Tag Archives: healthcare reform

Employer Health Care Benefits — Preparing for 2018


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I last wrote about health care in late March, shortly after the House of Representatives failed to bring the American Health Care Act (AHCA) to a vote. Since then, after a few amendments, the House did pass the AHCA, but with all the other brouhahas in Washington over the last few weeks, it’s questionable whether the Senate will get to health care anytime soon.

There are some good provisions in the AHCA as passed by the House. Among other things, the AHCA makes the following changes to Obamacare:

  • The individual mandate was repealed, as was the employer mandate;
  • The 2.3% medical device tax was repealed;
  • The net investment tax was repealed, as was the .9% Medicare high earner tax;
  • The Cadillac tax for expensive plans was delayed (and will probably never be permitted to take effect, since neither Republicans nor Democrats like this provision); and
  • Health Savings Accounts were expanded, effective in 2018

All of these provisions provide less government control over the health care marketplace. In the long run, these changes would generally be helpful for employers.

Still, as most people recognize, without an individual mandate, some incentive is necessary to get healthy people to opt into health insurance before they get sick and to maintain that coverage. The AHCA continuous health insurance coverage incentive replaces the individual mandate penalty. This incentive operates much like HIPAA certificates of coverage. As long as they do not let their health insurance lapse for more than 63 days, individuals cannot be charged higher premiums because of preexisting conditions. Moreover, the premium penalty for the first plan year cannot exceed 30%.

There is an exception to this 30% limit, but the exception permits insurers to charge late enrollees with pre-existing condition higher premiums only if the state has waived the community rating rule and the state has established a high-risk pool to help people with preexisting conditions fund their coverage.

The AHCA is far from a perfect bill, and it is likely to face substantial amendments in the Senate before it comes to a vote in that chamber. And Congress has many other priorities this session as well. So what will happen with respect to health care legislation by the end of the year is anyone’s guess.

Nevertheless, we are at the time of year when many employers are examining their options for health plans for their employees for the year ahead. What should employers do in this time of uncertainty?

Obamacare, the Affordable Care Act, is still the law, so until Congress acts, employers must comply with the mandates and reporting requirements. With the individual mandate in place, employees will want to know their employer-provided health care options in a timely fashion.

Moreover, although the Cadillac tax has been kicked down the road and its ultimate implementation is uncertain, avoidance of the tax—or preparation for it—will take time to structure.

For 2018 at least, the current employer responsibilities are likely to remain in place. Employers must continue to manage their benefit plans, tweaking them as makes most sense for their workforce. There remain many reasons why employers should support their employees’ health and wellness if they want to be employers of choice.

Employers, what concerns you the most about health benefits in 2018?

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Obamacare and the CBO Report: The Truth Is in the Middle


800px-Capitol_Building_Full_ViewLast week’s kerfuffle over the Congressional Budget Office (CBO) report on Obamacare, like most kerfuffles, had some truth on both sides of the debate. The CBO report says that the equivalent of 2 million full-time jobs will disappear by 2017, and 2.5 million by 2024, in part because people choose not to work at all or to work fewer hours. Is this a liberation of the oppressed American workforce or a death-knell to the American work ethic? Obviously, it is neither completely.

The Affordable Care Act grants subsidies to lower and middle income families to buy health insurance on the exchanges. Subsidies are just a way to give people money, albeit money with restrictions. In this case, people get the money (the subsidy) only if they buy insurance.

If you give people money, they have more choices. People will always choose to use the money in ways that they think will benefit themselves. Some of their choices also benefit society, and other choices do not.

Source: National Cancer Institute

Source: National Cancer Institute

With respect to healthcare, most people have had their health insurance subsidized by someone in the past.  Many received subsidized health insurance from their employers. Many others were covered by Medicare or Medicaid government subsidies. Only those on the individual market who could not tap into a high-risk pool paid for the insurance entirely on their own.

The Affordable Care Act now grants many people another government-subsidized option—health insurance purchased through the federal and state exchanges. So what choices are likely to make as a result of this new option? And will those choices benefit society or only the individuals involved?

  • People will quit jobs they don’t like because they no longer need employer-subsidized healthcare. This is the “benefit” described in the CBO report that the Democrats are touting.

It is true that many employees have stayed employed at a particular workplace only because they need health insurance. Prior to the ACA, employees younger than 65 may only have had the choice of employer-subsidized health insurance or unsubsidized private insurance that they thought cost too much. A second earner in a household might have been working primarily to provide health insurance, rather than because the family needed the salary. Those with pre-existing conditions didn’t feel they could get insurance if they changed jobs or quit work.

