All individuals are required to have health coverage beginning next year, and employers are required to offer coverage to employees who work 30-plus hours per week, or pay a penalty. During a webcast sponsored by Mercer, Beth Umland, director of research, said results of a recent survey by Mercer of nearly 900 employers found one-third of all survey respondents do not offer coverage to all employees working 30-plus hours per week.
“The majority of employers already offer a plan that complies with minimum coverage and value rules, so the 30-plus hours per week is a bigger concern for employers,” Umland noted. Among the one-third who said they will have to do something to comply with this rule, 59% say they will make all employees eligible, 30% said they will add a lower-cost plan option for all employees, 10% will offer a lower-cost plan to newly eligible employees, 10% will pay the shared responsibility penalty as necessary, and less than 1% indicated they will terminate medical coverage for all employees after insurance exchanges become available.
According to Umland, 12% of survey respondents indicate they will reduce employee hours to limit the number of eligible employees, 2% will ask those already eligible to work more hours, 21% will not change workforce hours, and 66% already provide coverage to employees working 30-plus hours.
Forty-three percent of respondents anticipate an increase in eligibility, and 43% say the number of eligible employees will stay the same. Among those who do expect an increase, they expect an 11% increase in the number of eligible employees.Tracy Watts, Mercer’s National Leader for Health Care Reform, pointed out that keeping good data on tracking hours is important in case employers are audited. Seventeen percent have budgeted for an increase in enrollment, 42% will not budget for an increase, and 41% do not know yet whether to budget for an increase.
According to Umland, employers plan to use different strategies to offset increased costs from the Patient Protection and Affordable Care Act (PPACA), including raising employee contributions for dependent coverage (28%). And, 2% of survey respondents reported they will eliminate the employer subsidy for dependent coverage altogether. Watts noted that these strategies could change enrollment decisions for families in which both spouses have coverage, so it is hard to anticipate costs.
Barbara McGeoch, prinicipal in Mercer’s Washington research group, reminded webcast attendees that employers’ exchange notices must be distributed to all current employees by October 1, 2013, and for all new employees, notices must be distributed within 14 days following their hire dates. McGeoch said there are two versions of a Department of Labor (DOL) model for the notice—one for employers that do offer coverage and one for employers that do not. Unlike other regulator model notices, she noted, the language in the notices can be modified. However, certain elements are required to be included: existence of new exchanges and description of services, employee may be eligible for premium tax credit, and employee may lose employer plan contributions by enrolling in exchange.
David Slaney, partner in Mercer’s Workforce Communication and Change business, added that while the exchange notice is required, it is still unclear how exchanges will work, making it hard for employers to prepare.
However, he said the PPACA in general is an opportunity to educate employees about decisions. In Mercer’s survey, 70% of respondents said they will educate employees about their choices and support informed decisions, 50% are preparing for handling increased volume of employee questions, and 43% are establishing processes for interacting with public exchanges. Nearly one-quarter (24%) are identifying employee groups that will need communications–for example, how will employers help those who have not gone through enrollment before? Twenty-two percent indicated they are not concerned and are prepared to handle communications.Although much is still not known about exchanges, regulators have issued wellness program guidance, McGeoch noted. She said the biggest takeaway from the guidance is the regulators’ focus that wellness programs are supposed to reward people for healthy steps and employees are supposed to have meaningful ways to get these rewards.
There are two types of programs—activity-based and outcome-based—and since activity-based programs are less stringent, the regulations are a little lighter for them. An outcome-based program now must offer employees alternative goals to get incentives. For example, McGeoch explained, if an employee does not meet a wellness program’s cholesterol target and asks the employer for a different goal, the employer must offer the employee one. She pointed out that this means employers will have to put more effort into designing rewards and alternatives or decide to just waive goals.
Sander Domaszewicz, national leader for consumerism and innovation leader for Mercer’s Health and Benefits business, told webcast attendees that when considering their wellness programs they need to ask, do I need to make changes to comply with the new regulations, do I have alternative goals that are reasonable and cost-effective for those who do not meet health-contingent outcomes, am I prepared for the increased administration of tracking outcomes/reasonable alternatives, and do I know what impact an increased use of alternatives will have on program or incentive costs. In addition, employers must decide on the appropriate incentive mechanism: a premium-based reward, a health savings account (HSA) contribution, or some other, more immediate incentive.
While employers have much to do to prepare for 2014, 36% of respondents to Mercer’s survey say changes they are making to their health benefits are influenced by concerns about the excise tax for high-cost plans that goes into effect in 2018. To avoid the 40% excise tax, employers must keep total health plan cost below a threshold of $10,200 for an individual and $27,500 for a family.
Some strategies they are using to avoid the tax, according to Domaszewicz are introducing or expanding consumer-directed health plans (CDHPs) (54%), adding or expanding health management programs (48%), and dropping higher-cost plans (28%). Thirty-nine percent indicated they are making other changes. “I’d say a lot of folks are looking to change provider networks,” he speculated.
Domaszewicz said he thinks employers will reset their benefit value. He predicts a greater use of CDHPs, and noted that the regulations say HSA contributions will be included in the total cost of a benefit program, so employers will need to manage that to avoid the excise tax.
In addition, employers will look at benefit administration—how to use flexible spending accounts (FSAs), health reimbursement accounts (HRAs), and telemedicine to bring down costs. If employees can make a phone call or go to a retail clinic instead of going to the emergency room, that will hold down costs.Employers will also use transparency of cost and quality—asking how to get employees to understand where is the best place to get health care service and using targeted messaging and incentives to get people to use the tools offered in the health plan program.