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Employers Adjust Health Benefit Strategies in Reform's Wake
Many remain confused about new requirements and how they work

By Stephen Miller, CEBS  5/22/2013

Many employers are making changes to their health plans as a result of health care reform coverage mandates, according to the International Foundation of Employee Benefit Plans’ 2013 Employer-Sponsored Health Care: ACA’s Impact report.

Key findings from the survey of more than 950 U.S.-based employee benefits professionals include:

  • Employers’ confidence in their sponsored health care plans increased year to year, but many organizations are planning to modify their plans because of effects from implementing the Patient Protection and Affordable Care Act (PPACA).

  • The vast majority of employers (90 percent) have moved beyond a wait-and-see mode and are taking steps to deal with new rules and regulations stemming from the health care reform law.

  • For the first time, employers were more likely to say their top health care focus is developing tactics to handle implications of the PPACA.

Sixty-nine percent of employers will definitely continue to provide group health coverage to their employees when health exchanges begin operating, in 2014 — a 23-point increase from 2012 (46 percent). Another quarter of respondents are very likely to continue their employer-sponsored health care plan.

Increasing Cost-Sharing

Nearly one in five (18 percent) employers has already increased participants’ share of plan premiums, and an additional quarter of respondents plan to increase the portion that employees pay for their premiums over the next year.

Of those employers planning to make changes, one in four is increasing its emphasis on high-deductible health plans (HDHPs) with health savings accounts (HSAs), while another 14 percent are assessing the feasibility of adding HDHPs with HSAs.

Companies are also encouraging healthy behavior in employees, with 19 percent developing or expanding organized wellness programs within the past year. Additionally, 14 percent of employers adopted or expanded the use of financial incentives to encourage healthier lifestyles within the past year; another 25 percent intend to do so next year.

More organizations are redesigning their plans to avoid the 2018 excise tax on high-cost or “Cadillac plans.” In 2011 only 1 in 10 companies intended to redesign its plan to avoid the additional tax, but a steady increase over the past two years suggests this number will likely soon double.

Focusing on Compliance

Similar responses to health care reform were revealed in a series of roundtables with mostly large employers, held in New York, Chicago and Atlanta by consultancy PricewaterhouseCoopers (PwC). In the wake of PPACA implementation, “employers are confronting broader strategic considerations relating to health coverage for their employees,” stated PwC’s May 2013 report on the roundtable findings, An HR Perspective: Focusing on the Future of Healthcare Benefits.

Compliance and reporting requirements were the biggest concern of about 15 percent of roundtable participants. “Overall, participants had a broad awareness of the issues involved, but there was some confusion about the existence of some of the requirements and how they work and many questions about the details,” the report noted. For example, “New rules will limit out-of-pocket maximums in most plans starting in 2014, but many employers were unaware that co-payments must count toward those maximums, or that it will be difficult to administer the requirement to have co-payments (generally imposed when a patient receives a medical service) apply to the out-of-pocket maximum.”

Nearly half (41 percent) of roundtable attendees considered the two highest priorities for their health benefit strategy going forward to include bringing health care consumerism “mainstream” (by offering high-deductible plans with health savings accounts and by educating employees on their use, for instance) and improving participation in wellness and health management programs.

Options for replacing employer-sponsored coverage and paying penalties were still too new for most employers to seriously consider for their active employee population, the roundtables revealed.

Employers Weigh 'Strong Penalty' vs. 'Weak Penalty'

Health care reform's employer mandate actually consists of two different penalties, based on two different categories of employer behavior, according to an analysis in Forbes by Avik Roy, a senior fellow at the Manhattan Institute for Policy Research.

Under the strong penalty, an employer that fails to offer full-time employees minimal essential coverage risks a fine of $2,000 times the total number of full-time equivalent employees minus 30.

Under the weak penalty, an employer that offers employees any health insurance plan legally available within the state risks a penalty of $3,000 for each full-time employee that purchases coverage through a public exchange and qualifies for a premium tax credit or subsidy because their employer-sponsored plan is not deemed "affordable."

Roy notes an emerging recognition among some employers that they can better control their health care costs by offering minimum-value coverage (in some cases, costing around $600 per employee per year) just sufficient to avoid the $2,000 per employee penalty, while paying $3,000 per each full-time employee that seeks exchange-based coverage and qualifies for a government subsidy—assuming that most low-income employees that would qualify for a subsidy won't actually want to pay for coverage beyond the minimal plan that the employer provides.

Stephen Miller, CEBS, is an online editor/manager for SHRM.

Related Articles:

For 2014, Higher HSA Contribution Limits, SHRM Online Benefits, May 2013

Consumer-Driven Decision: Weighing HSAs vs. HRAs, SHRM Online Benefits, updated May 2013

Use of Outcomes-Based Health Incentives Still Growing, SHRM Online Benefits, May 2013

Let Strategy Guide Health Benefits Decisions, SHRM Online Benefits, March 2013

Levers of Change: Employers Respond to Shifting Landscape, SHRM Online Benefits, March 2013

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SHRM Online Health Care Reform Resource Page

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