Cost center managers tend to lay low during times of change, but not Stephen Mooney. The latent entrepreneur in 2008 proposed the idea of splitting off the patient financial services division of Tenet Healthcare into a stand-alone company to take advantage of an opportunity he saw in the marketplace and to capitalize on the strong relationships already in place with Tenet's network of hospitals.
To understand what Mooney faced getting this idea off the ground, consider Tenet’s situation: The organization was in the midst of selling more than half of its 110 hospitals when he floated his idea by Tenet’s CEO. That meant significant change, and during a time when organizations typically are hesitant to champion new start-up initiatives.
“My idea didn’t have a lot of fans at first, but it did get our executives thinking about the future instead of our current dilemma,” says Mooney, who serves as president and CEO of Conifer Health Solutions LLC, a subsidiary of Fortune 100 company Tenet Healthcare.
Mooney was convinced that health care organizations would jump at the chance to boost revenue cycle performance and focus on patient care instead of billing and collections. So Mooney sold his vision to everyone he encountered, turning a $200 million cost center into an outsourcing success story, adding some 7,000 employees and 600 clients in just five years. Here’s how he did it.
Build a strong foundation
Providing revenue management to non-Tenet hospitals and health systems would require a hefty investment in technology, a cultural shift as well as the development of a sales and marketing arm. Still, Tenet execs were intrigued by the idea and pledged their support if Mooney could find some way to fund his revolutionary venture.
“My initial forecast had us losing money for the first two years,” he says. “Under the circumstances, the company couldn’t afford to lose a single dime. And since venture funding wasn’t an option, I had to find the cash in our operating budget.”
With the executive team behind him, Mooney set out to achieve buy-in from other constituents. He alleviated any concerns by sharing his vision and offering each group a customized slate of benefits. Servant leadership and creating vested partnerships was his goal.
For example, he grandfathered existing rates during the initial transition period. And, he lowered the cost of processing rudimentary transactions by offshoring selective technology and call center services, using the savings to build a robust technology platform.
“We’re not a tech company, we’re a tech-enabled company,” Mooney says. “I needed to enhance our IT platform so we could drive more volume through our machine and offer our clients greater efficiency and value.”
Next, he approached Tenet’s suppliers and asked them to partner with the company. Could they make near-term concessions by thinking long term?
“I shared my business plan with our suppliers,” he says. “I wanted them to see that they had the opportunity to grow with us if they were willing to reduce their fees. Plus, you need to establish strategic alliances from the outset because you’ll need them to manage growth.”
Tenet’s suppliers recognized the opportunity and jumped on board. But after several years of change, Mooney knew his larger task would be with his own team members.
“Getting this thing off the ground would take a lot of work, so I absolutely needed our employees’ support,” Mooney says. “You need to make sure that everyone’s behind you before you start approaching customers.”
Mooney emphasized the benefits of growth to garner support from workers. Having the opportunity to control their own destiny and career opportunities were his main selling points.
“I had to explain my vision to employees, get them engaged and help them understand that short-term sacrifices would yield long-term gains for them and also add tremendous value to our external clients," he says.
Mooney credits his team’s enthusiasm and willingness to embrace change with Conifer Health’s early financial success.
“We were supposed to lose money in the first year and to everyone’s surprise, we actually broke even,” he says. “I credit employee engagement for allowing us to achieve a budget-neutral position in our very first year.”
Hit a home run
Convincing a prospect to relinquish operational control of vital functions like billing and patient communications isn’t easy.
Mooney and his sales team made ends meet by selling point solutions while devising a strategy to close their first major end-to-end outsourcing deal.
“We bought time in the first year by hitting a few singles and doubles, but we needed to land a big fish to prove our concept,” Mooney says.
“Our executives were wondering if this was going to work, but health care organizations were wary of turning over their entire business office to an outsider from Mars.”
The sales team set its sights on landing a major deal with a member of a faith-based, not-for-profit system. Mooney knew that signing a member of this prestigious fraternity would encourage others to follow. But he and his team would have to sway a host of skeptical attorneys, consultants and stakeholders to ink their illusive inaugural deal. They emphasized their industry experience, their servant leadership model, and cultural alignment.
The looming impact of the Affordable Care Act finally proved to be the tipping point, as Conifer Health signed a number of major deals including a long-term agreement with Catholic Health Initiatives (CHI) to provide revenue cycle services for 56 hospitals across the nation.
“Even CHI's consultants agreed that their current model was unsustainable given the changes under health care reform,” Mooney says. “The market was aligning with partners and we finally convinced our prospects that they couldn’t wait to act.
“All I can say is don’t give up,” he says. “Our first deal died more than once, but I remained involved, and we continued to push the benefits that mattered to our prospects like improving the patient experience and the revenue cycle until the timing was right.”
Close service gaps and accelerate growth
Mooney worried that Conifer Health might lose its competitive edge given the massive changes imposed by health care reform. He hired experienced leaders, invested $200 million in the firm’s technical infrastructure and paid another visit to Tenet’s CEO where he presented a plan to leapfrog Conifer Health past its competitors.
“The market was in a state of flux due to health care reform,” he says. “Clients wanted turnkey solutions, and we needed to close a few service gaps to help them transition from a fee-for-service to a fee-for-value environment. The question became, ‘Should we build or buy these capabilities?’”
Mooney proposed a series of strategic acquisitions, and this time he not only garnered support, but funding from Tenet’s executive team and board.
In recent months, Conifer Health has added new services like clinical integration, population health management and financial risk management to its arsenal as well as data modeling and analytics. In the process, the firm has acquired a host of new clients and employees.
While acquisitions can boost revenues and a firm’s capabilities overnight, assimilating an outside organization can be tricky. Depending on whose research you believe, mergers have a failure rate of anywhere between 50 and 85 percent primarily due to a lack of cultural compatibility and the hasty departure of key employees who possess critical institutional knowledge.
