Although they’re certain the upheld health care overhaul will add to already rising health benefits costs, benefits managers are breathing a sigh of relief that the Supreme Court decided to leave much of health care reform intact.
Karen Vujtech, an HR disciplines expertise panelist for the Society for Human Resource Management, says employers were afraid that a partial or complete overturn would have likely thrown health care for the next year or two into total “disarray and chaos.”
“While [HR professionals] and employers may not have loved the law, they were very concerned about the chaos that any overturn of either part or all the law would have caused for all the work that they’ve already been putting in over the last couple of years to be ready for the changes,” Vujtech said Thursday.
Vujtech spoke on behalf of SHRM, which also released its own statement saying it supports comprehensive reform that “lowers health care costs, improves access to high-quality and affordable coverage, and strengthens the employer-based health care system."
SHRM says it will "continue to work with the Obama administration, Congress, federal agencies and other key stakeholders to continue to address our health care reform objectives.”
Now that a decision has been made, employers must focus on how they can provide comprehensive care to participants, while offsetting costs that have been increasing year over year. Average health care costs per employee are expected to surpass $10,000 this year, with average premium rates going up 7 percent, according to HR consultant Aon Hewitt.
On top of that, it’s been shown that parts of the law could tack on costs here and there. For example, according to a study that consulting firm Lockton did with its clients, the requirement that employers automatically enroll employees into a health plan would add 3.8 percent to health insurance costs.
At this rate, benefits managers will have to assess the economic impact of providing health care benefits. Come Jan. 1, 2014, they’ll have the option to continue providing affordable policies or face a $2,000 per-employee penalty for dropping coverage and directing employees to a public health insurance exchange, where they could receive a federal premium subsidy.
For smaller employers, this may be more financially viable. And even Lockton says its clients, which generally pay far more for health insurance than the penalty, could save 44 percent of their projected 2014 health insurance costs if they dropped coverage.
It’s been debated that this kind of financial incentive will prompt a movement away from employer-sponsored health insurance. But Vujtech doesn’t believe that will happen. “Most people don’t like to be forced to do something even if it’s good for them. While many employers have some negative reaction, most are saying they’re not going to stop offering health care benefits.”
While employees may get a better chance of being able to control their premium costs, Steve Wojcik, vice president of public policy at the National Business Group on Health, is convinced the health care law will do nothing to control costs for employers.
“The ACA really doesn’t do much in the way of cost controls and the latest government estimates say that they will actually add a little to costs while not slowing at all the growth in health care costs,” Wojcik said Thursday in an email.
Some of the requirements, he says, are arbitrary. “Some of the changes add unnecessarily to plan costs and do not benefit employees. For example, the government-prescribed and really micro-managed, summary of benefits and coverage is probably unnecessary at best and confusing at worst. Most employers produce their own benefits communications to suit their employees and this is also on top of Department of Labor requirements for ERISA plans.”
With the effort to move ahead with health reform requirements, employers will also concentrate on solutions they may be able to provide to help maintain affordable coverage. According to Wojcik, these include wellness incentives for employees who actively take steps to improve their health, maintain their regimens if they have chronic conditions, and makes changes to stay well.
The trend toward health account-based consumer directed plans will also continue.
Employers will also “continue efforts, working with government, to shed much more light on health care price and quality differences among hospitals, doctors, and other health care providers to help employees shop for better value.”
Health reform's cost impact (excludes retail, restaurant, hotels, hospitality and entertainment industries)
- pre-existing provision;
- remove lifetime dollar max;
- minimum annual dollar maximums;
- cover children up to age 26)
+2.5% average cost adjustment
Waiting period cannot be greater than 90 days -
From current 180-day waiting period: +3.9% average cost adjustment
From current 365-day waiting period: +19.9% average cost adjustment
Plans must automatically enroll newly eligible full-time employees and re-enroll existing employees: +3.8% average cost adjustment (note - Employees can opt out, so the impact will depend on how many new employees remain on the plan, for how long, and the size of the employer’s subsidy.)
Pay or play -
Employer continues to offer coverage (play): 0% other than the cost impacts listed above.
Employer terminates plan (pay): -44% average cost adjustment for employer; +101% - 155% for employee
Excise tax: +1.9% average cost adjustment