The Patient Protection and Affordable Care Act (PPACA) was signed into law on March 23, 2010, and the related Health Care and Education Reconciliation Act of 2010, which made changes to PPACA, was signed into law on March 30, 2010.
These two statutes “the health care reform law” make sweeping changes to existing legislation governing employer-sponsored group health plans, individual health coverage and governmental health programs.
“The health care reform law is the most sweeping employee health care benefits legislation to impact employers, employees and health care vendors since ERISA,” says Sharon Blichfeldt, a vice president and senior health and benefits account executive for Aon Risk Services Central, Inc.
Smart Business spoke with Blichfeldt about the health care reform law and how it will impact employers.
What employee benefits are impacted by the health care reform law?
The new provisions affect insured and self-insured employer health plans; health coverage for employees, spouses and dependents; and retiree health coverage. The health reform provisions generally do not apply to group health plans that have fewer than two participants who are current employees, or to plans that provide ‘excepted’ benefits, such as stand alone dental or vision plans, flexible spending accounts, etc.
Is the law focused on any specific types of benefit coverage?
Yes. The specific types of coverage that are most impacted by the law are those defined as ‘essential health benefits,’ which include ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental health and substance abuse disorder services, including behavioral health treatment; prescription drugs; rehabilitative and facilitative services and devices; laboratory services; preventive and wellness services and chronic disease management; and pediatric services, including oral and vision care.
Why is this the most sweeping legislation to impact employers since ERISA?
This legislation impacts employer health care plans across all levels. For example, the law requires that health plans extend coverage for dependent children until age 26. The child can be married, does not have to be a full-time student, and does not have to otherwise be considered a dependent.
Other high profile requirements of the legislation include removal of plan exclusions and limitations and revision of plan cost-sharing provisions. There are new rules around the health plan’s ability to impose preexisting condition exclusions on new plan participants. Lifetime maximums and annual benefit limitations must be removed for essential health benefits. Other cost-sharing provisions for plan participants, such as deductibles and coinsurance/copayments, must comply with preset limits imposed by the regulations.
Why are ‘grandfathered plans’ an issue for plan sponsors?
The legislation includes ‘grandfathered’ provisions that are designed to enable existing health plans to operate on a status quo basis for a period of time. Only certain provisions of the legislation are eligible for grandfathering and only for a defined period of time, after which the provision must be fully implemented. The plan sponsor must also be aware that a plan can lose its grandfathered status under certain circumstances, including elimination of benefits, increase in percentage of cost-sharing (coinsurance/copayment) requirements, increase in deductibles, decrease in employer contribution toward the cost of coverage by more than a certain percentage, and change in annual limits.
What is the expected cost impact?
This is a critical consideration for every employer, plan sponsor and/or insurer. Early projected cost implications of health care reform legislation range from less than 0.1 to 4.0 percent per health care provision. These estimates are in addition to health care cost trends, utilization patterns and demographics and state legislative mandates for insured plans. Some of the requirements will have minimal or no health care cost impact, but will add administrative burden to the plan.
Why should an employer continue to offer health care coverage?
The legislation anticipated this reaction and included consequences for employers who drop coverage for their work force. Beginning in 2014, the federal government will impose a $2,000 per employee penalty for employers who drop coverage. This penalty amount is likely to change before 2014 since it is disproportionate to the actual cost of coverage.
Other provisions of the legislation provide for subsidized premium assistance and free-choice vouchers that employers must provide to qualified employees who elect to purchase health care through the health exchanges, which are being developed to provide all individuals with mandated essential health care coverage, rather than participate in the employer-provided health plan. Employer-sponsored programs that lose employee participation to the voucher system will also lose the tax deductibility of the benefit.
With such wide-ranging implications, where does an employer begin?
A critical first step is to understand the legislation’s multi-faceted implementation schedule. With the legislation’s removal of the plan sponsor’s ability to control corporate costs through plan design and contribution structure, introducing health improvement initiatives also becomes essential. And, you need to keep the lines of communication open with your work force. Health care benefits remain a priority for the majority of employees, and replacing rumor and myth with facts is vital.
Sharon Blichfeldt is a vice president and senior health and benefits account executive in the Pittsburgh office of Aon Risk Services Central, Inc. Reach her at (412) 263-6532 or firstname.lastname@example.org.