Mooney has been successful in assimilating acquisitions by getting Conifer Health’s acquired companies to embrace his unique philosophy and vision for the company.
“We try to retain or find other opportunities within Conifer Health for everyone we acquire,” he says. “If we do lay someone off, we give them severance and outplacement assistance because everyone deserves the right to leave with dignity.”
He’s created new business units within Conifer Health to help him retain key leaders and staff from an acquired firm. He’s also bolstered retention by allowing employees to telecommute as Conifer Health expanded its footprint to more than 40 states.
“The key is empowering people to make decisions so they can serve the client,” Mooney says. “We’ve expanded what we offer our clients, and they’ve embraced them because they add value to their mission and their communities. I keep our staff engaged by relaying our success stories. That's critical feedback as it validates the work they provide our client every day.” ●
- Build a strong foundation before you approach customers.
- Prove your concept by hitting a home run.
- Close service gaps and accelerate growth.
The Mooney File:
NAME: Stephen Mooney
TITLE: President and CEO
COMPANY: Conifer Health Solutions LLC
Birthplace: Margate, N.J.
Education: Bachelor’s degree in accounting from Stockton State College in New Jersey and a master’s degree in business administration with an emphasis in accounting from Pepperdine University.
What was your first job and what did you learn from it? I restocked the ice cream vendor on the boardwalk of the Jersey Shore. I learned that every person is important because the business couldn’t operate without a runner. Plus, it taught me responsibility because I couldn’t take a day off unless I found someone to take my place.
What’s the best advice you ever received? Put people first because it increases their engagement. In turn, they’ll take care of your customers and the bottom line. For example, we let people go home when an ice storm is approaching and they make up for it the next day. They respond because we trust them to do the right thing.
Who do you admire most in business and why? Jack Welch, former chairman and CEO of General Electric, because he was incredibly focused and a great developer of people and leaders.
What is your definition of business success? Your business is successful when it’s turning on all cylinders, and it’s sustainable. In other words, you could walk away, and it would just keep going. We’re not there yet because we’re only a five-year-old company, but I believe that we’re on the path to sustainability.
Conifer Health Solutions Social Media Links:
How to reach: Conifer Health Solutions LLC (877) 266-4337 or www.coniferhealth.com
The Affordable Care Act (ACA) contains a total of 91 provisions, bringing change to the insurance market and impacting the type of coverage employers offer their employees.
“Many of the upcoming ACA provisions depend on the size of your employee population,” says Marty Hauser, CEO of SummaCare, Inc. “Employers need to understand these provisions, as they will likely determine what kind of coverage you offer your employees.”
Smart Business spoke to Hauser about how some key provisions impact employers.
What are some provisions impacting all employer groups?
Although some provisions of the ACA are based on the number of employees an employer has, others apply to all employer groups, regardless of size. These provisions include, but are not limited to, guaranteed issue and renewal of health insurance plans, no pre-existing condition exclusion, employer notification of the health insurance marketplaces and an increase to the maximum allowable reward for health-contingent wellness programs.
Beginning Oct. 1, 2013, employers will be required to notify employees of the availability of the health insurance marketplace, formerly known as exchanges. The marketplace is an online portal that will allow consumers and employers to find and compare different health insurance options. Employers must provide employees, regardless of plan enrollment status or part-time or full-time employment status, a written notice informing them of their coverage options. The Department of Labor (DOL) has created three different model notices for employers to communicate this information to employees, and these are available on the DOL’s website.
Another provision impacting all employer groups is the increase to the maximum allowable reward for health-contingent wellness programs from 20 to 30 percent of the cost of coverage. The program must meet five regulatory requirements to qualify as a health-contingent wellness program.
What are some provisions impacting small group employers?
Beginning in 2014, the marketplace will operate a Small Business Health Options Program, or SHOP, that offers choices when it comes to purchasing health insurance for small group employers — with up to 50 employees in 2014 and increasing to 100 employees in 2016 — and their employees.
Through the SHOP, employers will eventually be able to offer employees a variety of Qualified Health Plans (QHPs) from different carriers, and employees can choose the plan that fits their needs and their budget. In 2014, however, small group employers will be limited to offering only one QHP to their employees, as the provision allowing choices between multiple carriers has been delayed until 2015.
In addition to the availability of the SHOP, small group employers with fewer than 25 full-time employees, or a combination of full-time and part-time employees, may be eligible for a health insurance tax credit in 2014 if they offer insurance through the SHOP and meet other criteria, such as the average wages of employees must be less than $50,000, and the employer must pay at least half of the insurance premium.
What are some provisions impacting large group employers?
Effective Jan. 1, 2014, employers that employ an average of at least 51 full-time employees are required to offer employees and their dependents an employer-sponsored plan or the employer pays a penalty, often referred to as ‘pay or play.’
This provision has specific criteria meant to not only define and determine the number of employees in the group, but also to confirm the employer is providing affordable, minimum essential coverage. Part-time employees count toward the calculation of full-time equivalent employees, and there is no penalty if affordable coverage is offered.
If an employer doesn’t provide adequate health insurance to its employees, the employer will be required to pay a penalty if its employees receive premium tax credits to buy their own insurance. The penalties will be $2,000 per full-time employee beyond the employer’s first 30 workers. Penalties paid by the employer will be used to offset the cost of the tax credits.
Marty Hauser is CEO at SummaCare, Inc. Reach him at email@example.com.
Insights Health Care is brought to you by SummaCare, Inc.
The Patient Protection and Affordable Care Act, often called the Affordable Care Act or just Obamacare, represents one of the most far-reaching government overhauls of the U.S. healthcare system since 1965 when Medicare and Medicaid came into being. It will be phased in over time, with the majority of the changes taking effect in 2014.
