Health Care Reform: What Do Employers Need to Do Now?

Employers struggling with the application of the Patient Protection and Affordable Care Act (ACA) received welcome relief in July 2013 when the Treasury announced a one-year delay on implementation of the "pay or play" mandate. This mandate would have required most employers with the equivalent of at least 50 full-time employees to provide affordable, minimum value health insurance coverage to their full-time employees by Jan. 1, 2014, or pay penalties.

However, the delay on implementation of the "pay or play" mandate did not delay the individual mandate, which will require most individuals to purchase health insurance coverage in 2014, or pay a tax penalty. Treasury has also indicated that the delay in the employer mandate will not affect employees' access to the premium tax credits available under ACA exchanges beginning Jan. 1, 2014.

Many other ACA provisions also require compliance by Jan. 1, 2014, including:

• Minimum value compliance for employer-sponsored group health plans still needs to be determined for the 2014 plan year. This information must be reported both in written notices about the new health insurance exchanges, which most employers should have distributed by Oct. 1, 2013, and in summaries of benefits and coverage due during 2014 annual enrollment.
• New fees and assessments, such as the Patient-Centered Outcomes Research Institute (PCORI) and transitional reinsurance feesand health insurer tax. [See the SHRM Online article "PCORI & Reinsurance Fees—Keeping Them Straight."]
• Summaries of benefits and coverage (SBCs) must be prepared and distributed for 2014, using an updated template. [See the SHRM Onlinearticle "For Open Enrollment, Remember New Templates for SBCs."]
• Elimination of annual dollar limits on essential health benefits under group health plans, beginning Jan. 1, 2014.
• No more pre-existing condition exclusions for adults as well as children for plan years beginning in 2014.
• Grandfathered health plans can no longer exclude adult children under age 26 who have access to other employment-based coverage, effective Jan.1, 2014. [ See the SRM Online article "FAQs about Grandfathered Plans for 2014."]
• Coverage waiting periods can't be longer than 90 days effective for plan years beginning in 2014.
• Coverage of clinical trials is required for non-grandfathered group health plans, along with prohibition on discrimination based on participation in a clinical trial.
• New wellness incentive rules for plan years beginning in 2014. [See theSHRM Online article "Final Rules Provides Wellness Incentive Guidance."]
• Maximum out-of-pocket limitation will prohibit, for both insured and self-insured non-grandfathered plans, out-of-pocket limits that that exceed $6,350 (self) and $12,700 (family) coverage, for plan years beginning in 2014.

So, What Should Employers Be Doing Now?

First, employers should make sure their plans comply with all ACA provisions that have not been delayed. Next, employers should plan for eventual application of the pay or play mandate to their workforce. This should include:

• For a smaller organization, confirming whether or not it will meet the threshold to be subject to the mandate in 2015, particularly if the organization could be considered under common control with other entities that share some common ownership.
• Confirming how the employer will comply with the mandate—whether it will pay or play and how to implement its compliance strategy in 2015.
• If 2014 coverage expansions were planned to achieve compliance, deciding whether to proceed, delay until 2015 or consider another compliance strategy.
• Identifying which employees are full-time, seasonal or variable hour employees.
• Considering whether and how to utilize the safe harbor "look-back measurement method" of determining full-time status of some or all ongoing employees or new variable hour and seasonal employees (which would include selecting appropriate measurement, administrative and stability periods).
• Considering whether and how the employer's use of limited term employees and agency temporaries could affect compliance with the mandate and developing strategies to address those issues.

The one-year delay also gives employers more time to see whether changes in the law may relieve them from expanding coverage to workers who average more than 30 hours per week or perform only seasonal labor. As of mid -September, at least four bills had been introduced to change the full-time employee standard to 40 hours. At this point, the chances of passage are unclear, so this will be an important issue to watch.

While the delay in the pay or play mandate gives employers additional time, the clock is ticking for many other ACA compliance efforts, and employers should be prepared and seek guidance now.

by Maureen Maly, leader of the ERISA, benefits and executive compensation group

Health Marketplace: Costs for Similar Plans Can Vary Widely

Consumers shopping in the new health insurance marketplaces will face a bewildering array of competing plans in some counties and sparse options in other places, with people in some areas of the country having to pay much more for the identical level of coverage than consumers elsewhere.

A Kaiser Health News analysis of the 1,923 plans being sold on federally run online marketplaces found wide variations of price and availability. For instance, Cigna is offering 50-year-olds one of its midlevel plans for $614 if they live in Flagstaff, Ariz. That same plan, contracting with different hospitals and doctors, will cost $428 in Phoenix and just $395 in Nashville.

