With health care, big changes ahead for employers

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Since the Supreme Court upheld the Patient Protection and Affordable Care Act in June, businesses across Idaho have been adapting to a changed health care landscape and preparing for even bigger transformations.

A few major changes are in store for 2014. Among them is a mandate that employers with more than 50 full-time equivalent employees offer health insurance benefits.

The Arc of Boise, a non-profit that helps people who have intellectual and developmental disabilities, is right on the edge of 50 FTE employees and is preparing for the ACA requirements. If The Arc does pass the mark, it has a choice: Meet the requirements or pay a penalty.

“It does present a lot of challenges for us … just the administrative piece of calculating (the number of FTE employees) out every single year,” said Jennifer Beck, human resources coordinator for The Arc.

Under the ACA, employers will no longer be able to offer plans with deductibles higher than $2,000 for individuals and $4,000 for families. Employer-sponsored plans also will have to include “essential health benefits,” which the government is still in the process of defining.

The Arc offered a comprehensive benefits plan in the past, but “the prices really started to spike up a couple years ago,” Beck said. They cut back to a supplemental plan, and the employees share the cost with the organization.

If the organization does end up required to provide insurance benefits, they may be among those who opt to pay the penalty instead, Beck said.

Employers who choose to offer nothing will be penalized if any of their employees turn to the government-operated insurance exchanges for coverage, explained Kelly Madison, a Boise-based consultant who advises businesses on benefits options.

Employers also will be penalized if they offer a plan but any of their employees elect to use the exchange because their portion of the premium on their employer-offered plans is deemed unaffordable, or if the coverage does not meet the ACA’s minimum requirements.

The penalties vary based on individual circumstances, Madison said, but start at $2,000 per employee per year for employers that do not offer coverage, and $3,000 per employee per year for those that offer coverage ruled unaffordable.

But, according to StateHealthFacts.org, the average employer contribution to individual employee premiums in Idaho was $3,669 in 2011.

Beck said deciding to pay for a penalty instead of an insurance plan may end up being more cost-effective for The Arc, and having employees buy insurance through a government-run insurance exchange  could end up providing them with better coverage than they’re offered now.

“I think (the employees) would just be happier to get a better plan,” Beck said. “I don’t think they’d care where it came from.”

She said The Arc could use money that has been going to health insurance to pay for other benefits, such as 401K matching and employer-paid life insurance – items the organization had to cut in recent years because of the rising cost of insurance.

Beck said she does not think The Arc, which employs about 70 people, should be lumped in with companies that employ hundreds or more. But the work to figure out if it might be is already costing the organization time and money. It has already taken time to calculate how The Arc could be affected by other aspects of the ACA.

Beck has been researching and attending presentations to stay current on the ACA, but delays, repeals and changes make it difficult.

“It’s a moving target at this point, so you’ve just got to keep yourself informed,” she said.

Path ahead is unclear 

Studies offer conflicting predictions of how employer-sponsored benefits may change as the ACA is implemented. The Congressional Budget Office estimates 7 percent of employees now receiving insurance through their employers will have to switch over to government-subsidized plans. However, a McKinsey & Company survey of 1,329 employers found that 30 percent said they would “definitely or probably” stop offering health insurance in 2014 or after.

Madison, who is affiliated with Myriad Benefits, is among those who say employers may simply stop offering benefits altogether as more ACA requirements are implemented.

She said the companies she works with have been trying to rein in costs while still offering benefits in recent years. One way they do this is by increasing their plan’s deductible.

“I have clients who are often having deductibles of $2,000, $3,000, even up to $5,000, just so they can even be able to provide something to their employees,” she said.

Those high deductibles will not be an option under the new rules, however.

“These employers who have been struggling to provide insurance … I think they’re going to throw up their hands in the air and say, ‘We’re not going to do it anymore,’” Madison said.

Proponents of the ACA say it ultimately will reduce the price of premiums for employers. According to the White House website’s page on the ACA, the law will make providing insurance more affordable for businesses “by bringing the uninsured into the system and tackling the drivers of health care costs.”

But Madison predicted the cost savings will not be enough for some employers.

“They’ll just say, ‘Here I am trying to do what I should do, but I’m penalized because it’s not enough,’” she said.

Adjusted requirements for small businesses

Small businesses will not have the same requirements as those with more than 50 employees, but they still have new options to contend with because of the ACA.

The ACA offers the Small Business Health Care Tax Credit to employers who have fewer than 25 FTE employees, pay an average wage of less than $50,000 and meet certain other criteria.

For tax year 2010, just 228,000 taxpayers claimed the credit, according to a Treasury Department press release.

Some employers have run into restrictions on the credit. For example, certain family businesses do not qualify.

Jim and Joan Stephens, who own Boise-based Stronghold Remodeling and Sandler Training, a consulting business, employ three of their four children. Because more than half the employees at Sandler are related, Joan Stephens said, they are not eligible for the credits.

Joan Stephens said she was excited when she first heard about the tax credits, and disappointed to find out she couldn’t receive them.

“It’s like they’re out to get you if you’re a family business,” she said.

Madison said she thinks smaller employers may also stop offering insurance benefits because the ACA’s requirements may cause insurance companies to charge more.