The act focuses on increasing the rate of health insurance coverage for Americans and reducing health care costs. Here’s what some area businesses have on their minds about health care reform as the time nears for the full impact of the ACA:
- Steve Brubaker, chief of staff, InfoCision Management Corp.
- Craig Shular, chairman and CEO, GrafTech International
- Alan P. Jacubenta, president and CEO, Mango Bay Internet
- Rick Hull, president and CEO, Premier Bank & Trust
- Chuck Abraham, executive vice president/CFO, Hitchcock Fleming & Associates Inc.
- Rick Solon, president and CEO, Clark Reliance Corp.
- Andy Zynga, CEO, NineSigma Inc.
- Jodi Berg, president and CEO, Vita-Mix Corp.
1) How is your company preparing for changes associated with health care reform?
- With more than 4,000 employees, education is key and our priority is to make sure we provide everyone with the knowledge they need to make informed decisions. There are a lot of changes on the horizon and it’s important we communicate these changes in a timely manner. We are doing this though our internal communication channels such as our employee newsletter, employee intranet and face-to-face meetings.
- GrafTech has always provided an excellent health care plan to its team members. We are well-positioned to comply with the PPACA. Our plan is affordable for our employees; therefore, no one will be eligible for government subsidies and GrafTech will not be assessed a penalty.
- We are in constant contact with our benefits agent whom we have worked with for a number of years and have been very pleased with his knowledge and service. He attends all the latest classes and seminars available to keep us apprised of the latest laws. He will let us know what's changing with the different carriers and how it might have an impact on our current and future coverage.
- Most importantly, we are making sure we stay educated on the changes. It is important that we are able to answer our employees’ questions and also be supportive of their needs. Our budgeting process is robust, and we spend a lot of time in this area making sure we are making the right choices for our employees and our company.
- For more than three years, we have been learning about the requirements since the ACA was passed in March 2010. We will review our current plan design with our benefits consultants this summer. At that time, we will assess any changes that may be required for our 2014 renewal, including the possibility of adding a high-deductible option to our current plan.
- Our preparation for health care reform has consisted of our human resources staff reviewing the law with our health care providers and consultants. In addition, our legal counsel has reviewed our existing health insurance programs to insure compliance.
- We are working closely with our brokers, Oswald Cos., for frequent and regular updates regarding health care reform and the related steps of adoption. Oswald advises us of both milestones and compliance requirements so we can plan for and execute on each. Staying informed is most of the battle for us right now as we ramp up toward 2014.
- We have been educating ourselves regarding the elements of the law through articles, seminars and benefits affiliations. We offer a fairly comprehensive health plan to our employees today and are constantly monitoring the progress, changes and evolution of what is available in the insurance marketplace. So far we do not believe that the changes will have a large financial impact on Vitamix.
2) What are you doing specifically to contain health care costs for your employees?
- As a self-insured employer, we’ve always placed a high value on providing our employees with comprehensive health and wellness programs. Reducing our claims is a priority by ensuring our employees have convenient tools like on-site wellness clinics and fitness facilities to promote healthy decisions, and decrease employer out-of-pocket expenses. Where many companies are cutting back on amenities, we embrace the concept as a driver of employee engagement.
- GraFit is a company-sponsored wellness program that includes free biometric screenings and incentives to make healthy lifestyle choices.
We offer employees the opportunity to purchase fresh produce from a local vendor who delivers to our site every week.
Our leadership team helps shoulder the burden of health care costs too. Mid-level managers each pay an additional $150 per month for health insurance; senior-level executives pay an additional $200 per month.
- Every year, we go through a process to get health care quotes from different providers. We compare their offerings in order to get the best coverage for the best price. If a change is warranted and it is cost effective, we do it with the least amount of coverage change as possible. The current provider usually matches what we were able to find through quotes, decreasing the overall increase in price.
We have opted to continue to pay a larger portion of the overall cost rather than pass that on to the employees. In addition, we shop our benefits annually to make sure we are receiving the best possible coverage at the lowest cost possible. We continue to search for new tools to add to our offering that will allow the employees to have all the benefits they need. We also have a wellness program that is aimed at preventive care.
- Even though not required to at the time, our plan implemented coverage for Essential Health Benefits (basic preventive/wellness services), elimination of pre-existing condition exclusions, and an expanded definition of dependent. Additionally, we have tried to raise “wellness” awareness through a number of efforts: encouraging participation in the Heart Walk and other types of exercise, administering “weight-loss challenge” initiatives and sponsoring yoga and meditation classes at the agency. We also discuss regularly with our associates the importance of wellness, use of network providers, requesting generic drugs when available and proper use of urgent care facilities — in short, being wise consumers of health care.
- We started several years ago to educate our employees on the types of activities and choices that drive health care costs. We utilize our health care providers and consultants to propose innovative programs to help us control costs, and we have gone to a wellness program to promote individual health care improvement.
- We have a high-deductible HRA plan in place. We have taken the deductibles up to $5,000/$10,000 for premium reduction. We cost-share the premium with employees — the company pays 75 percent and the employees pay 25 percent of the premium. Further, within the high-deductible plan, we set a sub-deductible of $500/$1,000 for each employee, after which the company reimburses 80 percent of claims until the plan deductibles are met. It may sound complicated, but it’s kept us in the top quartile when compared to our peers for affordability of our plan to employees. We are also in the early phases of a wellness program, which we expect over time will help control/reduce cost increases. The biggest motivation for us to have such a plan is simply to provide resources that keep our employees feeling as healthy and energetic as they can, which we hope translates into more fulfillment while at work.