These are plans being sold in the 34 states where the Department of Health and Human Services is running the marketplaces or working in partnership with the states. Most plans fall into two types: 806 are health maintenance organizations (HMO) plans, in which patients have to stay within the network of doctors and hospitals that have contracts with the insurer, while 714 plans are preferred-provider organizations, where the insurer has discounted rates with some doctors and hospitals and agrees to pay some portion of the cost if the patient goes to a provider that is out of that network.

All the plans take effect in January, although consumers can shop and sign up before then. They are designed for people who don’t get health coverage through their employer or through a government program, such asMedicare or Medicaid.

Policies are grouped into four tiers of coverage — platinum, gold, silver and bronze — to help buyers compare policies. Policies in tiers named for less valuable metals generally have lower premiums. But the trade-off is insurers pick up less of the costs of medical care than they do in the higher metal tiers. People earning below 400 percent of the federal poverty level (about $46,00 for an individual and $94,000 for a family of four) will get subsidies to help pay the cost of the insurance.

The KHN analysis of premium rate data released by federal officials focused on plans that are offered to consumers of any age and excluded 23 child-only plans and 186 catastrophic plans that pay for most expenses only after the beneficiary satisfies a large deductible.

Insurers offered 158 plans in eastern Florida’s Seminole County, the most available in any single county, and 50 or more plans in 217 other counties across the country. On the other end of the spectrum, shoppers in 161 counties will have 10 or fewer plans to choose from. In sparsely populated Florence County, on the northern border of Wisconsin, Molina Healthcare, an HMO that also runs Medicaid plans in a number of states, was the only insurer to offer coverage: two plans. One costs $1,064 a month for a family of 30-year-old parents and two children. The other plan would cost $944 a month for that family. (Families with more children or older parents will pay higher premiums.)

The large number of plans in some places masks the fact that there aren’t that many insurers actually competing. In Miami-Dade County in Florida there are nine insurers selling 137 plans; Florida Blue alone offers 52 of them. Few markets are as competitive as is Miami. Nationwide, 18 percent of counties have only one insurer offering plans and 33 percent of counties have only two insurers competing, the KHN analysis found.

Monthly premiums are just one factor consumers will take into consideration when comparing plans. The data released by the federal government did not detail other crucial components of these plans, including deductibles, co-payments and which doctors and hospitals are in their networks. Consumers will have to turn to the insurers to find some of that information.

Price Differences Within Counties

The analysis found that the most expensive plan in a county tended to be about double the cheapest plan. In some places it was even more. Policies in Miami-Dade County ranged from a Florida Blue plan that costs 30-year-old parents and two children $1,419 a month and covers 90 percent of average health costs, to CoventryOne’s HMO plan that would cost that same family $550 a month and include a high deductible.

Plans for a 27-year-old in Dallas ranged from $153 to $387 a month. That most expensive plan, sold by Aetna, will help pay some bills if a patient goes out of network. That policy is in the gold category, where the insurer is required to pick up 80 percent of medical costs. The cheapest Dallas plan, sold by Blue Cross Blue Shield of Texas, is an HMO in the bronze category, where it must pay for only 60 percent of medical costs.

The data show that prices vary significantly among policies grouped together in the same coverage tier. In Cook County, Ill., insurers offered 21 plans at the silver level, where insurers pay about 70 percent of the costs. Aetna is selling the most expensive silver plan in Cook County for $1,108 a month for a family, while Blue Cross Blue Shield of Illinois is selling the cheapest silver plan for $582 a month.

Names Offer Clues

The names insurers have given their plans hint how they hope to get an edge in these marketplaces. CoventryOne is selling “Bronze $10 Copay HMO.” Other plans include the annual deductible amount in their names to help differentiate them from each other.

Other insurers are seeking to tease the plan approach with less jargon-filled names. Molina Healthcare’s plans include “Be Protected,” “Be Prepared,” “Be Saavy,” “Be Aligned” and “Be Connected.” In Arizona, Meritus Mutual Health Partners is offering “Saver Choice Bronze” and “Lifestyle Choice Bronze” for the low-premium plans that require patients to pick up about 40 percent of the costs. Meritus’ most comprehensive plans are named “Smart Choice Gold” and “Clear Choice Gold.”

Outlier In Virginia

The premium data include some striking price outliers, especially in Virginia. There, the records say Optima Health’s silver-level premiums for a 27-year-old reach as high as an eye-popping $1,858 a month. Executives with the insurer, owned by hospital system Sentara, say those premiums are misleading because they include coverage for bariatric surgery, an expensive treatment for morbid obesity. Excluding those policies, the average Virginia silver plan was below the national rate.

