Consulting firm Mercer has released a list of recommended strategies to help employers navigate the complexities of the health care reform law and fulfill its requirements. The five key topics discussed in the list include avoiding the ACA excise tax, rethinking dependent coverage strategies, classifying part-time and variable-hour employees, next generation wellness strategies and consideration of private exchanges.
Excise Tax Avoidance
Many employers are already making changes to their medical plans in anticipation of the excise tax in 2018, which is a 40% tax on the value of medical benefits over a set threshold. The cost impact of the excise tax can vary depending on the number of enrollees and the plan’s cost. Organizations likely to hit the tax threshold can phase in changes that will reset benefit costs at a level below the threshold. Research from Mercer indicates that nearly one-third of large employers (those with 500 or more employees) say that concern over the excise tax influenced health plan decisions for 2014. The most common strategies are adding, or building enrollment in, low-cost consumer-directed health plans (CDHPs) and eliminating the highest-cost plan offered today.
Rethinking Dependent Coverage Strategies
In 2015, employers are required to offer coverage to all employees working 30 or more hours per week or potentially face an employer shared responsibility payment. New rules have relaxed the requirement to offer dependent coverage until 2016. The ACA definition of dependents does not include spouses and does not require employers to subsidize or make dependent coverage affordable. Accordingly, Mercer notes an increase in the use of special provisions concerning coverage for spouses with other coverage available. For example, 16% of large employers have such a provision in 2013, which is up from 12% in 2012. The most common strategy is to impose a surcharge for spousal coverage, which 9% of employers do, while 7% do not provide coverage at all. Larger employers are more likely to require a surcharge, while smaller employers are more likely to exclude spouses who have other coverage available. Employers, regardless of size, should take a closer look at how they subsidize dependent and spousal coverage, as well as the attractiveness of their benefit compared to those of their peers in the market.
Classifying Part-Time and Variable-Hour Employees
Mercer research indicates that about one-third of large employers (and nearly half of large retail employers) do not currently offer coverage to all employees working 30 or more hours per week. Extending coverage to those currently ineligible will make up a large part of the increase in health benefit spending due to the ACA. While some employers will attempt to limit the number of newly eligible employees by reducing some workers’ hours, most indicate they will simply make all employees working 30 or more hours eligible for coverage in the full-time employee plan in 2015. Others will add a low-cost plan for the newly eligible, while a small portion say they will take no action and pay the shared responsibility assessment. Regardless of which strategy an organization adopts, it must be prepared to comply with the ACA reporting requirements. Employers need to review and correct employee classifications, ensuring that the systems and tools are in place to track employee hours and maintain records. Employers with a calendar-year plan need to start tracking hours no later than April 15, 2014.
Next Generation Wellness Strategies
Many employers will add or expand health-management programs to reduce health care spending by improving the health of their work force. The ACA allows employers to increase the value of incentives from 20% to 30% of total plan costs, and up to 50% for nonuse of tobacco. While over half of large employers have some type of incentive in place today to encourage participation in health-management programs, a small but growing number have focused on rewarding employees who meet measurable health standards. Such a shift supports the general trend toward consumerism, asking employees to take more responsibility for their health. However, says Mercer, it is important that incentives be introduced and used thoughtfully in the context of a company culture of health.
Consideration of Private Exchanges
Interest in private health insurance exchanges is growing rapidly, according to Mercer. A private exchange allows an employer to better manage costs, and deliver flexibility and choice to its work force. Private exchanges also facilitate an employer’s migration to defined contribution funding as a strategy to manage the year-over-year increase in health and welfare benefits spend to a predefined amount. In a private exchange, an employer can offer an array of choices that give employees an incentive to “buy down” to lower-cost medical coverage and use the remaining dollars for other purchases. Employees have easy access to attractive insurance products that meet other important needs (e.g., life, accident, disability, critical illness, auto) and more control over how they spend their benefit dollars. Mercer’s research shows that one-fourth of all employers are considering switching to a private exchange to deliver benefits to retirees or actives within just two years, with nearly half saying they would consider switching within five years.
These five strategies are the market’s response to changes taking place in benefits delivery, according to Mercer. The firm also notes that the ACA is driving new care delivery approaches and greater consumer accountability. Mercer anticipates that increased demand for primary care services will lead to more providers in retail settings and greater use of telemedicine. In addition, Mercer foresees that the widespread adoption of CDHPs and new transparency tools will facilitate consumer engagement by providing better access to data on care quality and price.
A copy of the list of strategies can be requested here.
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