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Employers Face Massive Changes Under Health Care
Reform Law
As the smoke clears from the passage of landmark health care
reform legislation, employers are starting to sift through the final
provisions and prepare for significant changes.
 The Patient Protection and
Affordable Care Act, signed by President Barack Obama on March 23, ushers
in a swath of changes to employer-sponsored health care plans -- one of
the biggest being a new coverage mandate for employers. Starting in
2014, the legislation requires employers with more than 50 employees to
offer affordable coverage to their workers or face a tax of $2,000 per
full-time worker (although the first 30 employees would be excluded
from the count).
In 2013, the law eliminates the employer deductible subsidy
under Medicare Part D and places a $2,500 annual cap on flexible
spending accounts. In 2014, the law calls for the states to create
exchanges to facilitate the sale of plans to individuals who aren't
enrolled in an employer's plan and prohibits insurance companies from
denying coverage for preexisting conditions.
While many of the law's complex provisions won't become active
for years, others will have an effect on employers' plans sooner rather
than later. According to an analysis by United Benefit Advisors (UBA),
some of these provisions are:
Immediately
- The federal government
provides a tax credit for qualified small employers. This credit
is retroactive for premiums paid in taxable years beginning after
Dec. 31, 2009. [See article: "Recent Laws Deliver Some Good
Tax News"]
- Employers who wish to
keep their policy on a grandfathered basis can do so, but only if
they make no changes to the plans except for adding and deleting
employees and dependents.
- The limit for
employer-sponsored assistance for adoptions increases to $13,170,
and the credit is extended through 2011.
Plan Years Beginning Six Months After Enactment
- Insurance companies
will be prohibited from canceling coverage except in cases of
fraud.
- Lifetime benefit limits
will be abolished.
- Plans must cover
dependents up to age 26. (For grandfathered plans, this applies
only to dependents that do not have another source of
employer-sponsored coverage until 2014).
- Small businesses that
develop wellness initiatives will be eligible for grants for up to
five years.
- Plans will be required
to cover preventive care at no cost.
The final regulations and disclosure requirements for this new
law remains weeks -- if not months -- away, but HR professionals
already are pondering the massive impact of this legislation. For many
employers, the first step involves figuring out which employees will be
covered, said Peter Cappelli, a professor at the Wharton
School at the University of Pennsylvania. In a recent column
for Human
Resource Executive Online, Cappelli notes that
many provisions "spill over" into other employment areas.
"For example, an employer cannot pay for the costs of the mandated
health care through reductions in wages," Cappelli writes,
"but how will that be assessed in practice? Will any reductions in
pay become suspect as a result?"
Most employers harbored serious reservations about the
government's plans before it was passed, according to a special health
care reform supplement from UBA's 2010 Employer Opinion Survey. The
supplement results, released a week before the president signed the
bill, found most employers don't expect health care reform to have a
positive effect on costs. In fact, 52.3 percent of respondents expect
reform to increase costs at a much higher trend, the survey found.
Such attitudes might hint at a possible trend of employers
dumping their plans and simply paying the penalty for not covering
employees. However, experts warn that this tactic could cost employers
more in the end because such a cut would represent a major drop in
total compensation for many workers. To keep quality employees,
companies would have to bump up salaries, which would increase
employers' share of FICA taxes, according to a report in Business Insurance.
Termination of a health care plan also would cause employers to
lose any wellness tools that could benefit employee productivity in the
long term, said Andy Anderson, a partner with Morgan, Lewis &
Brokius L.L.P. in Chicago.
Even as employers begin to plot a new course under the umbrella
of health care reform, some of the provisions may not see the light of
day. A number of states have initiated lawsuits aimed at blocking the
individual mandate that emerges in 2014, and more lawsuits are likely
to follow.
For now, employers might be best served by not making any rash
decisions and scouring the law for hidden opportunities, said Wharton
professor Arnold J. Rosoff. "Instead of writhing our hands, look
at all the ways we can meet the challenge to deliver health care to the
population," Rosoff told Human Resource Executive Online.
"Change brings pain to people who are too heavily invested in the
status quo, but it brings opportunity to everybody else."
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Recent Laws Deliver Some Good Tax News
While some provisions of the recent health care reform law have
many employers reaching for the aspirin, tax breaks included in that
legislation and in a jobs bill actually spell good news for some
companies.
 The Patient Protection and
Affordable Care Act includes a new tax credit for small businesses. The
tax credit is available immediately for qualified companies that pay at
least half the cost of single coverage for their employees, according
to a report in PLANSPONSOR.
In a news release, the IRS notes that this credit will be available for
employers that have fewer than 25 full-time-equivalent employees paying
wages averaging less than $50,000 annually.
The smallest employers -- those with 10 or fewer full-time
workers and paying annual wages of $25,000 or less -- can receive the
maximum credit of 35 percent of premiums paid in 2010. The maximum
credit for tax-exempt companies is 25 percent of premiums paid. In
2014, the maximum credits rise to 50 percent and 35 percent for
nonexempt and exempt businesses, respectively.
In addition to the health care reform legislation, a recent jobs
bill offers another tax "holiday" for employers. The Hiring
Incentives to Restore Employment (HIRE) Act provides a tax break for
hiring new employees and offers credits for retaining workers.
Employers who hire workers who have been unemployed for at least 60
days can qualify for a 6.2 percent payroll tax incentive (exempting
them from the employer's share of Social Security taxes on wages paid
March 19 through Dec. 31, 2010).
