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Findings highlight the impact of the Affordable Care Act on its fifth anniversary
A meaningful number of U.S. employers have reduced the total number of their part-time employees’ weekly hours due to the Affordable Care Act’s mandate to provide health coverage to employees who work at least 30 hours per week, according to a March 2015 survey report from the Society for Human Resource Management (SHRM).
The report, SHRM Survey Findings: Health Care Reform—2015 Update, was released on March 24, marking five years since President Barack Obama signed the Affordable Care Act (ACA) on March 23, 2010. SHRM surveyed 743 HR professionals from a randomly selected sample of its membership with the job function of benefits or compensation, or with the job title of manager or above. The survey was fielded from Jan. 21 through Feb. 4, 2015.
Starting on Jan.1, 2015, the employer mandate became effective for organizations with 100 or more full-time employees working an average of at least 30 hours per week (including the sum of hours by part-time employees that added together equal “equivalent” full-time employees). Under the ACA, these employers must offer full-time employees and their dependents affordable health care coverage or be subject to penalties. Small businesses with 50 to 99 full-time or equivalent employees need to start insuring full-time employees by Jan. 1, 2016.
SHRM’s survey found that 14 percent of HR professionals said their organizations had already reduced part-time hours, and an additional 6 percent said they plan to do so, as a result of the ACA employer mandate. However, very few respondents had or planned to reduce hours for their full-time employees.
Reductions in Hours
HR professionals were asked, “As a result of the ACA employer mandate, has your organization considered reducing the number of hours worked for some full-time or part-time employees?”
Yes, we have already reduced employee hours.
Yes, we plan to reduce employee hours.
Yes, but we have decided not to reduce employee hours.
No, we have not considered reducing employees hours.
Source:SHRM Survey Findings: Health Care Reform—2015 Update
On average, among organizations that reduced or planned to reduce hours for full- or part-time employees as a result of the ACA, 19 percent of employees at those organizations were affected.
One out of five organizations (20 percent) were offering health care coverage to employees who work less than 30 hours per week, the same as in 2014, but a decrease from 28 percent in 2013.
Beginning in 2018, a 40 percent excise tax will be levied on plans that provide high-cost health benefits to their employees.The tax applies to costs in excess of certain statutory dollar thresholds—$10,200 for self-only coverage and $27,500 for family coverage—which will be indexed annually for inflation.
One-third of organizations (33 percent) have either made changes to their health care plan to avoid the excise tax (9 percent) or plan to conduct an analysis to explore options in order to avoid the tax (24 percent).
Excise Tax Actions
HR professionals were asked, “Will your organization restructure its health care options to avoid the excise tax?”
We are/will be conducting analyses and exploring different health care options to ensure that we don’t pay the excise tax.
Not applicable; we never offered a health plan that would require us to pay the excise tax.
We are awaiting guidance on the excise tax before making any changes.
We have not yet begun to consider the issues around the excise tax.
Yes, we have made changes to our plan to avoid the excise tax.
One out of five organizations (20 percent) have received medical loss ratio (MLR) rebates since 2012.
The ACA set minimum percentages of dollars that fully insured health plans must spend on health care services (medical costs and activities that improve health care quality). In general, the minimum percentage of dollars that health insurers must spend on health care is at least 85 percent for large group plans and 80 percent for small group plans. If they fail to meet these standards for employer-provided plans during the prior year, insurance companies are required to provide a rebate to the employers that sponsor the affected health plans.
Thirty-seven percent of organizations receiving rebates distributed a portion to participants in the plan, and 28 percent applied the rebate toward future participant premiums. About one out of five organizations either applied the rebate toward other benefit enhancements (19 percent) or distributed the full amount to employee participants in the plan (18 percent).
MLR Rebate Distribution
HR professionals were asked, “If medical loss ratio rebates were received, how were they used?”
Distributed a proportion of the rebate to employee participants in the plan.
Applied the rebate toward future premium payments.
Applied the rebate toward other benefit enhancements
Distributed the full amount of the rebate to employee participants in the plan.
Twenty-two percent of organizations currently had grandfathered status, meaning they had not made significant changes to their plan designs since the ACA’s passage and so could avoid some (not all) of the statute’s minimum coverage and affordability requirements.
One out of five organizations (20 percent) had grandfathered status in the past, but have since lost it. Over one-half of organizations (58 percent) never attempted to maintain or did not qualify for grandfathered status.
The primary reason given for maintaining grandfathered status was that the organization’s current health plan was more robust than what was required by the ACA (50 percent), followed by avoiding additional costs to the organization or employees (26 percent). Nearly two out of 10 (19 percent) wanted to avoid compliance with specific elements of the law.
Of organizations that decided not to maintain grandfathered status, 45 percent wanted to make changes to their benefits plan. This was followed by 19 percent who said it cost more to keep than to change health care plans and 16 percent whose insurance carrier made changes to their health care plan.
“When health care reform was new, employers tried to keep their grandfathered status,” said Evren Esen, director of SHRM’s survey programs. “But now that they understand the law and its implications, employers
want to come out from under that umbrella to make changes, especially if these changes lead to lower costs.”
Employers subject to the ACA’s nondiscrimination provisions must refrain from discriminating in favor of highly compensated employees with regard to health benefits. The Internal Revenue Service has delayed enforcement of these new rules until regulations or further guidance has been issued.
The majority (85 percent) of organizations were currently following nondiscrimination rules, and 14 percent were waiting for more guidance.
Among other survey highlights:
• Have health-related employee benefit offerings changed as a result of the ACA? Two-thirds of organizations (66 percent) believed their organization offered the same level of health benefits, unchanged from 2013. Twenty-one percent said their health benefits had decreased and 13 percent said they had improved.
• Have nonhealth-related employee benefit offerings changed as a result of the ACA? Similar to 2013, the majority of organizations (84 percent) indicated that nonhealth-related benefits remained at the same level. Eight percent had improved nonhealth benefits, and 7 percent decreased the level of benefits.
• What type of nonhealth benefits did organizations reduce or cut? Of organizations that decreased nonhealth benefits, 44 percent reduced retirement savings and planning benefits, 38 percent reduced financial and compensation benefits, and 38 percent decreased employee programs and services.
• Are organizations concerned about losing employees through voluntary turnover as public exchanges provide a coverage option? The majority of organizations (86 percent) were not concerned that the availability of public exchanges would affect voluntary turnover, an increase from 69 percent in 2013. About one in 10 (11 percent) were somewhat concerned and few organizations (3 percent) were very or extremely concerned.
About three-quarters (77 percent) of HR professionals indicated their health plan costs increased from 2014 to 2015, while 17 percent said they stayed the same and 6 percent saw a decrease in costs.
For the 77% that saw increased costs, their overall health care costs were:
Up 6% to 10%
38% of respondents
Up 16% or more
Up 1% to 5%
Up 11% to 15%
For the 6% that saw decreased costs, their overall health care costs were:
Down 1% to 10%
Stephen Miller, CEBS, is an online editor/manager for SHRM. Follow him on Twitter @SHRMsmiller.
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