- We take a Total Wellness Approach to our employee benefit plans. We were early adopters of an outcome-based medical benefits coverage that encouraged positive healthy behavioral changes among our employees. Through a combination of biometrics, education, fitness programs, and financial incentives driven by wellness promotion, we will experience the benefit in overall reduced health care costs for the long term. We started a tobacco-free campus in 2012, and do not hire tobacco users. Vitamix still pays 100 percent of its employee medical premium; however, we have implemented a high deductible plan that employees can reduce to zero if they meet the criteria for modified NIH biometrics targets. For example, an employee who meets all target range biometrics for blood pressure, cholesterol, body mass index and smoking, along with participating in health education, training, or regular physical exercise, will incur no deductible for the year.
3) Do you foresee having employees pay a larger share of company-offered health care coverage?
- We’ve always taken a strategic approach to employee health and wellness. What that looks like right now is adapting our offerings to not only comply with the new requirements, but also to provide our employees with coverage that meets their family’s individual needs. We continue to monitor and will comply with all of the reform’s expanded coverage choices so we can provide our employees with effective and affordable options.
- That is not our current intention, but we will continue to monitor and evaluate if a change in the cost share model is required. Over the last 10 years, we have managed our program to an annual average inflation rate of 3.7 percent. This compares favorably to the national average of 6.3 percent over the same period. Our concern is that elements of PPACA do not lower insurance costs, but in fact cause the rates to go up.
- Things are unpredictable other than we know that there is a good chance that prices will continue to skyrocket. If we had to, we would ask our employees to pay a share of the expense for health coverage. It depends on what happens in the beginning of 2014 with community rates and what they offer versus staying with private insurance and the cost to the company.
- Not at this time. Our goal is to allow our employees continued benefits while keeping them affordable to the employee.
- Our goal would be to minimize having employees pay a larger share. Since we are in a service industry that relies heavily on high-caliber talent, our benefits plan is one of several tools used for recruitment and retention. Our goal would be to continue to make the health benefits as affordable and attractive as possible to our employees.
- We have always believed that paying a substantial portion of the health insurance premiums is helpful to recruiting the best people. We do not contemplate increasing the percentage that our employees pay.
- We pride ourselves with trying to have a healthcare plan in place that is affordable yet quality coverage for our people. While I think it is too soon to draw a line in the sand about the cost sharing, I can say that philosophically we are opposed to increasing the burden on our employees.
- We do not foresee this happening in the future; however, until the full impact of the ACA is discovered, we will reserve our opinion on the matter. Some pundits say it will definitely increase overall costs, while others say more competition will reduce costs long term. We are unsure what our health care insurers will do; however, our focus will continue to be on what we can control, and for now that is our wellness offerings and employee incentives toward better health.
Depending on the source, the Patient Protection and Affordable Care Act, a recently enacted law designed to reform the health care and health insurance systems, is either a bold step toward improving health care in the U.S. or a growth-stunting nightmare that upsets 60 years of progress in employer-provided health insurance. Either way, the legislation is becoming a reality and is quickly pushing businesses closer to the administrative equivalent of the fiscal cliff.
“What I tell people is that PPACA is really the most significant health care legislation since Medicare was passed in 1965,” says Marty Hauser, CEO of SummaCare Inc.
The law is an attempt to reform the insurance industry, he says, eliminating certain practices such as refusing coverage to those with pre-existing conditions, and improving access while bringing greater transparency and accountability to health care delivery.
“These are monumental changes,” says William Hutter, founder and CEO of Sequent. “This is one of the largest government overhauls ever. It’s going to dramatically impact employers and the employer-based distribution system for health care.”
With that, employers will need to better understand the administrative requirements they’ll face, which is not simple.
“It’s a vastly complicated law,” says Joe Popp, JD, LLM, tax supervisor and affordable care act implementation specialist at Rea & Associates. To illustrate its complexity, Popp says the PPACA is being administered simultaneously by the IRS, Department of Labor, Health and Human Services and the Occupational Safety and Health Administration.
“All in, it’s going to take eight years of change,” Hutter says. “And most of the rules and the regulations that are going to govern how this is enacted aren’t even written yet.”
“It’s kind of like trying to change the tire on your car while you’re driving 70 miles per hour down the highway. Things are changing almost daily,” Hauser says.
Furthermore, business owners are going to have to cope with the increased costs.
Paul Jackson, a partner at Roetzel & Andress says there will be 21 increased taxes or fees that business owners or employers have to pick up.
“The Congressional Budget Office estimated that those will be more than $1 trillion each year — that’s trillion with a ‘T,’” he says.
Waiting for guidance
While there is some guidance on how businesses can prepare for health care reform, service providers who spoke with Smart Business said their employer clients complain about a lack of regulatory clarity. In fact, that was a concern for Sen. Max Baucus, a major contributor to the act. At a meeting of the Senate Finance Committee, he expressed concern over the gap in understanding of the PPACA by small businesses, which led him to say, now famously, of the act’s implementation, “I just see a huge train wreck coming down.”
And there certainly is reason for businesses to worry because a misstep on the side of the administration can lead to significant penalties.
“What I’m hearing most from clients is they’re concerned with compliance,” Jackson says. “They’re concerned about whether they fall within the pay or play, but also concerned about the penalties.” For example, he says employers can be fined $100 per day per individual for not providing the summary of benefits and coverage statement to employees, which is one of the new disclosure documents required by the act.
Another significant concern is confusion.
“Without clarity on how this affects them as an employer, employers are really grasping at straws,” says Kevin Cavalier, vice president of sales at SummaCare,
Still, some businesses wonder where they should begin.
“There are companies that have been on top of this for a long time, they’re ready to go and they’re waiting just like we are for guidance coming out from the IRS and HHS, and they are ready; they’ve done their implementation work,” Popp says.”But for most businesses, they haven’t really started or they’re not very far on the path.”
