Businesses continue to face significant Obamacare transitions
The big date — Jan. 1, 2014 — is past, but Obamacare transitions for businesses are not.
Not much of that is because of recent developments on the individual mandate and healthcare.gov, according to industry experts. Instead, it's mostly because of the delay in the employer mandate and an option that many small businesses chose that delayed the full impact of the law.
For businesses with 50 or more full-time-equivalent employees, enforcement of the employer mandate will begin in 2015.
For many businesses with fewer than 50 employees, the new insurance landscape will really come into play only toward the end of 2014. That's because so many of them sidestepped the Jan. 1, 2014, changes by renewing previously existing policies on or before Dec. 1, 2013 — an option that has now expired.
Employer reporting, which was recommended for 2014, will also officially kick in for 2015.
Then, in 2018, comes the so-called Cadillac tax, imposing a 40 percent excise on health insurance premiums above a certain threshold — generally $10,200 for individuals and $27,500 for families, indexed to inflation.
"In many respects, the landscape that we were expecting to see in January of 2014 we're not going to see until 2015," says attorney Eric N. Athey, co-chairman of labor and employment at McNees Wallace & Nurick LLC.
That landscape is one of upheaval on various scales. The new insurance rules abolish medical underwriting, alter age bands, set mandatory minimum benefits and come with new taxes and fees — some temporary, some permanent.
There is an overall cost increase due to said taxes and fees, but beyond that, generalizations are dangerous. Some previous winners in the insurance game — generally companies with lots of young, healthy employees — will be losers, and some previous losers — generally companies with old, sick employees — will be winners.
But there are also subtler implications.
"When you get your rates now, instead of getting a single rate that covers both husband and wife, you get a member-specific rate for each person and each dependent," says Kevin Krause, COO and executive consultant at AIA Benefits Resource Group. "Your older people are going to have a higher rate. Before, it was all blended into one single rate. Now, you've got Joe who is costing you X. Plus, somebody with a larger family is going to cost you more than somebody with a smaller family. It creates some weird dynamics relative to hiring and retention and turnover."
Coupled with age-discrimination guidelines, those dynamics create some potential pitfalls in strategies such as defined-contribution plans. There is still quite a lot of gray in those guidelines, Krause says: Employers should proceed with caution and quality advisers.
Robert Glus, a partner at Conrad Siegel Actuaries, paints the business health insurance dilemma as a balance of four things: Avoiding penalties, minimizing financial impact, minimizing disruption to employees and ease of employer administration.
"Unfortunately, these are often competing forces and, in most cases, one or more must be sacrificed to achieve the others," he says.
Businesses that made preliminary assessments last year may find that those still largely hold, Glus says; but then again, initial perceptions about the best approach are often not accurate. And, of course, what happens with enrollment and, therefore, rates on the individual Obamacare marketplace matters when weighing whether employees will be best off being covered through work or getting insurance on their own.
"If you are an employer that historically had very low premiums because your workforce was very healthy and very young, you're among the ones that are most likely going to say, 'We don't want to offer health coverage any more,'" says Athey. "The good news is that when those employees go to the exchange, they're likely going to have a decent set of options."
Conversely, he says, those who have older and unhealthy workforces may be pleasantly surprised with their rates under the new conditions.
Krause notes, however, that it's important to remember that insurance from an employer is purchased on a pretax basis, whereas employees procuring health insurance on their own is on a post-tax basis. Then again, he says, many qualify for subsidies on healthcare.gov.
Even among employer-provided plans, there are decisions to be made, says Kelly Lieblein, regional vice president of sales for Highmark Blue Shield.
"For instance, a select network plan provides a lower-cost option without sacrificing quality," Lieblein says. "Broad network plans offer access to a wider range of doctors and hospitals, but at a higher cost. Another option is the defined-contribution approach."
Despite the enforcement delay, advisers say businesses that may fall under the employer mandate should have already been assessing their situations, at the very least. Also known as the pay-or-play provision, the mandate says that businesses with 50 or more full-time equivalent employees must offer health insurance that meets affordability and adequacy requirements or pay penalties — and the general definition of full time is 30 hours a week.
Whether employees count as full-timers in 2015 is a question involving complex equations and a measurement period happening this year.
"They can use a measurement period looking back up to 12 months or as short as three months," says Athey.
That means, Glus says, "Almost certainly the workforce hours and staffing policies currently in effect are already impacting whether or not an employer may be subject to potential penalties for 2015, and if employers wait too much longer, they may find it is too late to have a real impact for 2015."
The advisers won't quantify it or name companies, but they're unanimous in saying that they see numerous large employers that have already adjusted their part-time policies because of the mandate and others seriously considering it.
"I have had conversations with a number of large employers that are worried," says Aji Abraham, senior vice president of business development at Capital BlueCross.
As to whether the definition of full time might be revised upward, they say they've heard talk in the past but are not aware of any current momentum behind the issue.
Looking long term
Implementation of the Cadillac tax is still years away — but, Athey says, the industries most likely to be affected by it are also most likely to be unionized and dealing with contracts.
"Many union contracts run for three to five years," he says. "You may be negotiating right now contracts that take you right up to 2018 or beyond. Planning is important."
As for what might happen to insurance prices, the advisers say prognostication is difficult.
"Given the challenges that still exist, there is a lot of uncertainty about costs for 2015 and beyond," Glus says.
"I wish my crystal ball were clearer," says Krause. "I think until the risk distribution shakes out between the individual and group market as the previously uninsured population enrolls, all bets are off relative to premium predictions. Further, the fundamentals impacting health care claims cost which ultimately drives the premiums we pay have not yet been impacted (and the jury is out on whether they ever will)."
Here are some important health care dates for businesses — some of them revised from the original during 2013.
Obamacare Small Business Health Options Program (SHOP) federal marketplace program website functionality begins, with employee choice option and premium aggregation services
Nov. 15, 2014, to Jan. 15, 2015
Obamacare individual marketplace open enrollment for 2015
Jan. 1, 2015
Employer mandate enforcement begins
Jan. 1, 2018
High-cost excise (aka Cadillac) tax of 40 percent on excess benefit — coverage cost of more than $10,200 for individuals and $27,500 for spouses and families.