So “job lock” is real. Anyone who has worked in Human Resources or managed a workforce knows that many employees would rather be doing something other than working, and often their motivation for staying is related to insecurities around healthcare.

To the extent that the ACA has de-linked health insurance from the workplace, Republicans should extol this benefit. The problem is that the ACA doesn’t de-link insurance and employment. The ACA in fact imposes substantial penalties on employers if they do not continue to provide health insurance to employees. The ACA provides subsidies to employees but increasing costs on employers.

  • People will work less to keep their ACA subsidies. This is the impact of the ACA described in the CBO report that Democrats ignore and Republicans squawk about.

Many government programs give money to people but reduce the amount they receive as their income increases. Most of those programs therefore cause people to question whether they are better off maximizing their government payments or maximizing their income. Some will choose to work less to receive a larger payment from the government. Clearly, ACA subsidies will cause some of this behavior.

Moreover, it appears from the CBO report that lower income workers are more likely to decrease their work hours in response to the ACA. That is because they receive the greater subsidies, and the trade-off between their salaries and their ACA subsidies is more likely to favor the subsidy.

These choices to take the subsidy rather than work more for pay may benefit the individual, because non-working hours are valuable for family, hobbies, and other personal priorities. But the choices do not benefit society, unless someone else performs the same work for less pay or more work for the same pay. If productivity from new workers does not increase sufficiently to cover the cost of the subsidy, then society is worse off.

Even most conservatives believe that some redistribution of income to the poor through government programs is desirable; the question is how much. While I don’t think the ACA itself is the tipping point, I do believe that it will incent some people who could work more to instead work less, and in many cases, that will not benefit society.

So the CBO report contains ammunition for both sides of the Obamacare debate. While I believe the conservative arguments in response to the CBO report are over the top, I also believe that the liberal arguments are ignoring the very real likelihood that the ACA subsidies will decrease productivity.

The bottom line is that after the CBO report, the political argument around the ACA remains what it always has been—a debate on the role of government. Is it better for people to work less and receive more government support at taxpayer expense, or is it better to spend less on government programs and make people cover more of their expenses themselves? Should we redistribute income or not?

For employers, however, Obamacare is still bad news. Employers remain on the hook to provide subsidized health insurance to their workers or face substantial penalties. Moreover, the disparate taxation of employer-provided healthcare and privately purchased healthcare continues. In these ways, the labor market continues to be skewed, and therefore I still believe that the ACA has not moved healthcare in this country in the right direction.

For one of the more reasoned discussions of the CBO report, see Obamacare: ‘Job-killer’ or freedom from ‘job trap’?, by Linda Feldmann, Christian Science Monitor, February 6, 2014.

For a good articulation of the philosophical arguments on the role of government, see Leaving Work Behind, by Ross Douthat, New York Times, February 8, 2014.

What are you hearing from your employees about the Affordable Care Act these days?

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Next Week’s Launch of the ACA Healthcare Exchanges


doctor holding an injectionIn August I wrote about the ACA navigators and the difficulties of getting them ready to enroll people in healthcare plans through the healthcare exchanges that launch on October 1. Now we are just a week away from opening these healthcare exchanges.

As of last Friday, problems were still surfacing. The Wall Street Journal reported on September 20 that the software programs in many exchanges had glitches in reporting the pricing of the plans sold on these exchanges. See Pricing Glitch Afflicts Rollout of Online Health Exchanges, by Christopher Weaver, Timothy W. Martin, and Jennifer Corbett Dooren, September 20, 2013.

Although I am not a fan of Obamacare generally, I do support the concept of healthcare exchanges. I think it is a good idea to help consumers compare the costs and terms of plans available to them in the marketplace.

The transparency in pricing various healthcare plans that exchanges provide is helpful. If we could also get transparency from doctors and hospitals and other healthcare providers, we might begin to get some control over healthcare costs.

My beef with the exchanges is that I don’t like the federal government running them—nor the states, for that matter. I prefer the private exchanges that are springing up, such as those offered by Aon, Aetna, and other insurers. I trust private entities to run these exchanges more efficiently and accurately than the government.

Nevertheless, I hope that the public healthcare exchanges get off to a good start. I just don’t think it is likely that they will, given their slow start.

My real problems with Obamacare lie in the minimum essential coverage requirements and the affordable coverage requirements. I believe that a wider variety of plans should be available to consumers, so that we can pick among a broad range of healthcare insurance products that best meet our families’ needs.