“At the eleventh hour, the state allowed us to change that to a rider instead of a specific benefit,” said John DeGruttola, senior vice president of sales. Without the rider, the plan costs a 27-year-old $285 a month in those same counties.

Price Differences Across The Country

Raymond Smithberger, Cigna’s general manager for individual and family plans, said that medical costs can vary regionally because of differences in rates of disease, hospital charges and state-required benefits, among other factors.

“Similar to how the cost of living ranges in different parts of the U.S., so does the cost of health care,” he said.

Excluding the high-priced Virginia plans that covered bariatric surgery coverage, the average premium varied between parts of the country by as much as twofold. The average premium for a 27-year-old in Pierce County in western Wisconsin was $391; in Hidalgo County, Texas, it was $188.

The most expensive silver plan for a 27-year-old comes from Meritus in Arizona, a nonprofit co-op run by members. Its “Meritus Secure Silver PPO” runs $469 a month in some rural counties, according to the government data.

Jean Tkachyk, chief operations officer at Meritus, said the insurer has decided not to actively market those plans in those rural counties because “they would not be competitively priced.” In Phoenix and Tucson, Meritus was able to offer lower premiums because it was easier to get doctors and hospitals to join its network, she said. Meritus will be actively selling its plans there.

The lowest-priced silver plan in the country is in Pittsburgh, Pa., where a Highmark plan that excludes some area doctors and hospitals is being sold for $134 a month for a 27-year-old. Like many insurers, Highmark has created a smaller network to help hold down premiums. The $134 a month plan, for example, uses Highmark’s Community Blue Network, which has 8,000 doctors and 54 hospitals, compared with a broader network of 11,000 doctors and 63 hospitals that Highmark offers in more expensive plans.

Absent from the Blue network is the well-known University of Pittsburgh Medical Center, the main rival in the Pittsburgh region to Highmark’s own Allegheny Health Network. Highmark’s selective network “is generally more efficient, high quality and lower cost,” said spokeswoman Kristin Ash. A similar policy with the broader network including UPMC would cost $197 a month, she said.

By Jordan Rau and Julie Appleby, Kaiser Health News

Employers project 4.8 percent rise in 2014 benefit spending

Are employers finally getting a grip on that line item marked “health care?”

A Mercer study released Tuesday shows that companies expect to bump up their budgets for health benefits for 2014 by 4.8 percent.

The data was extracted early by Mercer from some 2,000 responses to a major employer survey that will be released in its entirety later. Last year, Mercer said, health benefit cost per employee increased by 4.1 percent over 2011 — a 15-year low.  

“The recession has been one factor behind slower cost growth, by dampening utilization,” said Beth Umland, Mercer’s director of research for health and benefits. “But employers have made fundamental changes in their health benefit programs in recent years that have put the brakes on unsustainable cost growth.”

The fact that employers are actively re-examining their plans to hold down costs comes through when they are asked how much costs would increase “if they made no changes to their current plans.” The answer: about 7 percent.

Among strategies employers reported they are using to control healthcare costs: consumer-directed health plans, which give employees financial incentives to be more careful about how they spend health dollars.

Employers also are turning to wellness programs to manage costs, Mercer affirmed. Wellness plans continue to grow in popularity as employers embrace the concept that healthier employees don’t use their health insurance as often.

There is a potential bump in the road. With the advent of the Patient Protection and Affordable Care Act, employers will have to offer coverage to more workers. Mercer found that “about a third of all large employer health plan sponsors (those with 500 or more employees) do not currently offer coverage to all employees working 30 or more hours per week.”

Mercer opined that some employers will follow in the footsteps of giants like Trader Joe’s and cut worker hours just below the 30-hour trigger point.

But, Mercer concluded, “most employers affected by the rule will simply open their plans to all employees working 30 or more hours per week and brace for rising enrollment. In addition, next year all individuals will be required to have health coverage or face a tax penalty. Because of this, employers may see fewer employees choosing to waive coverage.”

Given these factors, Mercer suspects that overall cost-per-employee for health care may jump as employers integrate the requirements of the PPACA into their budgets.

“Rising enrollment will be an even bigger issue in 2015 when the shared responsibility penalty goes into effect,” said Tracy Watts, senior partner and Mercer’s leader for health reform. “While some employers are going ahead with plans to expand eligibility in 2014 despite the delay, most of those with the big part-time populations are holding off and will feel the pinch in 2015.”

Meantime, Mercer also projects that, based on its early data analysis, very few large employers (5 percent) will terminate their health plans over the next five years. More small employers (those with fewer than 200 employers) will do so, Mercer said.

By Dan Cook