Smart Benefits: Employers Are Tangled Up in Healthcare Reform

Monday, April 29, 2013


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Healthcare reform means different things to different people. For the uninsured and those who will benefit from the premium subsidy, it means a welcome access to coverage. For employees who have coverage through their employers, it doesn’t mean too much right now, but come January, they may or may not have coverage, depending on their employers’ decisions. And for employers, it means confusing, time-consuming compliance challenges.

The Compliance Bar Raised in 2013

The federal healthcare reform law has been rolled out to employers in stages since its inception in 2010. But with the Exchanges readying for start dates of January 1, 2014, this is proving to be a critical year for employers, who must understand the requirements and decide whether to offer coverage.

The Impact on Small Employers

Small employers with fewer than 50 employees don’t face the financial penalties larger employers do, whether for not offering coverage or not offering affordable, minimum value coverage as defined by the federal government. But if small employers drop coverage, there are still consequences to their employees, and most likely, to their business.

  • Attrition: While some employees will receive a public subsidy through the Exchanges if their household income is low enough, those with higher incomes will be responsible for paying 100% of the cost of coverage. As a result, a business owner who decides not to offer coverage may lose employees to companies who offer health insurance, or pay higher wages to retain them.
  • Lost Deductions: Employers may lose tax deductions if they don’t pay insurance premiums.
  • Counting Hours: Since full-time status will be refined as 30 hours, smaller employers with a high volume of seasonal and/or temporary workers must track the number and duration of part-time workers to avoid paying these workers benefits. Those who can’t afford to cover more workers may take one of two paths: hire more part-time workers so no one employee ever exceeds 29 hours, OR, depending on the industry, never hire part-time workers again. The danger of both situations is the impact on the overall economy long-term.

Large Employers, Large Fines

Large employers will pay fines for not offering coverage and for offering coverage that’s neither affordable or of minimum value. Many large employers agree the penalties are lower than their current costs to insure employees, making dropping coverage more appealing. However, fear of the consequences of not offering coverage, namely morale, must be factored in to the decision. 

It’s Complicated

Whether you’re a smaller employer with large seasonality issues who will be forced to measure full-time status in a new way, or a large employer who is struggling to understand how to measure plan affordability and minimum value of plan designs under vague guidance, every employer will face unprecedented complexities and financial consequences.

Add to the dialogue the still somewhat cloudy idea of the health benefit Exchange and the responsibility of employers to educate employees during an October open enrollment and likely premium increases for 2014 and anxiety is mounting for Rhode Island companies.

For all of its promises, for many employers, the impact of healthcare reform this year will be more of a tangled web. 

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Amy Gallagher has over 19 years of healthcare industry experience. As Vice President at Cornerstone Group, she advises large employers on long-term cost-containment strategies, consumer-driven solutions and results-driven wellness programs. Amy speaks regularly on a variety of healthcare-related topics, is a member of local organizations like the Rhode Island Business Group on Health, HRM-RI, SHRM, WELCOA, and the Rhode Island Business Healthcare Advisory Council, and participates in the Lieutenant Governor’s Health Benefits Exchange work group of the Health Care Reform Commission.


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