HHS sealInstead, Obamacare has imposed countless requirements in a variety of healthcare areas. Those regulations are still being issued, even as the law goes into effect. Nancy Pelosi’s famous statement that Congress would have to pass healthcare reform to know what’s in it wasn’t even accurate—it is only once Health & Human Services issues final regulations that we really know what is covered.

Meanwhile, the uncertainty that employers have in what their costs will be have been—and will continue to be—a drag on their decisions to hire and increase employees’ hours and wages.

Although I am hopeful that the launch of the exchanges will go smoothly, I do not expect it. I expect continued confusion in the healthcare arena for years to come.

What do you expect around the launch of the Affordable Care Act, in the short term and the long term?

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Navigating Obamacare


Like Every Function, To Be Strategic, HR Must Bring Expertise to the TableMost Human Resources professionals have been through a benefits open enrollment season at some point in their career. Many have presented at numerous open enrollment meetings to explain to employees what their benefits options are.

Employees always have more questions about their health benefits during these meetings than HR has thought about in advance. And this is particularly true when a company is changing insurance carriers or making substantial revisions to what is covered or to the costs to employees.

HR can never anticipate every nuance or issue that might apply to a particular employee’s situation, even though those who present at open enrollment meetings have usually been involved in the benefit plan design and/or have had substantial involvement in negotiating plan terms with their carriers.

Pity the poor “navigators” who will have to explain Obamacare to the millions of people who will need to enroll through the healthcare exchanges so they do not incur a penalty (which the Supreme Court called a “tax”) for failing to have insurance come January 1, 2014.

According to Amy Schatz in the Wall Street Journal on August 7, 2013,

“Grants to hire and train the workers aren’t expected to be released for another two weeks for the 34 states where the federal government is running all or part of the marketplaces, which will offer insurance to those who don’t get it on the job or from Medicare or Medicaid. That leaves just 32 business days to hire and train thousands of helpers in these states.”

As an HR professional, would you want to hire and train people in the intricacies of enrolling millions of people in plans that are newly designed – and maybe still in design – using a new online enrollment system? All in thirty-two days?

What are the odds of being able to hire “navigators” who can explain the enrollment system to enrollees who may never have used a computer before? Or who can explain the terms “co-pay” and “third-tier drugs” to people who have never had health insurance before?

HHS sealAnd with only twenty hours of training, what are the odds these poor navigators will know what to do when the first customer calls?

HHS had better hope that the scripts written for their new hires are well-written. But if the scripts are anything like the HHS regulations, the system is doomed from the beginning.

Or perhaps the Administration will rewrite the Affordable Care Act to delay implementation of the individual mandate until 2015, as it has the business mandate.

What do you think the impact of the Affordable Care Act will be on your organization, as of January 2014?

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Supreme Court’s Upcoming Opinion in Fisher v. University of Texas Could Impact Employers


June is traditionally the month when the Supreme Court issues its blockbuster opinions. Last year, the case with the biggest impact on employers was the Affordable Care Act opinion, in National Federation of Independent Business v. Sebelius, which upheld the health care reform law, albeit by calling the individual mandate a tax, which Congress had refused to do.

This year, the Court’s opinion in Fisher v. University of Texas, is one that could make a difference for employers and their current and future employees. The Court could issue this opinion as early as June 3, but it will come by the end of the month for certain.

The issue in Fisher is whether the Court’s earlier decisions interpreting the Equal Protection Clause in an educational context permit the University of Texas to use race in undergraduate admissions decisions they way they did. Plaintiff Abigail Fisher, a white applicant who was rejected by the University of Texas, says she was the victim of “reverse discrimination,” while the University says that its desires to increase diversity in the student body and to remedy prior discrimination permit the University to use race as a factor in its undergraduate admissions criteria.

Justice Kagan has been recused, so only eight justices will vote in the case.

Middle Managers Squeezed by Change: How to CopeAlthough college admissions and employment actions such as hiring and promotions are different, there could be a spillover effect from the Fisher  opinion into the workplace.  In the past, many employers have looked at the Court’s affirmative action requirements in educational cases to develop their diversity initiatives. To the extent that employers want to increase diversity in their workforce for business reasons, rather than merely to remedy the effects of past discrimination in their hiring practices, the Court’s opinion in Fisher may limit  or, less likely, expand – what employers can do.

