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Healthcare Reform’s Impact on Business

06.16.10

Jeff Brockette, CEO of Texas Retina asks:
As employer of more than 100 people, what impact is the healthcare reform legislation likely to have on my business in the near term?

The law phases in over several years. Factors such as employee age, gender, and compensation, among others, will be important in answering this question. The impact on some employers could be minor while in most cases the impact will be significant for employers of 50+ employees. But widespread change is likely – and the best way to deal with that is to determine what it means to your business as quickly as possible, so you can clearly plan your strategy.

This is a great question, and it’s one that every employer is scrambling to find the answer to. As it turns out, how your company is impacted by health reform, both short- and long-term, depends in large part on your group size, the average income of your employees, and whether or not you currently offer health coverage.

Small businesses definitely have it easier than larger employers like yourself. Those with fewer than 25 employees and average wages below $50k per year, for example, may be eligible for a tax credit starting this year for a portion of the premium they pay, and groups with fewer than 50 employees will not be required to offer coverage at all. Large employers, on the other hand, won’t get much help paying the bills, and when the “play or pay” rules go into effect in 2014 companies that don’t provide health coverage will face stiff penalties. But there are some more immediate concerns.

The number one issue right now for companies of all sizes is grandfathering. We all remember when President Obama said “if you like your health plan, you can keep it.” And that’s true – sort of. The legislation exempts employers who hang on to their current coverage from many, but not all, of the “essential benefits” in the bill – things like first-dollar preventive care, cost-sharing limitations, and coverage of clinical trials.

There are other benefits, though, that the government feels are so important that all plans must include them, even if they’re grandfathered. The most significant of these is a limitation on waiting periods (no longer than 90 days), limitations on pre-existing condition exclusions, a prohibition on rescissions, the elimination of annual and lifetime limits, and coverage of adult children. Some of these changes go into effect on your next renewal after September 23rd, 2010.

Whether or not you should absorb a big rate increase and hang on to your current plan so it can be “grandfathered” is a tough decision – especially since the government has provides only some limited examples of what changes, exactly, will jeopardize a plan’s grandfathered status. Further, the full benefits, if any, of being grandfathered are not yet fully known.

There are also some compliance issues that kick in long before 2014, when many of the bill’s provisions go into effect. Beginning in 2012, for instance, all group plans must provide their employees with a “uniform explanation of coverage” or face a penalty of up to $1,000 per employee. That’s also the year that companies must start reporting the aggregate value of their employer-sponsored coverage on their employees’ W-2’s. In 2013, employers will have to notify their employees about the “Exchange” that will be up-and-running in 2014. And more immediately, companies with more than 200 employees will be required to auto-enroll all new employees in their employer-sponsored health insurance plan, and starting in 2011 they must determine whether they want to participate in the CLASS Act, a new national long-term care program funded through voluntary payroll deductions.

Additionally, the legislation will alter the range of rating factors that the insurance companies can use to charge different premiums for different risks. Specifically, the current differentials for gender and age, which can be very broad, will likely be replaced with a more narrow spread. The end result could be a slight reduction in cost for employers with a primarily female and/or older average age work force. This of course will come at the expense of employers with a primarily male and/or younger than average age work force. For example, a healthcare provider such as yourself may end up benefitting somewhat but your gain would likely come from an increase in premiums being passed on business employing primarily young males – such as the technology industry.

There’s a lot to think about, so the best advice I can give you or any employer is to team up with a good benefit advisor who can keep you informed of all the new rules & regulations and guide you through the numerous decisions you’ll have to make. Benefit advisors have always played an important role as your partner in selecting the right benefits package for your employees, but going forward your advisor will be more important than ever.


Kevin Pailet, Stuart Prescott & Dan Prescott
Founding Partners
Prescott Pailet Benefits, LP
EMPLOYEE BENEFITS



posted by Rachel Meador on 06.16.10 • comments (0) • Employee Benefits