Cavalier says in the fall, the government will begin public service announcements and education to the employer community.
“I think then you’ll start to see advice for an employer based upon their specific situation,” he says.
However, quickly approaching is the enactment of one of the more complicated provisions, referred to as “pay or play,” which will require tough choices.
“The employer needs to make decisions on how it impacts them and what to do come 2014,” says Cavalier.
Pay or play
Most affected by the law will be employers with about 50 employees. According to the DOL, a large employer, defined as one with 50 or more full-time equivalent employees — those working an average of 30 or more hours weekly — could be assessed a tax for not offering its full-time employees the opportunity to enroll in a health insurance plan that offers minimum essential coverage.
This means employers have to make a choice whether to offer affordable coverage or pay the tax penalty, which has led some employers to question the value of providing health insurance. According to Jackson, “We have a number of clients that are seriously considering dumping their health care and just saying, ‘OK, we’re going to pay the $2,000 per year, per employee penalty because we can’t obtain health care coverage for employees for that amount of money.’”
Companies with between 40 and 60 employees have a tough decision to make.
“For those companies, some of the struggles are, is there a way you can get under 50 so that you don’t have to take on some of these other burdens,” Popp says.
Those trying to operate with fewer employees could implement lean processes, work with fewer people or outsource responsibilities such as payroll.
However, Cavalier warns of the repercussions of not offering health insurance.
“The con is if the employer chooses to do that, what does it do for employee morale?” he says. “What does it do for retention of good employees, especially if you’re in an industry that’s competitive in regards to obtaining new employees that have skill sets that you need?”
Beyond the pay or play decision, employers will also have to deal with individual market reinsurance fees, changes to W-2 reporting requirements, minimum essential coverage requirements and the implementation of health care exchanges.
“The administrative and compliance demands of ACA are very confusing and very expensive,” Hutter says.
While it’s certainly easy to see the PPACA as a dark cloud, there are positive aspects to the law. Hauser says, when looking at the act broadly, it is attempting to address pressing issues. “Regardless of whether you support or oppose the health care law, I think everyone would agree that the current way we do health care in America is pretty non-sustainable, especially in a world economy.”
He says the act has brought more focus to prevention by creating incentives for employers to offer more wellness and incentive programs “so that we can move from a sick-care model to a real health care model.”
Though discussions of the costs associated with the act have been at the forefront, there are other considerations for employees.
“It’s not numbers. The numbers are going to be what the numbers are, and there’s nothing anyone can do about that,” Hutter says. “Knowing that, now you have to figure out what the best thing to do for your organization is.”
He says the most important asset companies have is the thinking and creative abilities of their employees.
“Companies are going to have to think long and hard about whether they want to undermine the relationship with that most valuable asset of any company, which is its people.”
Most news surrounding the implementation of the Patient Protection and Affordable Care Act (PPACA) pertains to the employer penalties for noncompliance with the large employers’ shared responsibility provision that begins with the 2014 plan year. However, how does PPACA apply if an employer has fewer than 50 full-time equivalent employees?
Smart Business spoke with Whitford about how smaller business owners need to be counting employees carefully and preparing for PPACA provisions.
How is employer size defined?
A large employer is defined as having 50 or more full-time equivalent employees during a testing period that can be from six to 12 months. Full time is defined by the government as 30 hours per week.
The term equivalent is used to account for those who work less than 30 hours per week. For example, if an employer has 30 full-time employees working 30 hours each week and three part-time employees working 20 hours each week, it has 32 full-time equivalent employees. The part-time hours per month are added, then divided by 130 to determine additional full-time equivalent employees.
There is some relief for seasonal workers.
How does PPACA apply to small employers?
The employer penalties are just one piece. All employers are subject to certain rules if providing a health insurance plan, such as:
- Waiting periods for eligibility cannot exceed 90 days, beginning in 2014.
- Continuing to cover dependents of employees until age 26, in most cases.
- Providing a Summary of Benefits and Coverage to each employee at specific events, such as open enrollment.
- Supplying 60-day notification for any plan changes, except at renewal.
What are some other considerations?
If a plan is not grandfathered — hasn’t changed since the law went into effect in 2010 — then it must continue to waive all cost sharing for preventive care services, which includes women’s preventive care for plans renewing on or after Aug. 1, 2012.
Employers also must offer employees information on the public insurance exchange whether providing health coverage or not. The law requires this notice be distributed each March; however, it has been delayed in 2013, pending Department of Labor guidance.
In 2014, all non-grandfathered small group plans will have limits on the deductibles charged in-network. The maximum deductible will be $2,000 per individual and $4,000 per family. There also will be out-of-pocket limits that apply to all non-grandfathered plans. These limits are the same as those for high deductible health plans, which this year is $6,250 for an individual and $12,500 for a family.
How will the pricing methodology change?
The biggest change for small employers will be the pricing methodology applied to group insurance plans. Insurance companies will be unable to use gender, industry, group size or medical history, and therefore are limited to family size, geography, tobacco use and age. The companies can charge the oldest ages no more than three times what they charge the youngest ages. Many insurance companies use a ratio of 7:1 or higher, so this should result in higher rates for younger, healthier groups and better rates for older, less healthy groups. In addition, there will be new taxes and fees passed through to the employer in 2014.
Where do small employers have flexibility?
A small employer, with fewer than 50 full-time employees, has more flexibility in determining how many hours an employee must work to be benefits-eligible. For example, a small employer can establish 37.5 hours as the minimum to be eligible for the company health plan, so employees regularly working less than 37.5 hours aren’t eligible. Those employees most likely are eligible for a subsidy to purchase coverage in the public insurance exchange. But, as a small employer not subject to the employer penalties, there are no financial consequences.