Moreover, many employers that are government contractors are required to develop affirmative action plans, and sometimes diversity initiatives, to satisfy Executive Order 11246 and other discrimination regulations.  These affirmative action programs are enforced by the U.S. Department of Labor Office of Federal Contract Compliance Programs (OFCCP). The OFCCP will certainly be bound by the Supreme Court’s constitutional interpretation in Fisher. Employers subject to OFCCP regulations may need to change their affirmative action plans and diversity initiatives to comply with new OFCCP requirements.

Other voluntary diversity programs that employers maintain may also become subject to more scrutiny and litigation by disgruntled employees. There has always been a tension between Title VII of the Civil Rights Act of 1964 and other non-discrimination statutes, which tell employers not to discriminate and which permit claims for reverse discrimination by white and male employees, and the affirmative action requirements of Executive Order 11246, which say that race and gender must sometimes be considered in workplace decisions.

Private employers seeking to promote diversity may be given more leeway than public institutions that are subject to the Equal Protection Clause, but it will be interesting to see how broad the Court’s decision in Fisher will be. Some commentators believe that the Supreme Court will differentiate between affirmative action requirements in the educational context and in the employment context. Those commentators believe the Fisher case “ought to have no impact on Title VII.”

It is true that employment law is largely statutory and is based on Title VII of the Civil Rights Act and similar anti-discrimination laws. Therefore, employers will have to closely analyze the Fisher decision to determine whether it has a spillover effect on employment. However, in my opinion, employers can anticipate that employees and applicants will pursue attacks on diversity initiatives they think have disadvantaged them, until the post-Fisher rules become clear.

For more on this topic, see Affirmative action in employment, by John P. Furfaro, Risa M. Salins & Madeline Stavis, Skadden, Arps, Slate, Meagher & Flom LLP, April 11, 2013, and Race Case Outcome Could Affect Applicant Pool Diversity, by Allen Smith, October 12, 2012.

How do you think the Supreme Court’s opinion in Fisher will impact the future diversity of our workforce?

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If You Liked Your Health Plan Before Obamacare, Sorry, You Can’t Keep It


presidential sealIn an op-ed in the Wall Street Journal on February 1, Daniel Kessler described four promises behind the Affordable Care Act (ACA, popularly known as “Obamacare”) that had not been fulfilled. This post focuses on the third broken promise Kessler mentions – “If you like your health care plan, you can keep it.” The Obama administration began breaking that promise almost as soon as the ink was dry on the President’s signature.

1.  Grandfathering Rules

The ACA contained grandfathering provisions designed to let employer plans avoid compliance with some of the requirements of the ACA. However, the regulations defining which plans could be “grandfathered” permitted only minor changes in healthcare plans. If a plan made any significant changes in deductibles, coverage, or other provisions, the plan could not be grandfathered.

The grandfathering rules essentially forced plans to choose between cost containment and avoiding the ACA requirements. Moreover, according to William M. Freedman of Dinsmore & Shohl LLP on the Association of Corporate Counsel website, fully insured plans wouldn’t even have the choice, because major insurers had decided not to sponsor two sets of plans – grandfathered and non-grandfathered.

Even for self-insured plans, the costs of attempting to maintain their grandfathered status are likely to be too great.  In fact, just a few months after passage of the ACA, the Administration predicted that there would be few grandfathered plans left standing by 2014, when the major provisions of Obamacare kick in:

 “[T]he Departments’ mid-range estimate is that 66 percent of small employer plans and 45 percent of large employer plans will relinquish their grandfather status by the end of 2013. The low-end estimates are for 49 percent and 34 percent of small and large employer plans, respectively, to have relinquished grandfather status, and the high-end estimates are 80 percent and 64 percent, respectively. Federal Register, June 17, 2010, page 34552.

So much for keeping the plan you liked.

2.  “Essential” Health Benefits, Even When They Conflict with Employer Values

HHS sealIf a plan isn’t grandfathered, it must change to meet the ACA requirements. The Department of Health & Human Services has now begun defining the “essential health benefits” that must be covered under the ACA. Most preventive care is now required under every employer health care plan, and must be provided free to participants. While there are good reasons to believe that preventive healthcare in the long run saves money, these requirements do not serve every employer’s workforce, and at least in the short term, they drive up costs.

As the non-partisan Institute of Medicine noted in its recommendations to HHS, “If cost is not taken into account, the [essential health benefits] package becomes increasingly expensive, and individuals and small businesses will find it increasingly unaffordable. If this occurs, the principal reason for the ACA—enabling people to purchase health insurance and thus covering more of the population—will not be met.”

