Despite a number of hiccups and delays, the implementation of Obamacare is continuing to move forward as the federal government releases guidance to help clarify different aspects of the Affordable Care Act (ACA).
With a major decision deadline just months away, companies should already be working to decide if they will be providing health care coverage to workers, and if so, what their plan will look like.
Employee Health Coverage Notices
In January 2014, the employer mandate portion of Obamacare will go into effect, requiring certain employers to provide health insurance to employees. However, employers must act before then as they must distribute health coverage notices to all employees by October 1, 2013. The requirement applies to any company subject to the Fair Labor Standards Act (FLSA), regardless of whether or not the company plans offer health care coverage. The FLSA generally affects employers that employ one or more employees and have at least $500,000 in annual revenue.
One of the key concerns is that the notification requirement pushes employers to decide this fall whether or not they plan to offer health care coverage. Although employers can change their minds in the future about offering coverage, the notification requirements are different if a company plans to offer coverage than if it does not. At a minimum the notification must include the following:
1.) The existence of the marketplace, the services it offers, and how employees can contact the exchange.
2.) Inform employees of their eligibility for a premium tax credit if the employer’s plan does not cover at least 60% of the total allowed cost of benefits and the employee buys qualified health coverage through an exchange.
3.) Explanation that if an employee obtains coverage through a marketplace, the employee will lose the employer’s contribution and corresponding tax benefits.
The U.S. Department of Labor (DOL) has issued guidelines and sample notices that employers can use although there are places where companies may need to make changes based upon its health coverage. Make sure to evaluate the model language and discuss with your health care consultant to ensure you are compliant.
The form for employers offering coverage must include information on eligibility requirements, whether dependents may obtain coverage, a statement explaining if the coverage meets the minimum value standard and whether the cost of the coverage is intended to be affordable based on the employees’ wages. The notices also ask for but do not require additional information, such as waiting periods and plan changes forecasted for the coming year.
All existing employees must be notified by October 1, 2013 while new employees hired after that date must be notified within 14 days of the employee’s start date. The notice must be provided in a way to be understood by the employee. Notices can be sent by mail or electronic distribution if certain requirements are met.
Delay in Exchanges
Implementing the insurance exchanges required by ACA is an astronomical undertaking, one that both the federal and state governments have found nearly impossible to do by the required deadlines. Therefore, it was no surprise when the Obama administration recently announced that the Small Business Health Options Program (SHOP) insurance exchanges in many states will not be fully operational during the first year.
Currently, most small employers do not buy coverage online. Instead they rely on an insurance agent to help them with coverage options. The SHOP exchanges are intended to make insurance coverage easier for small businesses to compare plans.
“In these new SHOP exchanges, there will be a website that displays health plan choices for small employers,” said Karen Pollitz, a senior fellow at the Kaiser Family Foundation, a non-profit research foundation that focuses on health care issues. “It will display them in a consistent way so that it will be pretty easy to compare plans.”
A key component of the SHOP exchanges that was used to garner support for the model was including an employee choice model. This would allow employers to offer a plan that meets the minimum value requirement of the ACA, but also allows employees the choice of upgrading to other plans. However, the U.S. Department of Health and Human Services (HHS) said that SHOP exchanges will not have to offer the option for employees to choose their own coverage plan until 2015. In the same announcement, HHS said that in the states where SHOP exchanges are being run by the federal government the employee choice feature would not be available until 2015. This means that some states that are running their own exchanges will offer the employee choices of coverage, but most states will not.
“This transitional policy is intended to provide additional time to prepare for an employee choice model and to increase the stability of the small group market while providing small groups with the benefits of SHOP in 2014,” explained HHS.
For employers in states with federally-facilitated exchanges or states that choose to delay the employee choice model, they will have to choose a single plan to offer their qualified employees for the first year that the SHOP exchanges are running.
A big question is whether small employers will choose to buy from the exchange or continue to get coverage from outside. While the exchange might make it easier for employers to compare plans themselves, many small business owners might not want to take time that could be used to run their business and use it to compare insurance plans.
“In Massachusetts where small group coverage has been offered through their exchange for several year now, it continues to be the case that most small employers buy outside the exchange,” said Pollitz.
