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May 2010
Sorting out health care reform.
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by Paul Catania, CEBS, PHR - Oswald Companies
Health Care Reform – Now What? Issues Employers Need to Address
The passage of Health Care Reform represents the finish line for many lawmakers. For employers, however, the conversation addressing the impact of reform is at the starting line, as more than 50 provisions will be enacted in the next three years. Interpretive guidance and implementation guidelines from federal regulators, specifically the Department of Heath and Human Services (HHS), The Department of Labor (DOL), the Internal Revenue Service (IRS) and the Centers for Medicare Services (CMS) will follow the initial statute. More so, a bevy of additional rules and regulations will be necessary to clarify provision details.
Key decisions for employers will continue to grow in complexity and will include how to manage all of the new compliance mandates; what and when to communicate to employees; and how to pay for and deliver employee benefits long term?
No matter the size of the organization, the following are key action steps that should be considered by management to not only be compliant, but also ensure the best financial outcome for the employer and employees:
Step 1: Understand the scope and timing of the new law.
Very few of us need to read the thousands of pages included in the new law, yet every employer should review the law’s key provisions and the timing of implementation. Most the early provisions will address several access concerns in many health plans, including (but certainly not limited to) raising dependent age to 26; ban on lifetime limits (dollar value); restrictions on annual limits; elimination of pre-existing conditions for those under age 19; and the creation of high-risk pools for those who cannot otherwise secure health insurance coverage. Known as consumer protections, these provisions are effective within six months of enactment (September 23, 2010) and then calendar plan years thereafter.
Between 2011 and 2013, more tax and funding provisions will be enacted, such as W-2 reporting for the cost of employer plans and the elimination of several tax deductible expenses, including Medicare Part-D employer subsidy and the over-the-counter medication involved in FSA (flexible spending accounts) plans.
The real marketplace impact will occur when the implementation of state-based healthcare exchanges take effect in 2014. These exchanges will create a new marketplace option for individuals. These will be important for employers to understand as plan designs, employee premiums and wages will all impact the employer penalties as well as employee subsidies allowed through the state-based exchanges. There will be new variables, financial and employee centric to consider when managing employer sponsored health plans as the exchanges become reality.
As with many health care related laws before this one, the need for “clarification” and provision documentation will increase, resulting in a greater need for compliance monitoring as well as improved organization and communication of health plan information.
Step 2: Understand health plan cost drivers.
In addition to complying with the law, as with any tax conversation, employers will have some choice on which direction they follow when managing future health plan costs. The law adds requirement and enforcement demands on both employers and insurance providers, with the likely potential to increase health care plan costs. The law, however, does not change the impact on many current cost drivers such as employer size, funding, plan design, group health status, and claims utilization. The reform law does impact other cost drivers, such as the establishment of new minimum loss ratios for carriers by the National Association of Insurance Commissioners (NAIC).
Regardless of the law’s impact, employers who follow the wrong direction when choosing a health plan will suffer from more punitive consequences, as increasing inflation is certain to exaggerate all cost drivers.
Step 3: Drive consumerism and educate employees.
Health Care Reform is not changing the fact that employees will continue to rely on employers for access and information regarding health insurance. The law will require new mandates for plans and individuals, but employees will still rely on employers for help when trying to understand the changes and the impact on their families.
Regardless of whether an employer continues to offer health care benefits, the new law will motivate all health plans (including the state exchanges) to offer increased deductibles and fewer low deductible or copay only plans. HSAs (health savings account) and other consumer-directed plan designs will continue to grow in number and acceptance.
The recent employer benchmarking data shows that more and more employers are already initiating education to employees on how to be wise buyers of health-related products and services. Reform will add to what is already a complex conversation regarding healthcare consumerism and it will require employers to clearly communicate how and why their group health plan will continue to serve as an employee benefit as well as secure the role of the employer as a key resource for information and protection from the confusing world of health insurance.
Summary
Employers will continue to have options. By understanding the law, understanding the unique cost drivers to the plan and setting good, clear expectations with employees, any employer will be able to maintain a level of control over its health plan during what promises to be a very unpredictable time.
This article is supplied with permission of Oswald Companies. For more information, visit www.oswaldcompanies.com.
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