Because of the complexities, employers are encouraged to review their employee count and other pending health care reform legislation with a qualified advisor.
Chuck Whitford is a client advisor at JRG Advisors, the management arm of ChamberChoice. Reach him at (412) 456-7257 or firstname.lastname@example.org.
Insights Employee Benefits is brought to you by ChamberChoice
The historical benefits of self-funded health insurance — lower costs, more flexibility and control — are even more appealing when added to the ability to avoid many Patient Protection and Affordable Care Act (PPACA) rules and expected premium increases.
As a result, there’s growing interest in self-funding. A March study by Munich Health North America of 326 executives from health plans, HMOs and insurance brokerages, found 82 percent of respondents saw more interest in self-funding, with nearly one-third seeing significant interest. The survey also found nearly 70 percent of insurance organizations plan to increase self-funding offerings during the next year.
“The PPACA has shed a light on self-funding because it created several new reasons why self-funding or partial self-funding is attractive,” says Mark Haegele, director, sales and account management, at HealthLink.
Smart Business spoke with Haegele about the reasons why self-funded health insurance is getting so much employer interest.
What historical self-funding benefits remain relevant today?
Historically, self-funded employers avoid the risk charge — typically 2 to 4 percent of the total premium — that all insurers build into premiums. Self-funded plans also avoid costs from insurer profit; premium taxes, usually 1 to 3 percent, depending on the state; and the insurance company’s fixed operating costs. A fully insured plan can include fixed operating costs that are 40 to 50 percent higher than a partially self-funded plan with a third party administrator.
Plan flexibility and control is the other overarching benefit of self-funding or partially self-funding. You don’t need to follow state coverage mandates for areas like autism, bariatric surgery and infertility treatments. Employers can customize plans based on member population needs.
Smaller, self-funded employers also receive detailed member data, resulting in the ability to make informed decisions. With the help of consultants and brokers, they can manage their population as much or as little as they want.
Why is health data more critical now?
The health care system is moving from a fee-for-service to a performance-based model, so transparency and information are more critical. If you expect members to make good purchasing choices, then employers and their members must know what services cost. This transparency is one of the staples of a self-funded plan. Employers know what services members partake in, the plan risk factors, what care those with chronic illnesses receive, etc.
What is drawing employers to self-funding because of the PPACA?
A number of pieces from the PPACA aren’t required under self-funding, including the:
• $8 billion insurer tax, currently calculated to be passed onto employers as a 4- to 6-percentage point increase in premiums.
• Medical loss ratio requirements, which force profitable insurance companies to reduce administrative expenses and ultimately lower service levels.
• Community rating rules that group small employers by geography, age, family composition and tobacco use. Thus, healthy, younger insurance groups will pay more — estimated to be 60 to 140 percent — while older, less healthy member groups pay less.
• Minimum essential benefits, where insurance companies are required to limit annual deductibles.
How are PPACA-driven premium increases already factoring in?
Although the PPACA’s community rating rules, insurance tax and minimum essential benefits don’t begin until Jan. 1, 2014, the repercussions have started. Some carriers are including extra 2013 premium increases. For example, rather than a 4 percent premium increase now, insurers might try to get employers to accept a 20 percent increase this year. In addition, despite state pushback, many insurance companies are considering offering an early renewal — changing the plan effective date from Jan. 1, 2014 to Dec. 1, 2013, for instance — to let employers temporarily avoid increases. However, those with a self-funded plan never have to worry about these costs.
Mark Haegele is director of sales and account management at HealthLink. Reach him at (314) 753-2100 or email@example.com.
Video: Watch our videos, “Saving Money Through Self-Funding Parts 1 & 2.”
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Many aspects of the Patient Protection and Affordable Care Act (PPACA) become effective Jan. 1, 2014, but preparing for that date is difficult for businesses because not all of the rules and regulations have been written.
“As of last month, there were still 1,200 regulations yet to be written by the end of the year. I don’t think anybody has it figured out yet — that’s the biggest problem,” says William F. Hutter, president and CEO of Sequent.
Nonetheless, there are steps businesses can take now to be ready for 2014. “The first thing to do is to understand the PPACA. Unfortunately, there is no definitive source of information on how it will impact companies because of the yet-to-be written regulations. So you need to read a variety of materials, starting in July — that’s when we should see those rules and regulations start to manifest,” says Hutter.
Smart Business spoke with Hutter about strategies small and midsize businesses can take to deal with the uncertainty surrounding health care reform.
Is there a chance that the effective date of PPACA provisions might be delayed?
Some factors already have. The Small Business Health Options Program (SHOP), an exchange for small businesses to purchase health insurance, has been delayed for a year. Also, nothing has been presented showing how the federal health care exchange, a marketplace for individuals to purchase insurance, is going to work.
Since everything is in flux, what can companies do in preparation?
A number of strategies are going to emerge, and many might have questionable structure. If someone presents an opportunity too good to be true, it probably is. Be careful about vetting companies offering creative strategies to avoid some of the impact of health care reform.
One legitimate strategy on the increase is the use of cell captives. Companies will self-insure, but with minimal exposure. There are good self-insurance options for businesses in the 60- to 70-employee range that will exempt them from certain aspects of the legislation, such as unlimited rehabilitative services. An employee can go to rehab for 30 days, come back and four months later have another drug problem that sends him or her back to rehab — there’s no limitation and it’s covered under the Family and Medical Leave Act. A company can design a plan that doesn’t allow that because it’s not required in a self-funded plan, even though it is part of the minimum essential coverage required under the PPACA in the fully insured environment.