Starting next year, certain small business tax credits for buying health care coverage will only be available for coverage bought on the exchange, which may provide some incentive for small businesses to purchase their coverage from the exchange. However, these are only available for certain small businesses and only last for a couple more years.
Even if a company chooses to purchase coverage through an agent rather than an exchange, it should utilize the exchange to do some price comparison and make sure that it is getting a cost-competitive plan.
“Even if they don’t participate in the exchange they’ll certainly be able to log onto the website and see what’s for sale in the exchange,” said Pollitz. “So they’ll have a lot more information independently available to them about the kind of coverage that is for sale.”
Wellness Programs
The government also has released final regulations on worksite wellness programs under the ACA. With $200 million appropriated through 2015 in grants for businesses that develop and implement a comprehensive wellness program, some companies are considering implementing one as a way to save on health care costs. To be eligible for the grants, a company must not have had a worksite wellness program in place before March 2010 and have less than 100 employees that work 25 hours or more per week.
The new regulations, which apply to plans beginning January 1, 2014, divide wellness programs into two broad categories – participatory wellness programs and health-contingent wellness programs. Participatory wellness programs are defined as programs that either do not provide a reward or do not include any conditions for obtaining a reward that are based on an individual satisfying a standard that is related to a health factor. In contrast, health-contingent wellness programs require an individual to satisfy a standard related to a health factor to obtain a reward. This standard may be performing or completing an activity relating to a health factor, or it may be attaining or maintaining a specific health outcome.
Under the regulations, health-contingent wellness programs are required to:
• Give employees the opportunity to qualify for the reward at least once per year,
• Not give a reward that exceeds 30% of the total cost of employee-only coverage under the plan, or 50% if the program is designed to prevent or reduce tobacco use,
• Make the reward available to all similarly situated individuals, which requires providing a reasonable alternative standard to any employee for whom satisfying the standard is unreasonably difficult due to a medical condition,
• Have a reasonable chance of improving the health of or preventing disease in participants,
• Disclose in all plan materials describing the terms of the program the availability of other means of qualifying for the reward or the possibility of waiver.
There was some concern among business groups when these regulations were first proposed that the requirement to provide an alternative standard would essentially require employers to provide personalized wellness programs with unwarranted levels of customization based on each employee’s individual circumstances. However, the final regulation clarified that the alternative could be very similar to the original standard, which gives employers more flexibility than under previous wellness program standards. How this could have impact program costs is not yet known.
“While the rules helpfully distinguish between activity-only and outcomes-based wellness programs that offer incentives, the reasonable alternatives that must be made available for outcomes-based wellness programs are broader than the current reasonable alternatives under HIPAA and those that apply to activity-only wellness programs and do not require medical justification,” said Steve Wojcik, vice president of public policy at the National Business Group on Health. “This is a new requirement and it remains to be seen how much it will affect wellness program costs, the ability for wellness programs to move the needle on health, and the willingness of employers to continue to offer outcomes-based wellness programs.”
Minimum Value Determination
Guidelines on how to determine whether health coverage under an eligible employer-sponsored plan provides minimum value have been released. Health care plans provided by companies that fall under the employer mandate must meet the minimum value standard, which the ACA defined as covering at least 60% of the total allowed costs of benefits provided under the plan. There will be three ways to determine minimum value:
1.) Minimum Value Calculators: Employees can enter information about a plan into an online calculator made available by HHS. The calculator is available now at http://www.cms.gov/cciio/index.html.
2.) Design-Based Safe Harbor Checklists: The government plans to issue checklists that would give certain employer-sponsored plans an easy way to determine whether a plan provides minimum value without performing any calculations or the need for actuarial expertise. If the employer-sponsored plan’s terms are consistent with or more generous than any one of the safe harbor checklists, the plan would be treated as providing minimum value.
3.) Actuarial Certification: Plans with certain nonstandard features would also have the option of engaging a certified actuary to determine the plan’s actuarial value without the use of a calculator.
For companies that are unsure how to prepare for new health care rules and penalties set to take effect next year, the Pallet Enterprise previously published the Obamacare Decision Tree to assist with answering common questions and provide a good picture of where they stand and what strategies to consider in the April 2013 issue. It is also available online at http://www.palletenterprise.com/ObamaCareFlowChartpeApril2013.pdf
