pavol.

However, businesses are employing other strategies as reform unfolds. Some are trimming the hours of workers so the company doesn’t exceed the 50 full-time employee mark that can trigger financial penalties; increasing employee contributions to their health plans; and even dropping employee spouses from coverage.

Large companies like UPS and Kroger have informed their employees about changes to their spousal health benefits. UPS is removing from their rolls spouses of covered employees whose workplaces provide insurance. Kroger, meanwhile, reached an agreement with its Indiana workforce, including several labor unions, that dismisses spouses from the benefit whether they are covered elsewhere or not.

“I’m sure that got the attention of other bargaining units,” Hadley says.

Under Obamacare, businesses with at least 50 employees have to keep track of the hours they work so the government can audit them–if it chooses to–to ensure everyone who is eligible (working at least 30 hours weekly) is receiving health insurance. They must also inform all employees of the existence of public health insurance exchanges in their state.

Redder says these communication requirements are driving employers crazy.

“What I have been hearing from them is that things are becoming more complicated and they are faced with more regulations to provide notices to the employees, which is great in theory. In reality, however, the employee is not reading them,” he says.

Mercer’s Knott says from a purely operational and tax liability standpoint employers should be heavily focusing on 2018. That’s the year when an excise tax goes into effect, which Knott says could have serious consequences for a business.

“They need to be thinking about this from a business standpoint, because it should be forcing employers to rethink their long-term strategy,” she says.

Employers will incur a 40 percent tax beginning in 2018 if the total cost of their health plans exceeds government threshold levels of $10,200 for an individual and $27,500 for a family. The tax is aimed at high-priced, or “Cadillac,” plans and would be assessed on the difference between the thresholds and the cost of insurance.

“We can tell them that if they do nothing today, what their estimated tax will look like…and it will grow exponentially,” Knot says.

Heiby says anything that affects the plan the public relations firm provides its employees doesn’t sit right with him. The company’s group policy has always been rich in benefits, which has helped it recruit and retain talent.

The public relations firm did renew the company’s existing policy for 2014 and will see what shakes out in 2015. He was told if he didn’t renew by December the company would’ve incurred premium increases of 30 percent to 40 percent.

“And at this point, why shouldn’t I go into it with a jaundiced view…what’s the next surprise?” Heiby says. “Come 2015, I know one thing for sure; our Cadillac policy will go away.”

Craig Lovelace is a freelance writer.