After months of haggling on Capitol Hill, it’s Corporate America’s turn to make some gut-wrenching decisions. The health care reform act carries immediate cost implications for employers that continue through 2018 with the introduction of a 40 percent excise tax on high-cost group health plans. While the costs vary by company, the compendium of mandates is projected to increase the annual tab for employee health care by 3 to 10 percent, according to estimates from Towers Watson.
Later mandates may inspire some employers to take on new roles like offering employees stipends to purchase coverage on their own. One thing is certain: Maintaining the status quo is not an option.
“Employers can’t wait until 2015 to make decisions about health care because it will be too late,” says Ron Mason, CEBS, senior consultant for health and group benefits at Towers Watson. “Cost implications loom large and will not dissipate without decisive action.”
Smart Business spoke with Mason about the need for employer decisions in the wake of health care reform.
Which decisions require immediate attention?
Employers need to forecast increases through 2018 to see if annual costs may possibly exceed the threshold for high-cost group plans. A strategy change or plan restructure might be needed to avoid the excise tax, and a longer wait may necessitate more draconian changes. The elimination of the lifetime benefit cap and the extension of dependent coverage to age 26 could also have an immediate impact on employer costs.
Employers should investigate whether their stop loss carrier will provide unlimited coverage to protect against catastrophic losses. Finally, a new reporting requirement in 2011 and a slew of additional reports in 2014 calls for quick action regarding data collection or possible outsourcing.
What other choices await employers?
Some significant mandates in the bill:
Mandate: Pay or play requires large employers to provide health coverage for employees working 30 or more hours per week or pay an ‘assessment’, which may impact companies with large flexible or seasonal work forces.
Decision: Offer coverage, amend staffing models or pay the assessment. In the past, employers avoided this problem by extending coverage waiting periods. The bill imposes a maximum wait of 90 days by 2014 and requires large employers to automatically enroll employees in health plans.
Mandate: Community Living Assistance Services and Support (CLASS) allows employers to offer coverage for a long-term care option through the government.
Decision: Employers must decide what role they want to play and either enroll in the CLASS program and make necessary payroll deductions, or not administer this option.
