Many employers are beginning to cope with the realities of the Patient Protection and Affordable Care Act as its mandates, confirmed as constitutional by the Supreme Court, begin to take effect. Still, many questions exist, as some of the law’s major provisions have yet to apply.
“Complying with the new regulations might be frustrating and confusing for the first few years and employers will have to rely on their trusted advisers and insurance carriers for assistance and guidance,” says Paul Baranowski, Director of Account Management at Benefitdecisions, Inc.
Smart Business spoke with Baranowski about the impending reforms and the effects they will have on your employees, their benefits and your business.
What are the key concerns employers will face regarding health care reform?
The immediate concerns for most employers are the mandates that will go into effect with this next benefits renewal cycle. The primary mandates include women’s health preventive care amendments, uniform summary of benefits and coverage statements, W-2 reporting requirements and a reduction in the maximum amount an employee can put into his or her health flexible savings account (FSA).
Regarding the women’s amendment, the mandates require that plans cover 100 percent of expanded services, including preventive screenings for HPV, sexually transmitted infections, HIV and gestational diabetes. Additionally, counseling for these services will be covered. Finally, commonly used contraceptive methods will be covered, as well. Some services related to these categories have been a part of plans for some time but are now covered at 100 percent. By expanding the definition of covered services, the act will increase costs to insurance carriers in the short term, which will then be passed on to employers as premium increases.
The Uniform Summary of Benefits and Coverage is required for group plans with open enrollment periods after Sept. 23, 2012. This is a new, separate benefit coverage document that attempts to explain coverage in a standardized format. It is intended to make plan comparisons easier and to illustrate what an employee’s costs under the plan will be. However, due to design and content restrictions, employees may get confused and potentially misunderstand what their own expenses will be for their health care services. As a consequence, employers will have to be more thorough, cautious and deliberate in their open enrollment meetings and education to employees. Most employers are fully insured, so their insurance carriers will produce the Uniform Summary document. Employers that are self-funded, however, will be required to assemble these themselves. Some claims administrators will charge fees to produce the summary on behalf of a self-funded employer.
The mandate that requires employers issuing 250 or more annual W-2s to include the annual value of health coverage on the W-2 is pretty straightforward and most, if not all, employers are ready to comply for W-2s issued in January 2013 for the 2012 tax year.
Regarding health FSAs, the maximum amount an employee can contribute is being capped at $2,500. Previously, there was no stated limit to these tax-favored plans. Not many employees currently contribute more than $2,500, so this new provision primarily affects higher paid employees.
What provisions of the act will employers need to deal with in 2014?
2014 is the year that many of the big changes required by the reform act will take place. The state insurance exchanges, where smaller firms and individuals can purchase medical coverage, will be in place in 2014. Also, the requirement that employers ‘pay or play’ will take effect. This means that employers with 50 or more full-time employees are required to provide coverage that meets the ‘affordability’ and ‘coverage’ rules or face penalties. However, companies with fewer than 50 employees will not face these penalties. Employees will also face a tax penalty if they do not purchase required coverage.
Assessing the impact, determining the best strategy to navigate through these reform changes and, at the same time, maximizing an employer’s benefit spend can be very complex. Determining the exposure and risk depends on an employer’s size, industry, location, the mix of part-time employees, the company’s core values and other factors. The law will have a greater impact on employers in certain industries (e.g. retail, hospitality) in which the number of hours that employees work changes frequently. To avoid penalties, many employers in these industries will likely need to offer some form of health benefits to employees who didn’t have them previously. Because there is no universal answer as to what an employer should do, employers should partner with trusted advisers to help them strategize through this process.
Are there parts of the legislation that can ease an employer’s pain?
Yes, some new regulations are being released that give temporary relief, particularly for companies facing the largest penalties for not offering ‘adequate and affordable’ coverage. For example, recent notice was given that allows employers to take up to 13 months to offer coverage to employees who do not consistently work an average of 30 hours a week. Previously, the legislation was interpreted to mean that coverage had to be offered to these employees in 2014. For companies that have a large variable-hour work force, this notice has delayed millions of dollars in potential costs.
How might reform play out in the long term?
Regardless of the November election outcome, we expect that the major features of this legislation will remain, albeit with delays and changes. Employers can best prepare by relying more heavily on consultants and advisers to handle the significant changes over the next few years.
Paul Baranowski is Director of Account Management at Benefitdecisions, Inc. Reach him at email@example.com or (312) 376-0436.
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