If you’re in the benefits department, it is our sincere hope that your plans for addressing the Patient Protection and Affordable Care Act (PPACA) are well underway. (Yes, it is possible that, by the time you read these words, part or all of reform may have been struck down by the US Supreme Court. Even so, the bell cannot be unrung, and there will be changes to make).
If, on the other hand, you’re one of the many who have adopted a ‘wait and see’ attitude toward said reform, shake the sand out of your ears and stand upright. We have some information you might need.
Sandy Ageloff, Health and Group Benefits Leader at Towers Watson, believes that your game plan should be coming together by now, even if you are one of those wait-and-seers. “We have a countdown clock on our website’s health care reform page,” she muses, “and it is down to 18 months now.”
So what are companies doing to prepare? Ageloff says that, according to a survey Towers Watson conducted in conjunction with the National Business Group on Health, the vast majority of large employers plan to maintain the status quo with regard to their health benefits, at least for the next few years. “90% of employers that were surveyed indicated that they have every intention to offer and subsidize health care benefits for their active employees, through 2014,” she says. “Particularly in the large employer market there is a very strong commitment to continue offering coverage.”
The picture changes somewhat when employers are asked to forecast out beyond 2014, though, Ageloff says. “When we asked them to think ten years out, those numbers dropped to the lowest point in a decade; 23% of employers were confident that ten years from now they would be offering and subsidizing benefits.”
Obviously, there is a lot of uncertainty about how health care reform will play out. Even so, there are things you can and should be doing now in order to prepare. We asked Ageloff about a few of the intricacies of play or pay — something that is likely to take effect in 2014.
To play or to pay — that is the question
Employers that provide health insurance and have at least 50 employees are facing a decision: whether to continue offering health insurance (play) to all full-time employees and their dependents, or to discontinue it and pay penalties for doing so (pay). If they discontinue coverage, their employees can access their state’s health care exchanges, which should be up and running no later than 2014. Even in cases where employers continue to provide coverage, some employees may opt to seek it from the state exchange. This could result in employer penalties, too.
“All employers need to assess that play or pay decision,” Ageloff advises. “And it isn’t a binary decision; it’s not necessarily that you decide to play and continue to do what you’re doing today for everybody OR that you’re going to pay, stop offering and subsidizing benefits for all of your employees. There is really a whole spectrum of different positions in between.”
“What we’ve found is that for some employers, particularly those with low wage workers, there is potentially a win/win for them, to consider incenting employees into those exchanges. The reason is that, at certain household income levels, individuals can get both premium subsidies from the government and benefit subsidies from the exchanges. So they could potentially get better or equivalent benefits for a lower cost.”
Different groups of employees, then, can be treated differently. “Employers will incur penalties for doing so in some cases,” Ageloff says. “But if you look at it holistically, both for the employee and for the company, it can end up being a win/win. The penalty that the employer could potentially incur is smaller than the cost of benefits for them, and the benefits the employee and his or her family could get through the exchanges could also be less expensive and better coverage.”
Look at your data, and your communication plan
The PPACA requires employers to communicate the state health care exchanges to all employees, says Ageloff. And the clock is ticking: those communications must go out by March 1, 2013, less than nine months from this writing. Writing a description of the state exchange will be a frustrating exercise in states where the programs remain undeveloped. “Some states are further along than others in developing their exchanges,” she says.
You can’t do much about that. But you can take a look at your own preparation. If you decide to play, you need to make sure that your plan provides a minimum level of essential coverage and that the coverage is affordable for employees; affordable is defined as 9.5% of the employee’s total household income. Don’t worry, you won’t have to ask employees how much their spouse makes — the government will do that if the employee seeks coverage through the state exchange. In the meantime, you can use your employee’s own income as a proxy for household income. If the cost to the employee for your coverage is less than 9.5% of the employee’s income, you can be sure it is an even smaller percentage of total household income.
Another consideration is how you define full-time employees. You may currently use 35 or 40 hours as the mark of a full-timer, but under the PPACA the number is 30 or more hours per week, or 130 or more hours per month.
Based on these provisions of PPACA, making the play or pay decision requires a close look at employee data, says Ageloff. “You need to understand how your benefit designs sit against the minimum coverage rules under the PPACA. You should know the contributions you’re making today, and your employee wages, and determine if you’re going to have a problem with the 9.5% rule. And perhaps the biggest part of the data analysis is to take a look at your current eligibility provisions and make sure you’re offering, or plan to offer, coverage for employees who are working 30+ hours a week (or the safe harbor of 130+ hours per month). So you need to know how easy or difficult it is to capture actual employee hours worked.”
“Once you’ve looked at your data,” Ageloff continues, “you should look at all of your options in the play or pay world – everything from continuing with the status quo, or full-blown play, to discontinuing the plan, or full-blown pay, or some of the strategies in the middle. Look at your data, set your strategy, and then communicate.”
Employee outreach is important
And communication is important here, because absent any word from you, employees form their own ideas – which are often much more scary than reality. “What we’ve seen employers do varies significantly by their culture, as well as how developed their strategy and thinking are around these changes,” Ageloff says. “What we’ve heard most consistently from employers is that they are continuing to evaluate what their strategies will be going forward. But I think that we’ll start to see some messaging as early as the fall open enrollment window for organizations with January 1 plan years. And we will clearly see some messaging in or before March of 2013, as the expected mandate to communicate the exchanges is put into motion.”
“Our recommendation is that employers should be doing an appropriate amount of outreach to employees, not inundating them with a lot of messages, but talking about the key points about the company’s intentions,” Ageloff says. “Stay tuned, pay attention to the Supreme Court ruling, then get your action plan together quickly. It’s only 18 months until possible go-live in 2014, and less than nine months from some pretty substantial communication to your employee base.” So get going!
You can do some further reading in Towers Watson’s Viewpoints article, here.