We’ve all heard about the conflict last summer over the overly narrow religious exemption from the requirement that birth control and abortifacients be covered as preventative care for women. Last week HHS issued yet another attempt at a compromise, which might meet the objections of non-profit employers, but does nothing to satisfy businesses whose owners have similar beliefs.

Birth control is not the only subject that has ethical implications. Blood transfusions are another category, as one case in Kansas demonstrated.   Many Christian Scientists do not take medicine or get preventive or other forms of medical treatment.

The point is that under the ACA, employers are not permitted discretion to design benefit plans that they subsidize in ways that do not contradict their moral principles. Once again, if you liked the health plan you had before ACA, you won’t be able to keep it.

3.  Mandatory Subsidies, But Not Too Much

In 2014, all employers with more than 50 employees will be required to provide subsidized health insurance to their employees. The law requires these employers to pay at least 60% of the covered health care expenses of a typical population, and it requires that employees cannot be required to pay any more than 9.5% of their family’s income for the employee’s coverage. Otherwise, the employer owes a penalty for not offering affordable coverage.

But if the subsidy is too large, the plans will ultimately be “Cadillac plans.” A Cadillac plan is any plan that costs more than $10,200 a year for single coverage and $27,500 for family coverage (adjusted for inflation), including both employee and employer contributions to flexible spending and health savings accounts. Beginning in 2018 employers will pay a 40% tax on premiums for such plans.

I seriously doubt that there will be many plans that can provide all the coverage mandated under the ACA, while not charging employees more than 9.5% of their pay for the plan, while not providing too great a subsidy so that the plan is a “Cadillac.” Towers Watson predicts that more than 60% of large employers’ current health plans will be subject to the tax, unless the plans are changed.

Keep the plan you like? Not if it costs too little. Or too much.

* * *

With every issuance of new regulations it becomes more and more evident that the Obama Administration is doing everything possible to fit employer benefit plans into a “one-size-fits-all.” When, in fact, this size may not fit a particular employer or its employees. It certainly does not agree with the originally expressed view that “if you like your health care plan, you can keep it.”

More and more employers will opt not to provide any healthcare at all. They will either keep their workforces under 50 employees (see here for an interesting concept that is likely to grow), or they will choose to pay the penalty as cheaper than administering a healthcare plan that doesn’t suit anyone.

Ultimately, we will all be on government-run plans. Which might have been the intent all along.

How do you see employer healthcare plans changing in response to the ACA?

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Employers, Be Strategic In Implementing Health Care Reform


The Affordable Care  Act (ACA) is here to stay, commentators all agree. There might be some adjustments at the margin – possibly Congress will eliminate the medical device tax; maybe Congress will permit Flexible Spending Accounts and Health Savings Accounts to be used for over the counter drugs.  But the essentials of the ACA will remain, including the individual and employer mandates.

The purpose of this post is not to detail the many compliance issues that employers must satisfy under the ACA. Suffice it to say that employers of all sizes need to be aware of their obligations in 2013, and the even greater obligations facing them in 2014, when the major provisions of the act become effective. Employers should consult their legal counsel, brokers, and other benefit plan experts to determine what they must do to comply with the ACA.

Instead, this post is intended to provoke employers to think strategically about how they want to structure their health insurance plans for employees.  I recently participated in an Aon Hewitt conference call in which their healthcare experts advised that compliance and corporate strategy are two different things, and employers need to focus on both.

Many corporate leaders deplore the need to be experts in health insurance and plan design issues, because it detracts from their focus on their companies’ products and services to customers. Nevertheless, most executives recognize how important the health and engagement of their workforce is. As they implement the ACA, companies will become more involved in healthcare decisions, not less. Wise employers will deal with the problem strategically.

HR, Finance, and other executives at companies of all sizes should discuss:

  • Do we want to build unique health insurance plans designed specifically for our workforce? What are the major healthcare needs of our employees? What employee behaviors are driving our healthcare costs, and how can we incent healthier behavior?
  • Do we want to build or join a private healthcare exchange to provide our employees with more  choices? Would we rather push employees into state or federal healthcare exchanges to reduce our involvement in structuring healthcare plans?
  • Should we structure our jobs to maximize the number of part-time employees for whom we do not need to provide health insurance? What will the implications be for employee satisfaction and for our operational efficiency?
  • How do we segment our health insurance offerings and our communications for various groups within our workforce?

Now that the ACA has survived the Supreme Court and the electoral process, employers must focus on their roles in its implementation. But they shouldn’t ignore their companies’ strategic needs as they do.

Complying with the ACA is one thing. Making the right strategic decisions for your workforce is another. Be sure you do both.

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