All of these self-funded plans will become high deductible health plans with three layers of risk. The first is the employee deductible, which will pay the first layer of claims. The second layer will be an amount of self-retained insurance risk a company insures. The insurance company will pay the third layer. That setup protects insurance companies from a lot of the smaller claims. In Ohio, about 70 percent of claims are less than $8,000.
What impact will reform have on health care costs?
It will not bring down the cost of insurance because there’s nothing health care reform can fix relative to the aging demographics of the workforce. There’s been a dramatic increase in recent years in the use of medication and cost of defensive medicine. As baby boomers continue to age, those costs will only increase. There are not enough 20-somethings coming into the workforce to compensate for the aging demographic in the state of Ohio.
If anything, the cost of regulation just keeps increasing. A recent study stated that fines and penalties are expected to total $88 billion. All kinds of alternative strategies are being considered, not to avoid the intent of providing good coverage for employees, but because of uncertainty with the legislation. If you can create certainty by having a new health care plan design, that’s good for business. At least you know what you have.
We’re not going to see the conclusion of how health care reform is going to be implemented for a decade. It’s going to be a really long time.
William F. Hutter is president and CEO at Sequent. Reach him at (888) 456-3627 or firstname.lastname@example.org.
Website: Understand your legal obligations when sponsoring a health plan for your employees. Download a checklist.
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As we approach next year’s continued implementation of the Patient Protection and Affordable Care Act (PPACA), which affects how and what type of health insurance employers will offer, many employers are beginning to explore the best plan for them.
One popular topic of discussion is wellness programs. The PPACA provision on wellness programs that rewards positive health outcomes is being expanded. Next year, employers will be able to provide even more incentives for employees participating in wellness programs, with the reward percentage changing from 20 to 30 percent of the cost of coverage.
“It’s not surprising that a significant change under the PPACA is one that encourages employers to promote and reward employees for healthy behaviors,” says Marty Hauser, CEO of SummaCare, Inc. “Employer-sponsored wellness programs are popular, and incentivizing employees to make better overall lifestyle and wellness choices can help to lower long-term health care costs. It is reasonable at a time when we are trying to make health care available to more consumers and also drive down overall health care costs.”
Smart Business spoke to Hauser about the new wellness aspect of the PPACA and what employers should consider to help encourage and promote a healthier workforce next year.
What types of wellness programs are eligible for the 30 percent reward?
Wellness programs are currently and will continue to be divided into two categories — participatory wellness programs and health-contingent wellness programs. Participatory wellness programs are not eligible for the 30 percent reward, while qualified health-contingent wellness programs are.
In general, participatory wellness programs account for the majority of wellness programs offered by employers. They are made available to most employees and do not offer a reward or request that the individual satisfy a health standard to receive a reward. Examples include a full- or partial-reimbursement to employees for fitness center membership and/or a program that rewards employees for attending free health education seminars or lectures.
Health-contingent wellness programs require the participant meet certain health measures to receive a reward. These rewards can include incentives such as a discount or rebate on monthly health insurance premiums; partial- to full-waiver of cost-sharing benefits, such as deductibles or copays; and/or other monetary or non-monetary incentives. An example could include a program where participants’ biometrics are measured regularly and rewards are based on meeting a health measure. Participants who don’t meet the health measure must take additional steps to get the reward.
What are the requirements of a health-contingent wellness program?
A qualifying health-contingent wellness program must meet five regulatory requirements. These requirements include:
• Frequency of opportunity to qualify. The program is offered to all similarly situated employees.
• Size of reward. This could be as high as 30 percent of the cost of health coverage and up to as much as 50 percent for programs meant to prevent/reduce tobacco use.
• Uniform availability and reasonable alternative standards. The program is designed to be available for everyone, with a reasonable alternative for those whose medical conditions don’t allow them to participate to the full health standard.
• Reasonable design. The program is designed with an overall goal to promote health and prevent disease.
• Notice of other means of qualifying for the reward. Those who qualify for a different means of obtaining a reward have the opportunity to do so.
These requirements are meant to protect the consumer and safeguard against unfair practices.
What should interested employers do?
Discuss your options with your health insurer, benefits consultant or broker to determine what type of program makes the most sense for your employee population, time, wellness staff and budget.
Marty Hauser is CEO at SummaCare, Inc. Reach him at email@example.com
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Under the Patient Protection and Accountable Care Act (PPACA), large employers may know that to avoid penalties, they need to offer coverage that is affordable and qualified to full-time staff. But how do you treat a new hire to fold him or her into full-time staff so the employer shared responsibility rule can be applied?
Smart Business spoke with Tobias Kennedy, vice president of Sales and Service at Montage Insurance Solutions, about how to handle new hires, in the final of a three-part series on the employer shared responsibility provision.
When must health coverage be offered to new hires?
Per the PPACA, new hires must be offered coverage within 90 days if you reasonably expect the person to be full time. However, if, at the time of hire, you cannot reasonably predict whether the person will be full or part time, you can submit the employee to a similar set of measurement/stability periods as the full-time ongoing staff. (For more information on ongoing staff measurement/stability periods, see the second article in this series.) The term ‘standard measurement’ was created to distinguish ongoing staff from what you can use for new hires, which is called an initial measurement period.
How does the initial measurement period work?
Like the standard measurement, the initial measurement period must be continuous months of between three and 12 months. Also, you have an administration period and an associated stability period where, as long as the person remains employed, you treat him or her according to the results of the hourly average from the measurement period.
What administration period rules need to be satisfied for new hires?
First, the period is no longer than 90 days — same as for ongoing staff. However, there is a caveat that the 90 days actually starts counting upon date of hire, keeps counting until you start your initial measurement period, where it pauses, and begins counting again for the period from the close of the measurement period through to the start of coverage. This is pertinent if you don’t measure from date of hire, such as beginning to measure the first of the month following date of hire, so some days between hire date and measurement beginning are deducted from the total 90-day allotment.
