Reprinted from AIS's HEALTH REFORM WEEK, the nation’s leading publication on the business implications of the massive changes for the health industry mandated by reform.
Employers in general and those with lots of low-paid employees in particular are getting increasingly antsy about the combined effect of upcoming health reform law provisions that they fear would hurt their competitive position, according to consultants speaking at a conference session March 6. While these employers for now do not seem to be leaning toward dropping employee health coverage completely, the consultants said, they are exploring strategies that could reduce the impact of the changes on them — and affect health insurers in the process.
“What we hear from clients is that the big issue is the whole picture — how it fits together,” said, for instance, Anne Phelps, a principal in Ernst & Young who heads its health care practice and works with a coalition of employers (in industries such as restaurants and hospitality) that have high percentages of low-paid employees. Like the other two speakers at a panel at the America’s Health Insurance Plans’ National Policy Forum in Washington, D.C., she said federal agencies have helped by listening to the employers’ concerns but have been too slow in putting out guidance and rules to clarify the issues.
The results of the new annual survey of 3,000 employers conducted by consulting firm Mercer and discussed at the conference by Amy Bergner, an attorney and partner who focuses on health policy, show some of the specific concerns. The most significant one, mentioned by 48% of respondents even though the provision does not take effect until 2018, Bergner noted, is the 40% excise tax on the cost of coverage of employer-sponsored plans that exceed $10,200 for individual coverage and $27,500 for family coverage.
She said that the second most frequently mentioned worry in the survey, cited by 28% of respondents, relates to the provisions requiring auto-enrollment in coverage for full-time workers. Employers have expressed concern about both the administrative aspects of that and the reaction from employees who are having deductions taken from their pay without authorizing them. This issue was followed closely, according to Bergner, by 27% of employers citing worry about the requirement that plans must pay at least 60% of actuarial value for covered services (HRW 12/19/11, p. 4). Another big concern is the law’s mandate that all employees working more than 30 hours per week must be eligible for health coverage.
What are employers considering doing in response to these provisions? The survey shows, Bergner said, that 40% of respondents said they may change their work-force strategy so that they have fewer employees working more than 30 hours per week and therefore requiring health coverage. She noted that this could impact health-plan enrollment, but also pointed out that 29% of respondents are looking into an opposite kind of move — making part-time workers eligible for the health plans of full-time employees.
The employers Mercer works with, she asserted, generally don’t want to reduce health coverage, but they are prepared to lower the value if competitor employers do. In that case, there could be “a race to the bottom,” she acknowledged.
As evidence of intent, Bergner cited survey findings that only 14% of small employers and 7% of large employers said they are likely to terminate health coverage once the insurance exchanges start operating in 2014. However, they are concerned about whether employer contributions to workers’ health coverage might be taxed under reform, she said. And she pointed out that 32% of respondents plan to reduce spending on dependent health coverage.
Phelps, a former Bush administration health policy adviser, focused in her presentation on the employers with low-wage work forces that have formed a coalition because of concerns that they “could be on the hook for penalties” under the reform law. Under the statute’s so-called “pay or play” provisions, employers have financial liabilities only if their coverage is deemed not affordable or not meeting the minimum value, she noted. One problem the employers are facing in preparing for this, she continued, is that the affordability and minimum-value concepts have not yet been adequately defined.
The requirement in the reform law, explained Phelps, is that health coverage is deemed unaffordable if it costs more than 9.5% of household income. But employers can’t — “and don’t want” — to know what their employees’ household income is, she contended. There has been some discussion with and guidance from regulators, she added, about basing the 9.5% figure on just an employee’s current wages, which an employer of course would know.
Phelps said employers of low-wage workers also are concerned that if they made coverage affordable to workers under the 9.5% requirement, it might not be affordable to the employers. Moreover, since annual benefit limits will be gone under the reform law from 2014 on, a source of low-cost plans (i.e., “mini-meds”) is ending, and employers fear that their employees may decide not to buy health coverage costing 9.5% of their income.
Other reform-law-related issues that Phelps said are worrying the coalition’s employers include:
The delay in issuing regulations detailing what will be done to minimize the “churn” of low-income workers between Medicaid and the exchanges starting in 2014;
Whether there will be a “look-back period,” and, if so, of what length, to determine whether a worker qualifies as a full-time employee under the law; and
The lack of any detailed guidance yet on reporting requirements under the statute.
The employers in the coalition, according to Phelps, generally are not looking to drop coverage, but are very concerned with such requirements as coverage for part-time workers. She said many employers are interested in developing a new insurance product for those workers that both is affordable and in compliance with the law’s requirements.
But small employers also have become aware that the law’s employer mandates generally apply only to those with more than 50 workers, noted the panel’s other speaker, Paul Dennett, senior vice president, health care reform at the American Benefits Council. “Employers will think long and hard before they hire that 51st worker,” Dennett said.
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