According to research by consulting firm Mercer, the short term will see new fees, plan design changes and the expectation of additional enrollment will add an estimated 2% to 3% or more to health plan cost in 2014, even if employers table plans to extend coverage to all employees working 30 or more hours per week. The Obama administration has delayed for one year the deadline for employer reporting and shared responsibility payments (see “Regulators Delay ACA Employer Reporting, Payment Deadlines”).
Over the long term, avoiding the excise tax on high-cost plans slated for 2018 remains a challenge for employers. More than one-third of employers surveyed by Mercer in May 2013 said they were taking steps in 2014 to help bring down cost by 2018.
“The delay will give employers more time to cope with some of the requirements, but they know it’s no free pass,” said Julio A. Portalatin, president and CEO of Mercer. “We expect employers to stay 100% focused on cost management. Last year they slowed benefit cost growth to its lowest level in 15 years, but in 2014 they have the new fees and the likelihood of new enrollment to contend with, on top of normal medical inflation. As employers evolve their go-forward benefit strategies, private exchanges continue to be a powerful strategy for corporate cost management and expanded employee customized choice.”
Mercer expects that employers will continue to prepare for PPACA compliance. About one-fourth of employers surveyed by Mercer had not yet decided how they would track and report variable employee work hours and one-third had not decided what look-back period to use. The U.S. Treasury Department has suggested that proposed reporting and disclosure regulations will be provided this summer. However, public exchanges, which are slated to be operational in 2014, may still reach out to employers to verify applicant eligibility for health insurance.
Half of employers surveyed by Mercer were concerned about handling employee questions about the exchanges, and 43% were concerned about establishing processes and systems for interacting with exchanges. Employers must still prepare to address employee confusion about their need to have health coverage and their options for coverage, both from their employer and the public exchanges.
Mercer's survey also found that about one-third of employers currently do not extend coverage to all employees working 30 or more hours per week, and many of these employers had already made plans to do so in 2014 (see "Health Care Reform: Preparing for 2014"). "While we don't know for sure whether these employers will choose to expand eligibility early, they have sufficient lead time to decide to hold off," said Tracy Watts, a senior partner in Mercer's Washington, D.C., office. "Most have not announced changes yet, and if they have an extensive part-time work force, the money to be saved by not expanding coverage in 2014 could be considerable."
The delay creates a "gap year" for employees that had been enrolled in mini-med plans. These limited coverage plans may not be offered after the end of 2013 plan years. This may provide another reason for employers to consider offering a private health exchange in 2014--to allow employees who do not qualify for subsidies in the public exchanges to purchase lower cost medical plans and supplemental medical benefits. Because employers do not have to make their coverage affordable for another year, employers can choose whether, or how much, to contribute to the cost of coverage.
Offering employees lower cost plans through private exchanges is one way employers can reset plan value while giving employees the option to buy up for richer coverage, said Watts. "Creative cost management is going to be a fact of life under reform, and the delay doesn't change that."