Also, the administration period when added to the initial measurement period cannot exceed the first of the month following 30 days of an employee’s anniversary. The longest an employee can possibly go from date of hire to coverage effective is 13 months and some change.
How does the stability period operate for new hires?
Like the ongoing staff, if a 12-month measurement period is chosen, then a 12-month stability period must be chosen. So, if an employee were hired on May 15, 2014, the employer would use a 12-month initial measurement period beginning the first of the month following date of hire, June 1, 2014, to May 31, 2015. Because the employee’s anniversary is May 15, 2015, the first of the month following 30 days of that is July 1, and the employer’s only option for administration is the month of June. If the new hire was deemed full time, he or she is offered coverage for a 12-month stability period beginning July 1, 2015, through June 30, 2016.
So, in this example, what happens with the employee on June 30, 2016?
The employee’s timeline runs from May 15, 2014, to June 30, 2016, so there is enough time for him or her to have eclipsed whatever time frame the employer uses as the standard measurement period for ongoing staff. If this new hire worked for an employer who measures ongoing employees from Nov. 1 to Oct. 31 every year, what happens to benefits on June 30 would be contingent upon the average hours worked from Nov. 1, 2014, to Oct. 31, 2015.
If the employee were full time during this time frame, the benefits would continue to the end of the year, per a 2016 stability period associated with that standard measurement period. If the employee was not full time in the standard measurement period but was during his or her initial measurement, benefits will continue through to June 30, 2016. And if the employee was not full time in either measurement period, benefits don’t have to be offered through the end of 2016.
It’s important to note that if an employee was not full time during the initial measurement but was full time during the standard measurement, you will need to add him or her to the benefits. So, in the running example, if an employee didn’t qualify based on June 1, 2014, to May 31, 2015, hours worked, but you re-measure according to your ongoing rules and find the person was full time during the Nov. 1, 2014, to Oct. 31, 2015 period, then the 12-month new hire stability period of not having benefits is clipped short. It’s replaced by the guarantee of benefits for the full 2016 plan year with an effective date of coverage of Jan. 1, 2016.
This can be complicated, but you should be fine as long as you work with a good consultant and utilize the tools your payroll vendor provides.
Tobias Kennedy is vice president of Sales and Service at Montage Insurance Solutions. Reach him at (818) 676-0044 or firstname.lastname@example.org.
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The Patient Protection and Accountable Care Act (PPACA) has a number of employer provisions generally called the “employer shared responsibility.” So, with this responsibility, who, exactly, do you have to offer coverage to as full-time employees?
“It’s not always as easy as 100 percent of your staff sitting in a chair from 8 a.m. to noon, then again from 1 to 5 p.m.,” says Tobias Kennedy, vice president of Sales and Service at Montage Insurance Solutions. “The reality is employers will have project-based staff, variable-hour employees and other factors that make figuring out ‘full time’ slightly tricky.”
Smart Business spoke with Kennedy about the PPACA’s look back/stability safe harbor, in this second of a three-part series on the employer shared responsibility provision. The first article discussed how the penalties are triggered under employer shared responsibility.
How does the look back/stability safe harbor work?
This provision allows an employer to look at ongoing staff and make a technical calculation on whether or not a person is supposed to be offered benefits under the PPACA. The legislation applies month-to-month, but because the government realizes that a monthly application would be administratively crippling, an optional safe harbor exists where you can extend the length of time used to measure employee hours, and then that data determines which employees qualify.
For ongoing staff, you get three new time frames to calculate with: a measurement period, an administration period and a stability period.
What is a measurement period?
The measurement period is a time frame you get to select — it has to be continuous months and can last anywhere from three to 12 months. Obviously, the shorter the period, the more likely to have irregular spikes; the longer the period, the more it’s a true measure of an employee’s average.
Essentially, you simply define the period of time, and those are the months that an employer uses to calculate employee hours worked. For example, the employer might select a 12-month measurement period and choose to run it from Nov. 1 to Oct. 31 every year. In this case, the employer would look at the hours worked over this period of time to determine each employee’s average hours worked to see if it is more or less than the PPACA-mandated 30 hours — thus qualifying, or not qualifying, for benefits.
What’s involved during the administration period?
The administration period is where you, the employer, have time to evaluate the results of your measurement period, and take care of logistics. This period cannot be longer than 90 days. For practical purposes, this would be used to see who is benefit eligible, plan your open enrollment meetings, distribute benefit information and then collect/process all of the applications for the upcoming plan year.
Using the previous example’s time frame, an employer might have this period run from the end of the measurement period to the end of the year, e.g., Nov. 1 to Dec. 31.
Once an employer moves on to the stability period, what happens?
In the stability period, as long as an employee remains employed, employers must treat him or her according to whatever average the measurement period deemed them — either full time or part time — regardless of the hours worked. So, if an employee measured as full time during the measurement period, you have to continue to offer him or her benefits through the entire stability period even if hours dip lower, as long as the person is still employed.
The stability period has to be at least six months and also no shorter than the time chosen as the measurement period. So, in the example from before, because the measurement was 12 months, the stability period also needs to be 12 months. If employees were measured from Nov. 1, 2014, through to Oct. 31, 2015, the employer would enroll employees throughout the end of 2015 for their 2016 plan year.
Then, the measurement, administration and stability periods continue to go on, overlapping such that every plan year occurs back to back without a break, and each plan year’s eligibility is associated with the hourly performance of employees during the preceding associated measurement period.
In the final of this three-part series, we’ll discuss how to treat a new hire to eventually fold him or her into your employee hourly average calculations.
Tobias Kennedy is vice president of Sales and Service at Montage Insurance Solutions. Reach him at (818) 676-0044 or email@example.com.
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