“Many of the small employers that I talk to … are saying that as these costs continue to go up, that it’s very likely that they will be dropping coverage,” Madison said.

She added that competitive businesses such as technology companies are likely to offer benefits to attract the best employees, but struggling industries such as construction and mom-and-pop stores are more likely to drop coverage.

On the other hand, the Congressional Budget Office estimates the credit will save small businesses $40 billion by 2019, according to the White House health reform website.

The credit now offers a maximum of 35 percent of a small business’ premiums, but the maximum increases to 50 percent in January 2014.

Idaho physicians support a state-based insurance exchange

Many Idaho physicians also are employers, so they too must consider how the benefits they offer could be affected by the ACA.

Susie Pouliot, CEO of the Idaho Medical Association, said she does not believe most physicians’ offices will have any trouble meeting the ACA requirements for employee benefits. She said she could not name an IMA member who runs a small business and doesn’t provide coverage.

“Those of us who work in the health care field hold health care benefits for our employees at a high value,” she said.

While the IMA does not have an established policy regarding employer-sponsored health insurance, Pouliot said research shows that workers who have access to health benefits are better employees.

“Healthy folks are happy folks and productive folks,” she said.

Pouliot said the IMA has been helping Idaho doctors get the information they need to know how the ACA will affect them. The group also has taken positions on the elements of the ACA that Idaho gets a say in implementing.

She said the IMA supports a state-based insurance exchange.

“We think Idaho can do a better job regulating insurance companies and plans that are operating in the exchange based on our knowledge of our own state,” she said.

The IMA also supports expanding Medicaid to people who make less than 133 percent of the federal poverty level. Pouliot said people in that group often turn to the state or county catastrophic health care funds because they do not get the preventative and consistent care they need.

“It’s better care for patients that they have regular access to medical care and they don’t wait until a medical problem has become out of control,” she said.

According to a recent analysis by the Spokesman-Review, Idaho taxpayers stand to save $380 million over six years if the state Legislature agrees to expand Medicaid. The federal government will pay for the program entirely until 2016, then gradually cut back its support to 90 percent after 2020.

Pouliot said the IMA would like to see the federal government better address other health care issues – most importantly Medicare reimbursement problems and medical liability reform – but it supports the ACA’s goal of ensuring all people have health insurance.

“All Idahoans should have access to some sort of health care coverage,” she said.

 Preparations underway at insurance companies

Insurers also are preparing for the way they do business with employers and individuals to change as the ACA requirements come into effect.

Karen Early, director of corporate communications for Blue Cross of Idaho, said if more employers opt out of sponsoring insurance for their employees, Blue Cross will have plans to offer the increased number of individuals looking for insurance coverage.

“We plan to be very competitive on the (government) insurance exchange,” Early said. “Everybody knows that the individual marketplace is going to grow.”

Early declined to discuss Blue Cross’ plans for enticing employers to continue sponsoring coverage for their employees.

She said Blue Cross has had to develop all new products to offer as the ACA is implemented. Complicating the matter are the continued unknowns, such as how “essential benefits” will be defined and how the insurance exchange in Idaho will be structured.

“There’s a lot of work that has to be done in the background to prepare for what is going to be a very changed health insurance marketplace,” Early said.

A health insurance exchange for each state

By Jan. 1, 2014, the federal government requires every state to implement some form of Affordable Health Exchange – a “one-stop” online marketplace where businesses and individuals can shop for private health insurance plans.

Idaho has not yet decided what form its exchange will take. The Idaho Health Exchange Working Group has been reviewing the state’s options, meeting twice in August. Idaho Department of Insurance public information specialist Tricia Carney said the group will meet again in September and October, but it does not have a date set for making a recommendation on what type of exchange the state should pursue.

Idaho has three basic options for its exchange, according to a presentation from the Aug. 29 meeting:

* State-based exchange: The state operates the insurance exchange, but can use federal services for determining premium tax credits and cost-sharing reductions, exemptions, risk-adjustment programs and reinsurance programs.

* State partnership exchange: The state operates the day-to-day plan management and/or consumer assistance aspects of the exchange, but can choose to use federal services for reinsurance programs and determining eligibility for Medicaid and the State Children’s Health Insurance Program.

* Federally facilitated exchange: The federal department of Health and Human Services operates the exchange. The state can choose whether to use federal services for reinsurance programs and determining eligibility for Medicaid and the State Children’s Health Insurance Program.

States that wish to create their own exchange or a partnership exchange must submit a blueprint application to the federal government by Nov. 16. HHS will issue approvals and conditional approvals Jan. 1, 2013.

If Idaho does not meet the blueprint deadline, a federal exchange will be implemented. The state also can choose to default to the federal exchange and submit a plan for a state-based exchange at a later date.

At an Aug. 2 meeting, Idaho Department of Insurance Director Bill Deal estimated implementing an exchange would cost about $40 million, noting that the state would reduce costs by piggybacking the exchange on the Idaho Department of Health and Welfare’s computer system.

The federal government awarded Idaho a $20.3 million, one-year grant in November 2011 that was to be used to plan and set up an exchange. However, the Idaho Legislature turned down the money in the hopes that the Supreme Court would overturn the Affordable Care Act.

Idaho will be able to apply for more federal grant money in November.