On June 28, the U.S. Supreme Court upheld the majority of the Patient Protection and Affordable Care Act with a 5-4 ruling. As both sides of the political spectrum use the decision on the controversial law to win support for their own policies, employers may be wondering where this leaves them.
“The decision provides some necessary clarity that can lead to more decisive health benefits planning,” says Bruce Davis, principal and leader of Health and Group Benefits Consulting at Findley Davies.
At the same time, Davis warns this ruling isn’t the end of the matter. Some health care issues are unlikely to be resolved until after the November election and the health care exchanges smaller Ohio employers were counting on will be operated by the Department of Health and Human Services.
Smart Business spoke with Davis about what the Supreme Court’s decision means for employers now and in the future.
How does the Supreme Court’s decision impact employers?
Employers now know what they need to do this fall as they head into open enrollment. They need to:
- Comply with the new Summary Benefit Coverage requirements by modifying open enrollment materials to include new coverage examples with help from health insurance carriers or third-party administrators and professional advisers.
- Work with payroll vendors, IT staff and human resources to ensure they can report the aggregate cost of their employer-sponsored health coverage on employees’ W-2s to be issued in January if they have more than 250 employees.
- For plan years beginning on or after Aug. 1, provide expanded coverage for eight categories of women’s preventive care without cost sharing if they are nongrandfathered under the PPACA.
What might this mean in terms of cost?
For 2013, businesses can examine their demographics to understand what expanded women’s preventive care requirements mean in terms of increased claims costs, but generally, Findley Davies believes it will be approximately 1 percent. Other costs, such as coverage for children up to age 26 and general adult/child preventive care requirements had already gone into effect.
Cost increases may elicit new work force strategies. For example, employers with more than 50 employees will be penalized for not offering essential health benefits or offering benefits deemed unaffordable. However, those requirements apply to full-time employees — those working an average of 30 or more hours weekly. Employers in some industries may begin using part-time employees or independent contractors to a much higher degree.
What parts of the Affordable Care Act remain undecided?
In July 2012, Ohio and several other states decided not to participate in expanded Medicaid, which was permitted in the Supreme Court decision, and will not establish a state-based health insurance exchange. HHS will operate the exchange in Ohio in 2014 to serve individuals and employers with fewer than 100 employees. Smaller employers were investigating the idea of moving toward a defined benefit contribution model and letting employees use the exchange to choose their own coverage based on their risk tolerance.
If you have fewer than 100 employees, you’ll need to follow the developments in each of the states in which you do business to determine whether they will move ahead with a health insurance exchange for 2014. It won’t be clear for another year which carriers will participate in each exchange, which plans will be offered and their costs.
Further, the first comparative effectiveness research fees are due July 2013. Employers will remit the $1 per member fees using IRS Form 720, but the IRS has not yet revised that form to take these fees into account. There also are several requirements where the federal government should be issuing guidance in 2012, such as how to file a quality of health care report and how non-discrimination rules apply to insured plans that favor highly compensated employees.
How does politics play into what happens next?
This will be a huge issue for the November election. For example, if the Democratic majority in the Senate changes, then some smaller measures might pass, such as restoring the ability to pay for over-the-counter medicines under flexible spending or health savings accounts.
However, employers cannot wait for the election results. Even if Republican candidate Mitt Romney is elected, the inauguration won’t happen until Jan. 20, well after businesses must comply with some of the act’s provisions.
What should employers tell their employees?
The decision relieved some anxiety and provided clarity, but employers need to begin communicating to their employees. Take advantage of this opportunity and reinforce your commitment to providing a competitive, affordable health plan as you work to comply with the new PPACA requirements.
Employers also need to be ready for questions from their female employees. Health care flexible spending accounts will become limited to $2,500 in January, which needs to be explained in upcoming open enrollment materials. In addition, there’s the misconception that reporting the value of health care coverage on a W-2 means it is taxable. Employers need to be proactive in explaining that this is information gathered for the federal government so it can administer the premium subsidies under the health insurance exchange programs.
Health benefits remain a very important part of employees’ total compensation. Employers will want to drive that message, as well as demonstrate how these benefits fit into the overall value proposition of what it means to work for their organization.
Bruce Davis is principal and leader of Health and Group Benefits Consulting at Findley Davies. Reach him at (419) 327-4133 or firstname.lastname@example.org.
Insights Human Capital is brought to you by Findley Davies, Inc.
