Posted: May 25, 2012
Five top strategies to prepare for health care reform
Employers should be thinking about theseBy Jane Jensen
Health care reform legislation has been mentioned frequently in the presidential race yet little has been said to help employers who are determining right now how they’ll comply with the Patient Protection and Affordable Care Act of 2010 (the PPACA), increasingly referred to as the Affordable Care Act (ACA).
With major implications scheduled to begin taking effect in 2014, companies will need to explain to employees by next March new health care benefit options that take into consideration the State Insurance Exchanges. So while mindful of the potential game-changing impact of a Supreme Court challenge in late June and, of course, the presidential election in the fall, employers know that either way, they don’t have the luxury of waiting to see what happens. For one thing, many significant reform measures affecting employer-provided benefits have already been implemented by employers, insurance companies and Medicare.
What employers should be doing now to be prepared:
Examine your workforce characteristics
How many of your workers are under 26? How many are full-time? Do you have contract or seasonal employees? How many hours do your part-timers work? How many employees may have postponed retirement until they are old enough for Medicare? Surprisingly, many employers don’t have a complete grasp of the make-up of their workforce — the answers to these questions are essential to understanding important and potentially expensive new requirements, as well as cost-saving options, under the ACA. Gathering the information may not be easy and may involve reconfiguring how HR collects information both for planning as well as fulfilling new reporting requirements.
Understand new coverage options
Some employees may find coverage under the expanded Medicaid program, or subsidized coverage in the Exchanges to be more affordable than employer provided health care. This represents a significant opportunity for employers looking to cut costs. Retirees, older employees under 65 (not yet eligible for Medicare) and low-income employees might have an opportunity to pay less and have better coverage under the Exchanges. But how employers structure their plans will affect the options available to their employees. Sometimes referred to simplistically as “play” (continue to offer health care) or “pay” (exit and pay a penalty for each employee), the options actually are more numerous and complex along a full spectrum of opportunities.
Know your numbers
Complying with the ACA will mean additional costs for most employers. Almost every employer needs to plan for some new investment in technology, additional administrative and regulatory tasks, and employee and marketing communications. Employers may have new obligations to cover some employees previously not eligible for coverage (notably some part-time and contract employees and dependent children up to 26 years of age, a popular provision already in effect). You may see a shift in who is covered by your plan – fewer employees may waive coverage and some spouses may opt into their own employer’s plan. There will be penalties for companies that fail to understand and follow the new rules, including penalties that go into effect in 2018 for so-called Cadillac plans (that cost more than the government’s predetermined levels). Employers that do their homework on the numbers will be better prepared to address the short and long-term challenges of reform irrespective of the direction it takes.
Decide how health care fits into your overall employment deal
How important is health care to your employment value proposition? If you have a large low-paid population, will you be the employer of choice if you offer a health plan? How about if you don’t offer one, and allow employees to access federal subsidies? If you decide to exit health care, will it affect how you recruit employees? Or the deal you have with current employees? If your health care costs rise, or if you scale back benefits to avoid the excise tax beginning in 2018, how will that affect your Total Rewards programs, notably compensation (pay and bonus)?
Beef up employee communications
The noise about the ACA will be deafening as various stakeholders from media to political pundits to the government begin to explain its major components in advance of their taking effect. In addition, expect to see significant marketing from insurers and health plans touting their plan options in the Exchanges should they move forward. Employers would do well to beef up their internal communications — using all the tools available from printed materials to websites to social media — about their own plans and how they will affect active employees and their dependents, and retirees and their dependents.
If they haven’t done so already, employers should do what they can now to understand the impact of the legislation and what pieces of it will affect them and their employees and when. They need to look at their objectives for employee health care in the context of how they reward, attract, retain and engage employees—and decide what their strategies will be in the near and longer term.
Jane Jensen, MAAA, FSA is a senior consultant in the Towers Watson Health & Group Benefits practice in Denver. Jane has more than 25 years of experience in all aspects of health and welfare employee benefits design and financing, including program implementation, vendor management, renewal negotiations and performance measurement. At Towers Watson, Jane serves as the lead actuary on Health Care Reform issues. In addition to her leadership duties, she serves as a senior consultant on many clients throughout the Western United States.