The Treasury Department made it a little easier for companies to comply with the Affordable Care Act (ACA) by delaying the employer mandate to provide health insurance for companies with 50 to 99 employees.
Those businesses will have until January 2016 before facing potential penalties, while companies with 100 or more full-time equivalent (FTE) employees still face a Jan. 1, 2015, compliance deadline.
“Some of it was about giving companies time to come into compliance, but they also don’t know yet how penalties will be enforced or collected. The law doesn’t allow the IRS to collect any penalties, so they have a real challenge trying to figure out how to collect the money,” says William F. Hutter, CEO of Sequent.
Smart Business spoke with Hutter about changes in the ACA and what they mean for employers.
What break have companies with 100 or more employees been given regarding the first year of the employer mandate?
For 2015 only, instead of being required to extend coverage to 95 percent of employees they have been granted a grace period and only need to offer coverage to 70 percent of employees.
But plans still have to meet minimum essential coverage standards and have to be affordable.
While companies are getting that break, one of the most difficult aspects of the ACA is the complexity of the reporting and tracking requirements for companies. Most companies with 100 or more employees are already meeting these criteria, but it’s really a challenge for companies with variable-hour workforces.
It can be pretty challenging for retail and hospitality businesses. When you have 70 full-time employees and 50 part-time employees, tracking those variable-hour employees to get your FTE count can be pretty challenging.
What do businesses need to be doing now?
A lot of the administrative details — creating your policy, and your measurement, administrative and stability periods — need to be done now. Make sure your HR and payroll systems can handle the necessary reporting because it’s going to be virtually impossible to track it with a pencil. You need a way to extract that data from your system in a way that matches the reporting criteria.
For larger companies — 100 employees or more — their look-back period to determine employee eligibility for coverage starts this year, correct?
Yes. A large retailer based in Columbus, Ohio, decided a few months ago that employees would either be full time and eligible or part time, never working more than 27 hours a week. More companies will adopt that tactic because it’s easier. They don’t want to worry about who might become eligible in such a volatile environment as retail.
Almost every company has part-time employees who could become eligible based on the measurement period. Let’s say they work 40 hours a week during peak season, are offered and take benefits, then drop back to 20 hours a week. Normally under IRS code, going from full-time to part-time status would create an open enrollment period. But the ACA says they’re still an eligible employee because they met the criteria during the measurement period, and the change to part-time status no longer produces an open enrollment opportunity because of the stability period.
We’re trying to figure out if there’s a nuance in the ACA that address this issue, but haven’t found it. The IRS says you entered into a contract for benefits until the next open enrollment period or change in family status. So the employer would still have to provide coverage and the employee would have to pay his or her share, even if it’s too expensive on a part-time salary.
That’s one of the challenges with the ACA — it’s constantly changing and evolving. Once you digest and understand the implications of it from a business operational standpoint, it changes again. Because of the latest delay, businesses with 50 to 99 FTE employees don’t need to worry about it for a while and can probably wait until things calm down. ●
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Expansion of the Medicaid program in Ohio was approved by the state Controlling Board because there wasn’t enough support to get it passed in the legislature. But there’s no economic reason for anyone in Ohio to oppose the expansion, says William F. Hutter, CEO of Sequent.
“The battle about Medicaid expansion was based on principle; it was about certain forces resisting an additional expansion of federal government in Ohio. And that somehow expanding Medicaid to the less affluent population in Ohio was an endorsement of health care reform,” Hutter says. “That is one view. I started taking a view that Medicaid expansion in Ohio is good for business and good for the population.”
Smart Business spoke with Hutter about how the Medicaid expansion helps businesses and what companies are doing in response to the program.
Why is Medicaid expansion good for businesses?
Under the Affordable Care Act (ACA), if an individual meets the criteria of having an income of less than 138 percent of the federal poverty level they can apply for Medicaid benefits.
Consider industries like hospitality and retail, which deal with a lower-cost, transient employee population. They’ve taken a position that they have employees they would like to move to full time, but have health care to deal with under ACA and the benefits cost too much. One of the advantages for that group of people, and those industries, in Ohio is that they might qualify under Medicaid.
If employees are covered under Medicaid, they are exempted from the full-time equivalent (FTE) count of businesses. That means they aren’t included in determining whether a business has 50 FTE employees and would be subject to penalties starting in 2015 if they do not provide health insurance coverage for employees. Normally, hours of all part-time employees are totaled to compute how many FTE employees are added to the number of full-time employees to see if a business hits 50.
Having more employees exempted from the FTE calculation could allow businesses to hire more people and get them qualified for Medicaid. Employees get medical coverage, the business gets exempted from the ACA and health care providers benefit.
