If you were taking a wait-and-see approach to implementing health benefit changes until after the 2012 presidential election, it’s time to kick your planning into high gear. President Obama’s re-election means the Affordable Care Act (ACA) health care reform law is sure to be fully implemented come 2014.
The Supreme Court upheld the law’s constitutionality in June. Although some House Republicans have vowed to introduce legislation repealing the ACA, the smart money in Washington is betting on such efforts to go nowhere.
Best to start planning now for the law’s effects on your benefits program. That includes the ACA’s so-called “play or pay” employer mandate, which requires most employers to offer health insurance to employees or pay penalties, starting in 2014. Experts advise taking four key steps right away:
1. Assess the strategic impact of continuing or dropping health benefits. The ACA does allow many employers to decline to offer health coverage, although they’ll have to pay stiff penalties if they do. But would those be your only costs? How might your benefits decisions affect efforts to recruit, retain and develop your workforce? Would offering (or dropping) health coverage give you a competitive advantage?
2. Determine whether to retain “grandfathered” status if you decide to continue offering a health plan. Group health plans that were in effect when the ACA was signed on March 23, 2010, can keep grandfathered status if they keep the same insurance carrier, and employees’ out-of-pocket costs don’t increase substantially. That has advantages—grandfathered plans are exempt from complying with some ACA requirements. However, the exemption alone shouldn’t drive your decision-making. Learn more about grandfathered status at “The New Health Care Reform Law.”
3. Determine if your existing plan meets qualifying standards for eligibility and affordability. You’ll need help to make that call, probably from your insurance carrier or broker. Running 906 pages in its final form, the ACA is a complicated law. Insurance professionals have been keeping abreast of compliance standards all along. Tap their expertise.
4. Calculate the true costs of either offering or not offering health coverage after 2013. It’s not a simple exercise. Among the factors to consider:
- Projected growth of the employer-paid portion of premiums
- Size of your workforce, and the likely number of insureds
- Administrative costs associated with running your plan
- The penalty hit you will take if you decide to drop coverage and have employees seek health insurance through state exchanges.
They’re all part of the equation every employer will have to balance: Is it more cost-effective and business-savvy to continue offering employer-paid coverage or let employees fend for themselves in the health insurance marketplace?
What's next on the health care reform horizon
Significant ACA milestones loom in 2013 and 2014:
2013: Calm before the storm
Next year’s ACA requirements will be relatively easy on employers, with most regulatory attention focused on preparing to set up state insurance exchanges. Specific changes for 2013:
FSA limits. Beginning Jan. 1, employee health care flexible spending account contributions are limited to $2,500.
Nonprofit plans. Consumer Operated and Oriented Plan (CO-OP) program begins, a crucial step toward creating nonprofit, state-based health insurance exchanges designed to cover individuals who can’t buy insurance elsewhere.
2014: Big changes!
The real ACA action begins in 2014, when the individual mandate kicks in and state insurance exchanges go live. That’s also when employers begin facing big penalties if they don’t offer health insurance.
Individual mandate. Effective Jan. 1, 2014, all individuals must have health insurance or else pay a penalty, which would max out in 2016 at 2.5% of household income, plus cost-of-living adjustments.
Employer mandate. Employers with more than 200 workers must automatically enroll employees into a health insurance plan.
Risk pooling. State-based exchanges open for business to help small employers (usually those with 50 or fewer employees) pool risk together to lower coverage costs.
Employer penalties. Employers begin facing big penalties if they don’t offer health insurance. Worst-case scenario: An employer with 50 or more employees that has just one employee receiving a premium tax credit to buy insurance through a state exchange will have to pay a penalty of $2,000 per full-time employee (excluding the first 30 employees).
Minimum benefits. Federal officials define an essential benefits package with which all insurance policies must comply. Some of this work has already begun.
Incentives. Employers can begin offering enhanced incentives for employees who participate in wellness programs that meet new federal standards to be developed.
