July 1, 2014
From Ingram's Magazine

by Brian Johnston

After the delays in implementing the Affordable Care Act, now come the realities.

With the initial date of passage of the Patient Protection and Affordable Care Act of 2010 (now generally known and referred to as the “Affordable Care Act,” “ACA” or “Obamacare”) it was generally known that 2014 would be the year of significant change for all individuals and employers regarding the future of health care as we knew it.

Of course, the government’s health-care exchange rollout was a debacle and other compliance deadlines were largely pushed into 2015 as a result; health-insurance carriers followed suit in many cases by delaying the imposition of premium increases that would likely occur for many employers based on new ACA insurance underwriting guidelines.

As a result, 2015 now becomes the proverbial “Fork in the Road” for many employers who are faced with the decision of: Option A: continue providing health insurance to my employees (possibly despite any increases in costs); or Option B: cease providing health insurance and let my employees purchase their own insurance elsewhere.

Although there are many good and legitimate reasons for why an employer might choose Option B and not provide health insurance for employees going forward, a significant number of employers have concluded they simply must choose Option A and continue providing health insurance, either because culturally it is the “right” thing to do, or the employer must provide health insurance for its employees to continue to attract and retain the types of employees needed for the company to maintain its competitive success. Regardless of the reasons, employers who provide health insurance to their employees must remember the “3 C’s” when proceeding forward in 2015 and beyond: Compliance, Costs, and Creativity.

Compliance. As noted in a prior article in this magazine, all employers who offer group health insurance to their employees have some level of compliance responsibility under the Affordable Care Act. Mandated coverages must be provided regardless of an employee’s current or previous health condition. On a going-forward basis, to avoid ACA-related penalties, employers with at least 100 employees (in 2015) or at least 50 employees (in 2016) must provide a “minimum value” of health insurance coverage at an “affordable” price to all employees working at least 30 hours per week. ACA-related fees must also be paid. Lastly, there are minimum reporting requirements, including required notices of coverage options and beginning in 2015, reports that must be provided to the IRS regarding those who are eligible and those who actually purchase health insurance coverage through the employer’s plan.

Costs. Even though health-insurance costs are already in the Top 5 of almost every company’s highest expense items, the costs of providing additional coverage in greater amounts and to more people will necessarily drive those costs even higher; projected health-insurance costs for many will increase by 30 percent or more in the next two years alone. Employers need to be aware that these increases are likely to come, if not in 2015, then by 2016 at the latest.

Creativity. Because of the projected increases in premiums, employers need to strategically explore new ways to decrease the costs of health insurance. Those with fewer than 50 employees need to look at new health-insurance pooling arrangements, such as possibly the federal health-care exchange known as the “SHOP Exchange,” or another type of association-based program where the cost of providing health insurance can be buffered with the cost of claims for other smaller employers in a larger pool.

Larger employers, even those with 50 or 100 employees, should explore the merits of using a self-insured arrangement to provide greater flexibility over health-insurance coverage options and costs of coverage in lieu of paying fixed premium costs to a health-insurance carrier; new “captive” insurance and other “alternative funding arrange-ments” can help employers minimize the risk of unexpected claims costs that otherwise may occur. “Private Health Exchange” models are also worth considering as well.

All employers need to more closely evaluate who is eligible to receive health-insurance coverage under the employer’s plan; although employees working at least 30 hours or more a week must be covered under the ACA, other family members may not. Since those individuals can all elect coverage through the health-care exchange program, it may no longer be necessary for employers to provide that coverage as well.

The Fork in the Road is coming. It is imperative that employers work with knowledgeable insurance consultants, brokers and advisers in evaluating which option works in 2015 and beyond.

To read the full article, click here.