How do health care providers benefit?
Providers complain that they don’t make money on Medicaid patients because reimbursement rates are lower. However, hospitals and urgent care centers do not turn people away; they provide medical care 90 percent of the time whether or not someone can pay. What’s better, to be paid zero for providing $500 worth of medical services, or to be paid $400? From a patient standpoint, while Medicaid might not cover all costs, it takes some pressure off because there is reimbursement from the federal government.
Have businesses developed strategies in response to the Medicaid expansion?
Absolutely. They are trying to get employees signed up for coverage. We’ve been working with clients on helping them with the Office of Healthcare Transformation, which built the Medicaid application portal in Ohio. Director Greg Moody has done a good job creating a portal that makes it easy for people to sign up.
There have been comments that only 30 percent of the people who register get qualified, but it’s a financial qualification — it’s not arbitrary. It’s a set amount based on income being up to 138 percent of the poverty level.
This is one of the more worthy social benefits that helps keep people healthy and is in-line with the intent of the ACA. It will be good for small and midsize businesses and keep more people employed. Yes, it’s not in high-wage positions, but it is an improvement and will move more money into Ohio and create economic flow.
Employers are starting to figure this out. They want to do what’s best for employees, the company and shareholders. For the current circumstances and environment, Medicaid expansion is good for Ohio. ●
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The Kaiser Family Foundation recently released a study that stated premiums available on state-based health insurance exchanges would be lower than expected. In Ohio, rates cited were even lower than the national average, with costs for the second-lowest silver tier plan at $249 compared to $320 nationally.
However, Ohio Lt. Gov. Mary Taylor had earlier announced that individual premiums were expected to increase by 41 percent.
Smart Business spoke with William F. Hutter, CEO of Sequent, about whether the Patient Protection and Affordable Care Act (ACA) will succeed in driving down health insurance costs.
Do the rates cited in the Kaiser study mean costs are going down?
Possibly for a couple of years — we’ve still not seen the community rating prices for small group coverage, and just maybe the lowest prices were illustrated in the Kaiser study. The rates indicate a very low and attractive premium structure. It’s unlikely these rates will be sustainable after 2016 because carriers don’t know the real cost of insuring this group yet.
In addition, the paper didn’t address complex tax implications for both the company and employees that must be considered for total cost. For example, the new taxes on insurance premiums paid by carriers, but collected from employers, are a protection for the carriers. The tax will be set aside to help carriers offset the real cost of coverage for the first two years. After that, the exchange carriers will be on their own, with no government subsidy.
What impact will these rates have on businesses and their health care plans?
One of the leading actuarial firms, Milliman, has an analysis tool to help any company dig through the ‘play or pay’ considerations. Having completed more than 250 separate analyses, Milliman reported it made sense to ‘pay’ for only two of those companies. However, it’s difficult to access the individual total costs relative to plan designs.
What do the delays mean for 2014?
This is a practice year for everyone; 2014 is a penalty-free zone. With the rollback in enforcing penalties and a delay in reporting incomes for the affordability test, people think they are off the hook regarding ACA requirements. But everything else is going forward, including a big increase in taxes.
Unfortunately, the early testing on the exchange, scheduled for early September, was delayed. The Department of Health and Human Services also delayed the deadline to sign final agreements on health plans that will be available to consumers on the exchanges, which might have occurred because some insurers have been hesitant to sign up.
Many people anticipate there may be massive technology glitches relative to the exchanges, including a brewing concern in the technology arena about confidentiality and Health Insurance Portability and Accountability Act (HIPAA) compliance. The system is going to be large and unwieldy.
Who is going to buy insurance from the exchanges?
Even with the individual mandate — which still could be delayed by the government — beginning next year, most people will not be making changes regarding their health care, whether they have insurance or not. If you haven’t purchased coverage because you’re young and invincible, you’re not going to purchase coverage now with minimal individual mandate penalties in the first year.
The people who will be truly interested in participating are the most needy — those who cannot afford other coverage because they are ill and not working.
As for businesses, depending on the average income per worker, some might drop plans and let employees go to the exchanges. Businesses with fewer than 50 full-time equivalent employees will not be penalized when penalties are assessed in 2015. So, they could drop coverage, give everyone a $4,000 raise and let employees buy their own insurance. But companies need to remember that giving a raise to buy exchange coverage causes everyone’s taxable income to increase. Therefore, the employee pays more in taxes, the company pays more in taxes and the increase might bump income over the subsidy limits.
It’s still very difficult to predict what exactly is going to happen because there are so many unknowns. ●
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