It’s hard to believe, but it’s been nearly two years since the Patient Protection and Affordable Care Act was passed and “healthcare reform” became one of the hottest topics around. Given that some of the remaining changes don’t go into effect until 2013 — and the most significant changes don’t occur until 2014 — we wondered (1) how informed our clients are about the law, and (2) how prepared they are for the impending changes.
To answer these questions, we conducted a nonscientific survey of small and large employers, primarily Midwest-based. The key information surveyed included:
- The degree to which an employer understands the “play or pay” penalties.
- Insurance exchanges as outlined in the reform law.
- If an employer has/has not determined if it will continue to offer a medical plan on/after January 1, 2014.
As we reviewed the responses, we found the following to be true:
- There was virtually no difference among employer size in the responses.
- Approximately half of all respondents indicated they were somewhat or moderately informed about exchanges and “play or pay” penalties.
- Approximately half of all employers have determined they’ll continue to offer employer-sponsored medical benefits as of January 1, 2014. The remaining half have not made a decision at this time.
The survey results are summarized in the following table:
What Do the Results Suggest?
We believe the key survey finding is that almost half of the respondents are only somewhat or moderately informed of the law’s requirements. This suggests the majority of employers don’t have a strong understanding of the law, since the balance of respondents would be either well informed or not informed. From our perspective, we can only focus on the group that has a modest understanding and suggest that this means strategic decision making could be compromised.
To date, regulatory guidance provided by the Centers for Medicare and Medicaid (CMS) and Health and Human Services (HHS) has been limited. According to the Kaiser Family Foundation, as of December 22, 2011, 14 states have already established an exchange, five states are planning to do so, and two states have decided not to create an exchange. The remaining states are either studying options or have shown no significant activity relative to the formation of an exchange. Most states that haven’t yet made a definitive decision seem to be waiting on further guidance from HHS or until the U.S. Supreme Court hears arguments on the constitutionality of the individual mandate scheduled for March of this year. As a result, it’s quite possible that many employers have purposely opted to refrain from spending any time and money on the law as currently written since guidelines are scarce, and the Supreme Court hearings are just a short time away.
What We Know Under Current Law
While we now understand there’s a void of information that employers may use as the basis for long-term benefit strategy, we thought it would be helpful to summarize some of the future elements of reform law.
- Reporting Health Coverage Costs on W2 — Beginning for the calendar year ending
December 31, 2012, employers must disclose the value of the benefit provided by the employer for each employee’s health insurance coverage on the employee’s annual Form W-2.
- Health Flexible Spending Accounts (FSA) — Limits the amount of contributions to health FSAs to $2,500 per year, indexed by the Consumer Price Index for subsequent years.
- Employer Part D Subsidy — Eliminates the tax deduction for the federal subsidy received by employers that sponsor a creditable prescription drug plan.
- Individual Responsibility — Requires most individuals to obtain acceptable health insurance coverage or pay a penalty.
- Free Choice Vouchers — Provides vouchers for the purchase of individual health insurance to qualified individuals.
- Play or Pay — Requires employers that adopt medical plans to meet minimum design standards or pay a penalty. For those offering plans that meet minimum standards but have employees who instead opt into the exchange, employer penalties are greater.
- Clinical Trials — Prohibits insurers from dropping or limiting coverage because an individual chooses to participate in a clinical trial related to the treatment of cancer or other life-threatening diseases.
- Annual Limits — Prohibits group plans from imposing annual dollar limits on the amount of coverage an individual may receive.
- Pre-Existing Conditions — Prohibits insurance companies from refusing to sell coverage or renew policies because of an individual’s pre-existing conditions. Also eliminates the ability of insurance companies to charge higher rates due to gender or health status.
- Small Business Health Insurance Tax Credit — Credit up to 50 percent of the employer’s contribution to provide health insurance for employees. Small nonprofit organizations would receive a 35 percent credit.
- Excise Tax on High Cost Employer-Provided Health Plans — Tax is on the cost of coverage in excess of $27,500 for a family and $10,200 for an individual.
Regardless of the outcome of the Supreme Court’s hearings on the constitutionality of the individual mandate, it’s highly unlikely that reform will be repealed or significantly changed any time soon. After all, we’re at the beginning of a presidential election campaign and, generally, that means modest legislative changes, at least until we know the election outcomes. Therefore, reform is the law of the land, and until there’s legislated change, it’s here to stay.
|Want To Learn More?
Members of Plante Moran Group Benefit Advisors periodically host webinars on related topics, including “The State of Healthcare Reform: Preparing for 2014,” designed to help participants understand the key milestones in healthcare reform and prepare accordingly. To view a past webinar or sign up for an upcoming one, visit our webinar page!