Employees must be hired after Feb. 3, 2010, and before Jan.
1, 2011, to qualify for this credit. Also, a business can earn a 2011
credit of up to $1,000 for each new qualified worker that is kept on
the payroll for at least a year.
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Plans Aim to Take Bite Out of Overall Health Costs
with Targeted Dental Options
In the ongoing quest to control health care costs, some
employers and insurance companies are putting their money where their mouths
are by educating employees about the overall benefits of good dental
health.
Several recent studies point to a link between good dental care
and improved overall health, especially for pregnant women and those
with chronic diseases, according to a report in Workforce Management. A
2009 CIGNA study found that early treatment for dental problems saved
thousands of dollars annually for stroke and diabetes patients. Other
research suggests a healthy mouth can help protect pregnant women from
preterm birth.
CIGNA, Aetna and other
insurance carriers have started to emphasize this "mouth-body
connection" by creating special intervention programs for at-risk
groups. Aetna's plan, for instance,
includes 100 percent coverage of vital procedures for enrollees, such
as deep cleaning of diseased gums.
These programs place a greater emphasis on dental health in an
attempt to stave off costlier health problems down the road. For years,
the "mouth-body connection" was discounted by physicians and
carriers, said Dr. Doyle Williams, chief dental officer at Delta Dental
of Massachusetts. Yet when one considers that the human mouth carries
more than 6 billion bacteria and that a person swallows hundreds of
times each day, "it's a little easier to understand how gum disease
affects the whole body," he said.
The prevalence of gum disease, also called periodontitis, is
high in the U.S.,
with more than one in three adults age 30 and older afflicted,
according to the American
Academy of
Periodontology.
Still, evidence that a healthy mouth leads to lower health costs
is not clear cut, said Dr. Miles Hall of CIGNA Dental.
"I'll be very frank: The studies that are out there show a
strong association," Hall told Workforce Management. "At this
point, they do not necessarily show a causal relationship. But it's
significant enough that we took a step to be proactive about it. We
think that the right thing is to treat that gum disease and to remove
financial barriers."
Even with more support from insurance companies, employers face a
number of challenges in cleaning up their workers' mouths. Often,
employers use different carriers for medical and dental benefits, which
can complicate coordination of these programs.
However, Williams noted that dental-only plans can effectively
target all employees, not just at-risk groups, which can improve rates
of prevention and cost savings for the whole workforce. This approach
means the medical benefits of dental hygiene are in place before
someone becomes pregnant or develops a condition such as diabetes,
Williams said.
Regardless of the "mouth-body connection," employers
see real value in offering dental benefits, a recent study by Wells
Fargo shows. Despite current economic pressures, 97 percent of
employers polled made no reductions to their dental plans in 2010.
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DOL POSTS CHIP NOTICE
The U.S. Department of Labor has posted a model notice
that some employers must distribute as early as May 1. The notice informs
workers of possible state assistance through the Children's Health
Insurance Program (CHIP) or Medicaid.
To view the form and learn what states offer CHIP/Medicaid assistance,
visit http://www.dol.gov/
ebsa/chipmodelnotice.doc.
BUSINESSES STICK WITH VALUE-BASED DESIGN
Employers who have adopted value-based design in their
benefit plans are sticking with the model, according to a poll by
Buck Consultants. Among respondents who have melded value-based design
into their plans, 79 percent made no changes in 2009, and more than half
of those companies do not anticipate a change in 2010. Eighty-seven
percent of respondents use value-based design in their wellness programs,
and 80 percent use the design for disease management, the study found.
Value-based design creates incentives for employees, doctors and
insurance companies to adopt the use of high-value services, healthy
lifestyle habits and use of providers who adhere to evidence-based
treatment guidelines, according to the National Business Coalition on
Health.
GENERICS FUEL JUMP IN DRUG SALES
Sale of
prescription drugs in the U.S.
rose to $300.3 billion in 2009, an increase of 5.1 percent from the
previous year, according to a report by IMS Health. Of all drugs sold,
generic drugs dominated, with 75 percent of all sales coming from
generics -- up from 57 percent in 2004, the study found. While the number
of drugs given to new patients slipped 1 percent, the number of
prescriptions for people already being treated jumped nearly 2 percent,
the report showed.
MORE COMPANIES GO FOR PTO
More employers are using paid-time-off (PTO) banks
instead of traditional vacation and sick days, according to a survey by
BLR. Fifty-four percent of respondents said they use a PTO system
compared with 43 percent in 2007. Nearly three-quarters of those polled
allow employees to carry over PTO days into subsequent years, BLR said.
PAPER IS OUT FOR ENROLLMENT
The number of employers relying on paperless
enrollment has leapt 165 percent over the past five years, according to
new research by Guardian. Forty percent of employees now are using
computer-only methods to enroll compared with 12 percent five years ago,
and 61 percent are using a computer in at least a portion of the
enrollment process.
GOOD OR BAD: WORKERS CRAVE
FEEDBACK
A new study by Gallup
found that employees would rather have negative feedback than no feedback
at all. Thirty-seven percent of employees said their bosses concentrate
on strengths when giving feedback and 11 percent said the feedback was
negative. A quarter of respondents said they were "ignored" by
their managers. Sixty-one percent of those in the "strengths"
group said they were engaged in their jobs, and 45 percent of the
"negative" group said they were engaged. However, only 2
percent of the "ignored" employees said they were highly
engaged.
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