On June 28, the U.S. Supreme Court upheld the majority of the Patient Protection and Affordable Care Act with a 5-4 ruling. As both sides of the political spectrum use the decision on the controversial law to win support for their own policies, employers may be wondering where this leaves them.
“The decision provides some necessary clarity that can lead to more decisive health benefits planning,” says Bruce Davis, principal and leader of Health and Group Benefits Consulting at Findley Davies.
At the same time, Davis warns this ruling isn’t the end of the matter. Some health care issues are unlikely to be resolved until after the November election and the health care exchanges smaller Ohio employers were counting on will be operated by the Department of Health and Human Services.
Smart Business spoke with Davis about what the Supreme Court’s decision means for employers now and in the future.
How does the Supreme Court’s decision impact employers?
Employers now know what they need to do this fall as they head into open enrollment. They need to:
- Comply with the new Summary Benefit Coverage requirements by modifying open enrollment materials to include new coverage examples with help from health insurance carriers or third-party administrators and professional advisers.
- Work with payroll vendors, IT staff and human resources to ensure they can report the aggregate cost of their employer-sponsored health coverage on employees’ W-2s to be issued in January if they have more than 250 employees.
- For plan years beginning on or after Aug. 1, provide expanded coverage for eight categories of women’s preventive care without cost sharing if they are nongrandfathered under the PPACA.
What might this mean in terms of cost?
For 2013, businesses can examine their demographics to understand what expanded women’s preventive care requirements mean in terms of increased claims costs, but generally, Findley Davies believes it will be approximately 1 percent. Other costs, such as coverage for children up to age 26 and general adult/child preventive care requirements had already gone into effect.
Cost increases may elicit new work force strategies. For example, employers with more than 50 employees will be penalized for not offering essential health benefits or offering benefits deemed unaffordable. However, those requirements apply to full-time employees — those working an average of 30 or more hours weekly. Employers in some industries may begin using part-time employees or independent contractors to a much higher degree.
What parts of the Affordable Care Act remain undecided?
In July 2012, Ohio and several other states decided not to participate in expanded Medicaid, which was permitted in the Supreme Court decision, and will not establish a state-based health insurance exchange. HHS will operate the exchange in Ohio in 2014 to serve individuals and employers with fewer than 100 employees. Smaller employers were investigating the idea of moving toward a defined benefit contribution model and letting employees use the exchange to choose their own coverage based on their risk tolerance.
If you have fewer than 100 employees, you’ll need to follow the developments in each of the states in which you do business to determine whether they will move ahead with a health insurance exchange for 2014. It won’t be clear for another year which carriers will participate in each exchange, which plans will be offered and their costs.
Further, the first comparative effectiveness research fees are due July 2013. Employers will remit the $1 per member fees using IRS Form 720, but the IRS has not yet revised that form to take these fees into account. There also are several requirements where the federal government should be issuing guidance in 2012, such as how to file a quality of health care report and how non-discrimination rules apply to insured plans that favor highly compensated employees.
How does politics play into what happens next?
This will be a huge issue for the November election. For example, if the Democratic majority in the Senate changes, then some smaller measures might pass, such as restoring the ability to pay for over-the-counter medicines under flexible spending or health savings accounts.
However, employers cannot wait for the election results. Even if Republican candidate Mitt Romney is elected, the inauguration won’t happen until Jan. 20, well after businesses must comply with some of the act’s provisions.
What should employers tell their employees?
The decision relieved some anxiety and provided clarity, but employers need to begin communicating to their employees. Take advantage of this opportunity and reinforce your commitment to providing a competitive, affordable health plan as you work to comply with the new PPACA requirements.
Employers also need to be ready for questions from their female employees. Health care flexible spending accounts will become limited to $2,500 in January, which needs to be explained in upcoming open enrollment materials. In addition, there’s the misconception that reporting the value of health care coverage on a W-2 means it is taxable. Employers need to be proactive in explaining that this is information gathered for the federal government so it can administer the premium subsidies under the health insurance exchange programs.
Health benefits remain a very important part of employees’ total compensation. Employers will want to drive that message, as well as demonstrate how these benefits fit into the overall value proposition of what it means to work for their organization.
Bruce Davis is principal and leader of Health and Group Benefits Consulting at Findley Davies. Reach him at (419) 327-4133 or [email protected].
Insights Human Capital is brought to you by Findley Davies, Inc.