Spending on unemployment compensation is at an all-time high, jumping from approximately $31 billion in 2008 to $120 billion in 2009, $160 billion in 2010 and a projected $120 billion for 2011. Numerous states, including Ohio, have depleted their unemployment compensation trust funds and have had to borrow from the federal government.
“Ohio employers have seen modest increases in their state unemployment taxes over the last few years as automatic triggers kicked in to try to keep the fund solvent. However, the increases just haven’t been enough to stay ahead of the benefits paid out,” says Anthonio C. Fiore, an attorney with Kegler, Brown, Hill & Ritter.
Eventually, the federal government will look to Ohio employers to replenish their fund through higher contributions or taxes. To keep the costs to employers from growing ever higher, Fiore says the state and its employers must work to reform the unemployment compensation system in Ohio and get people re-employed.
Smart Business spoke with Fiore about the tasks at hand.
What is the status of Ohio’s unemployment compensation (UC) trust fund?
Employers pay into both the state and federal unemployment compensation trust funds. Solvency of the state’s UC trust fund had been a growing concern for a number of years, but it finally moved into the red in January 2009. Ohio currently owes the federal government over $2.6 billion for loans from the Federal Unemployment Account (FUA) — commonly referred to as Title XII loans.
How does the situation in Ohio compare to that in other states?
Ohio is in the same boat as many other states. The highest unemployment in nearly three decades is spread across the U.S. and very few counties and states have been immune. State unemployment taxes increased as a percent of total wages on average by 34 percent from 2009 to 2010 and are expected to increase even more for 2011 and 2012.
As of Sept. 1, 2011, 27 states and the Virgin Islands have outstanding federal loans of over $36 billion. The United States Department of Labor (USDOL) projects a peak in 2013 of up to 40 states and $65.2 billion in outstanding loans. Interest on loans is charged at the rate of just over 4 percent for 2011. Approximately $1.7 billion will need to be paid from sources other than the state unemployment insurance (UI) tax — employers in 19 states (not including Ohio) will pay a special assessment to cover this cost. The first interest payment from states is due September 30, 2011, and interest will continue to accrue as long as loans are outstanding.
State and federal unemployment taxes will continue to increase over the next three years and remain at higher rates for at least 10 years on average. Average UI taxes will more than double with some employers experiencing much higher tax increases as a percentage of total wages. Increased taxes will increase the cost of hiring. Increased duration of unemployment compensation will continue to be a disincentive to individuals deciding whether to actively seek and accept work available in the labor market. Relief from automatic Title XII interest and Federal Unemployment Tax Act (FUTA) offset credit penalties is possible only if states, businesses and workers push for them. States with no debt may be less supportive of relief, arguing that they have already addressed solvency and did not get relief.
How long will it take Ohio to get its fund solvent once again?
The goal is not simply to pay back the $2.6 billion to the federal government. The goal is to replenish the fund to what is called ‘minimum safe level’ in order for it to weather future economic downturns. The minimum safe level is around $2.5 billion; therefore the state UI fund is approximately $5 billion away from where it needs to be in the future. It could take three to five years to get the fund back to this level.
How can Ohio get the fund back to solvency?
Obviously, the best case scenario is finding a way to get more individuals employed, so fewer individuals are collecting unemployment. That would help Ohio rebuild the fund the fastest, versus raising employer taxes. In terms of direct costs to companies, businesses can work with third-party claims administrators and/or an attorney to more aggressively manage their claims to eradicate fraudulent claims and overpayments. The state itself is taking numerous proactive efforts and is focusing on ways to reform Ohio’s unemployment compensation system, keep businesses in Ohio, attract new companies to Ohio, and get Ohioans re-employed.
How will developments at the federal level impact Ohio?
Pending legislation (H.R. 1745, also known as the Jobs Act) would reform aspects of the unemployment system. Ohio would benefit from some of the reforms that are being advocated by a broad coalition of national and state business associations. One of these is a requirement that would strengthen job search requirements for those receiving unemployment. In addition, President Obama recently released the ‘American JOBS Act’ with several provisions affecting unemployment compensation. While some provisions of the proposal have merit there is still uncertainty surrounding what price tag will be levied on those who fully fund the system — employers. The current system was developed in the 1930s and was not set up for the situation the country is currently in. Reforms would focus on getting people re-employed faster and into the jobs that are available.
ANTHONIO C. FIORE is an attorney with Kegler, Brown, Hill & Ritter. Reach him at (614) 462-5428 or email@example.com.