NEVER BEFORE have human resources and benefits managers had to deal with the amount and kind of change and uncertainty they are dealing with this year.
Complicated by a floundering economy, American businesses are dealing with changing regulations, decreasing employee productivity and increasing benefits costs and complexities. It seems as if there are more unknowns now than ever before. Wouldn’t it be great if we could at least move the “unknowns” into the “predictable” column? Let’s try to do that here.
The PPACA (or ObamaCare) will be fully implemented in 2015, and mandates that all employers with 100 employees or more offer their employees health insurance benefits. At the same time, the ACA continues to evolve, and it will continue to be challenged in the courts. For example:
This year you will still have to provide coverage to all employees who average at least 30 hours per week, but that could be changing. Legislation is under consideration to raise the average minimum hours needed to qualify for the company’s health insurance offering from 30 to 40, which would reduce the financial burden on some employers.
Compliance with the health benefit mandate is becoming even more complicated and difficult. In 2015, employers must make sure the coverage they offer meets the requirements of the PPACA, including the minimum value test and the affordability test. This year, employers must provide coverage to at least 70% of their FTEs who meet the mandate, but that number will increase to 95% next year. Since penalties are assessed monthly, employers will need to constantly evaluate the makeup of FTEs.
Even worse, the excise or “Cadillac” tax will kick in 3 years from now. The tax is a surcharge to employers who have health insurance spending exceeding $10,200 for an individual or $27,500 for a family (indexed to inflation in future years), and it includes contributions to FSAs, HSAs, HRAs and some employee assistance programs. (The regulators are still debating what constitutes employee assistance programs.) So now, you’ve also got to focus on what you’re going to do to avoid the tax while staying compliant within the law.
While the pace of regulatory change is accelerating, we must recognize that the PPACA legislation was a public response designed to increase access to healthcare, but it wasn’t structured to address the root causes of rising health costs. As employers pay much of the cost for the PPACA, they have a right to demand that public policy also provide them opportunities to improve the health and productivity of their employees.
Special interest groups and even the federal government are increasingly testing companies that use wellness programs to guide employee health habits. Honeywell recently won a celebrated case in which opponents challenged their right to impose penalties on employees for nonparticipation in their wellness programs. Incentive-based wellness programs will increasingly come under fire for inequities, unfair treatment and being involuntary. Protagonists know that company management doesn’t like to be sued, so challenges will discourage many employers from engaging in these types of wellness programs. Yet, properly executed wellness programs, especially when they are face-to-face at the workplace, have proven to lower health risks and costs. Employers will increasingly see a conundrum between doing the right thing for the health of their employees (and the financial health of their company) versus intruding on personal rights.
While ObamaCare does little to fight the root cause of our health cost crisis, it has inspired changes in insurance rules that will increase access to healthcare for millions of Americans. Yet, the government exchange system is problematic and cannot be used by large employers.
Ta da! American ingenuity comes to the rescue. The public exchanges have spurred growth of private exchanges that may ultimately help employers address the root causes of our health cost crisis.
The value proposition of private exchanges is to deflect the growing complexity and regulation faced by employers. Private exchange platforms offer employers three advantages:
Increased administrative efficiency reducing health benefit costs;
Defined contribution plans that reduce employer financial exposure, and enhance employee consumerism; and
Broader choice of health insurance plans, which soon may be bundled with attractive health promotion options
Employers are flocking to private exchanges to take advantage of short-term cost savings, but they might leave just as fast if the private exchanges don’t create long-term value. How private exchanges decrease immediate health benefit costs:
Defined contribution plans (versus traditional defined benefit plans) are used by private exchanges to help employers stabilize insurance cost inflation by sharing more of the risk with participants, which also drives healthcare “consumerism.”
Private exchanges also improve administrative efficiency, which yields lower costs, which can be invested in wellness and onsite health care.