Top 10 Issues Employers Should Consider Now

1.  Review and revise documents related to healthcare plans and arrangements. Employers need to verify that they have made all necessary changes and eligibility provisions. Employers may have already had plan design changes in play in preparation for the Employer Mandate, and they should consider what to implement in 2014 and what to delay to 2015.

2.  Continue to prepare for the Employer Mandate. Employers do not have to worry about enforcing the Employer Mandate tax penalties and reporting requirements in 2014, yet they should continue to prepare by evaluating their workforce—both employee classification and hour counting.

3.  Review cost-sharing for 2014 coverage of the Employer Mandate. Even though the affordability requirement will not be enforced in 2014, limits on cost-sharing provisions are still effective in 2014. Employers should take the time to review their cost-sharing structures and evaluate whether to implement or delay any shifts in employee-contribution cost-sharing.

4.  Review and revise wellness programs and incentives based on the ACA guidance. Employers can financially incentivize employees to meet certain health standards. Compliance with the ACA's guidance on wellness programs does not guarantee compliance with other program provisions, however, so employers need to carefully develop their wellness programs.

5.  Prepare for the rest of the ACA. Although the Employer Mandate has been delayed, the rest of the ACA provisions are scheduled to move forward. Employees need to implement new employee notice requirements and communications, plan fees, and other ACA requirements as originally scheduled.

6.  Gear up for ACA notices. Significant ACA requirements involve communicating information regarding the employer’s health plan to employees. Employers are required to send notices to their employees regarding the “New Health Insurance Marketplace Coverage Options and Your Options.” All employers must produce and distribute this notice.

7.  Prepare for earlier open enrollment as a result of additional notice requirements. With the October 1, 2013, deadline for the distribution of the Marketplace Notice, employers should consider moving open enrollment to an earlier date to accommodate the Marketplace Notice deadline.

8.  Develop strategies for the Individual Mandate and Health Insurance Marketplaces. Even though the Employer Mandate is delayed to 2015, the obligation of employees to have individual coverage under the “Individual Mandate” begins January 1, 2014. The opportunity for individuals to purchase coverage on the Health Insurance Marketplaces starts October 1, 2013. Employers are required to provide notices to employees regarding the Marketplaces and will be required to respond to Marketplace requests to confirm employee data and coverage.

9.  Review HIPAA/HITECH—Updates required for the Final Rule. All employers should be reviewing and updating their HIPAA policies and procedures for their covered entity health plan. Reviews should include updating Privacy Notices and evaluating business associate relationships and underlying agreements. The deadline for compliance is generally September 23, 2013.

10. Evaluate changes necessitated by the Supreme Court's ruling related to the Defense of Marriage Act (DOMA). Although it is anticipated that guidance for this act will be issued soon, all employers should be evaluating their health

Issues Facing Employers Under ACA Legislation Impact More than a One-Time “Pay or Play” Decision

On the surface, the “Pay or Play” requirements of the Affordable Care Act (ACA) seem relatively straightforward. Employers analyze their employee census data and current plan contribution information regularly, and knowing if you are a “large employer” is a fairly easy calculation of ACA-defined full-time and full-time equivalent employees as of a certain moment in time. Based on this, if you qualify as a large employer, the "Pay or Play" decision begins. “Pay” applies if you choose to not offer minimum essential coverage or any coverage. This will result in a $2,000 per full-time employee per-year excise tax. “Play” applies if you offer minimum essential coverage to all of your full-time employees - relatively simple when an Employer has the correct data regarding their current population and spend. However, ongoing monitoring of compliance and projected cost, while ensuring consistent eligibility and affordability standards are met over time, especially within the context of highly variable employee populations, is where ACA impacts become orders of magnitude more challenging in context of current benefits management approaches within organizations.

Employer decisions will have ramifications well beyond the initial impact of whether or not to continue providing health benefits to employees, or to pay penalties and have employees seek benefits from a public exchange. The decision itself either way can have both a financial and motivational impact on employees. The employee population has come to expect, rightly or wrongly, that their company will offer a comprehensive benefits package as a part of total compensation/total rewards. Should this no longer be offered, the employee is faced with the prospect of lower take home pay (due to loss of what are known as Section 125 Cafeteria Plan benefits) and the stress of having to ensure coverage is secured and is paid on time.

The employer must be aware of the compensation issues and expectations when removing something that ranks high on the list of employee “wants”. There is also the need to identify the goals, opportunities and risks associated with these decisions surrounding recruitment and retention in employee strategy. Benefits have long been used as a recruiting tool to ensure the best and brightest employees are hired and are retained. With the ACA implementation, a “Pay” decision is much larger than the “straightforward” $2,000 per-head, per-year calculation. Compensation changes, loss of tax deductibility and effect on total compensation, employee turnover and retention, competitive value to employee attraction...all have significant financial impacts on the total cost of the decision. When employers really start looking at the impacts of a "Pay" decision, many will find that the equation can become much more complex and quickly shift in favor of a “Play” decision.

As such (...and as is suggested through many industry polls of employers qualifying as “large” under the ACA) many employers will elect to continue providing health benefit plans, but will also seek ways to reduce cost-burden while maintaining employee morale and company “brand” as an employer of choice. Many employers will evaluate or expand on self-insured plans as a means to effect this cost-control, and focus significant resources to arrive at ‘best-of-all options’ approaches. Achieving this, however, presents a significant challenge to employers and their advisors that will require changes to current benefits management practices, data, and systems.

What is meant by “Pay or Play?”

Starting January 1, 2014, the Affordable Care Act (ACA) will require companies with 50 or more full-time employees (or equivalent) to provide health insurance coverage, send employees to a health insurance exchange (either state or federally run), “pay” a penalty of $2,000 per employee per year (less the first 30 employees, if at least one employee goes to an exchange and receives a federal subsidy for coverage), or develop a plan to do both.

Employers who decide to “play” will be subject to a $3,000 penalty for any employee who finds the offered employer coverage unaffordable and receives a subsidy. What is “unaffordable”? Unaffordable is defined as an employee’s self-only coverage premium that exceeds 9.5% of the employee’s wages (based on the annual W-2).

The new State Exchange process is a key component of the reform. Each state is mandated to provide individuals with a range of health insurance plans to choose from. It is through this exchange that individuals who meet federal income guidelines will be eligible for subsidies to pay premiums. Note: the “mandated” piece was struck by the Supreme Court as the decision to opt out of the exchange development process is allowed. The deadline for states to make this decision was December 14, 2012. So far, 29 states are either deferring to the federal government to provide this exchange or have not declared the decision. A “donut hole” in the law is that the subsidy is currently only tied to the state opting in. There is no language that says if the federal government provides this exchange access that individuals will be eligible for a subsidy. Interpretation by legal experts is still underway.

The issue faced is: Which makes the most sense for businesses today: extend coverage to all employees, elect to not provide coverage and pay the penalty, or develop a hybrid of the two? How this will impact employees and analyzing which employees may be eligible for subsidies is the major challenge companies face today.