How new healthcare may affect you starting in 2015

healthcare moneyBeginning in 2015, employers with more than 50 employees are required to offer healthcare coverage to their full-time employees or otherwise be hit with a significant financial penalty. In 2016, this kicks in for smaller firms. A Willis Group Holdings P.L.C. survey found that 62 percent of the employers surveyed said they plan to comply with this mandate. Thirty-two percent of employers surveyed were undecided, and only 6 percent of those surveyed said that don’t plan to comply with the mandate.

Despite the majority of the employers surveyed planning to observe the mandate, that doesn’t mean these companies plan to extend benefits to employees’ spouses without adding in a surcharge. In fact, a Business Insurance report on the study indicated that 12 percent of employers already have added a special surcharge or have eliminated coverage to employees’ spouses if the spouse is eligible for coverage from his or her own employer. Between 2015 and 2018, 3 percent of employers surveyed plan to take this type of action. Another 20 percent are expected to do so, but no date has been set.

The Kaiser Family Foundation says that the average premium in 2013 for only covering employees was $5,884. However, adding a spouse can double the cost.

Of the respondents that identified a cost impact of health care reform, 54 percent noted a cost increase between 0 percent and 5 percent, while 22 percent estimated their increase in the 5- to 10-percent range – all while group medical costs for employers have continued to rise. Nearly three-quarters (74 percent) indicated their health plan costs increased in 2014, the study indicated.

The Willis “Health Care Reform Survey 2014” study’s key findings are as follows:

  • Employers are choosing to “play” and continue to offer health benefits. “‘Moving away from benefit engagement’ was rated as extremely unlikely by over 60 percent of respondents and somewhat unlikely by another 17 percent,” according to the study. “Employers view their medical benefits as an important and desirable part of their compensation offerings and they will take steps to manage costs so that they can continue to offer benefits to their employees. This conclusion is also evidenced by the findings that the employers represented covered the vast majority of their full-time employees already, before any mandate to do so. That demonstrates the centrality and importance of group medical benefits to their compensation practices.”
  • Cost shifting is only part of the solution. Nearly 75 percent of respondents experienced an increase in their health plan costs from 2013 to 2014, but of those who had a cost increase, 22 percent of respondents kept employee contributions the same. Strategies other than cost shifting, which are being utilized by employers in attempts to contain costs, include increasing new hire waiting periods, reducing benefits to minimum essential coverage and managing seasonal and variable hour employees to reduce the number of potentially benefit eligible employees.
  • Private exchanges are emerging as a new distribution channel. While most employers have not finalized strategies, 20 percent of responding employers are considering private exchanges, and 8 percent have strategies in development. The opportunity to control costs through defined contributions while providing greater choice to their workforces (ideally combined with user-friendly technology based tools to assist employees with evaluating those choices) is an attractive prospect for many employers. The majority of respondents also indicated that they are likely to promote employee choice, engagement and consumerism as part of their benefits strategy.
  • The cost of health care reform is a top concern among responding employers, but many have not measured it. Nearly two-thirds of respondents replied that they have not identified the impact of health care reform. Forty four percent of respondents replied that they have not specifically identified the cost of the Cadillac tax. While this seems counterintuitive considering the significance and attention applied to the costs of health care reform, it demonstrates that employers’ focus has, in many cases, been drawn to the immediate compliance needs and administrative difficulties. Despite the fact that industry consultants have identified the concern over the impact of the Cadillac tax to their clients, lack of employer engagement on this topic might be because employers view the ongoing cost analysis as a “luxury” as compared to the day to day administrative requirements demanded of them more.
  • Delays have provided breathing room…but have not affected strategies. Though the announcement of the initial employer mandate delay in 2013 came too late for many employers to adjust their strategies, the majority of survey respondents (69 percent) indicated that the announcement did not have a major impact on their benefit plan decisions.
  • Plan design compliance requirements are being met, but administrative compliance has been delayed. The majority of employers (86 percent) have determined that they have a minimum value plan (defined as the plan covering 60 percent of medical costs), but half of respondents have not yet determined the standard measurement (or “look back”) periods and safe harbor methods (for purposes of determining affordability). Requirements that involve administrative changes, as opposed to benefit design and contributions, are more difficult to implement and have been delayed.
  • Employers continue to rely on their brokers for strategy and health care reform information. Keeping up with health care reform requirements is no small task and employers are overwhelmingly looking to brokers to keep them informed and up to date regarding regulatory changes.

For a downloadable PDF of the full study findings, including charts and graphs of the study’s key findings, please click here.

 

How is your employer handling this? Are you requiring a surcharge for spousal coverage? Is it just to cover costs? I’d love to hear from you about this at tinabarbaccia@randallreilly.com.