The intention was simple enough. Provide Americans with affordable, accessible health care. And now after four years and almost 20,000 pages of legislation and regulations, the Affordable Care Act (ACA) has turned healthcare stakeholders on their heads.
Employers, employees, hospitals, physicians, insurance carriers, prescription drug manufacturers, medical laboratories and state governments are all on high alert, frightened and perplexed regarding the new changes and their ultimate impact. Vague governmental directives and multi-agency overlap including HHS, DOL, the IRS and others, have got many decisionmakers scratching their heads. In fact, under the ACA, there will be 159 tax subsidized government agencies involved in executing the new legislation.
Prohibitive administrative costs, complex health insurance technology involving the aggregation of millions of pieces of secure data, carrier data exchanges, ever-changing medical inflation updates and "college loan-like" application process for individual coverage have many people wondering how the Exchanges will simplify anything.
Federal Health Insurance Exchange
As the ACA continues to roll out in 2013 and beyond, large and small carriers alike will pick and choose where they intend to solicit new customers and evaluate the competitive products and pricing in each and every marketplace, while the government faces astronomical administrative costs. The HHS' initial $2 billion estimated cost to construct the Exchange has now risen to $4.4 billion and is slated to reach $5.7 billion in 2014. Managing the gargantuan website will certainly cost additional billions without question for perpetuity.
This begs the question: how can employees and employers prepare for the unknown on a practical basis?
Fundamentally, health insurance premiums are the reflection of health care utilization. On average, 80 cents of every health insurance dollar is attributable to consumers accessing their health care system. Access can be anything from diagnostic tests like an MRI or X-ray, inpatient or outpatient surgery, emergency care or prescription drugs. It all starts with the consumer.
For these individual consumers or employees, there are a few tried and trusted suggestions for managing health care options that apply not just to the upcoming legislative changes but for almost any situation.
TIPS for INDIVIDUAL CONSUMERS and EMPLOYEES
1. FOCUS ON YOUR HEALTH
Obesity, substance abuse, stress and sedentary lifestyles have all contributed greatly to rising health care costs. Living a healthy lifestyle may seem obvious but we have an entire generation of baby boomers whose high risk lifestyles and subsequent high cost health costs provide a cautionary tale. An American population getting older and sicker does not bode well for health care cost reductions any day soon.
2. KNOW YOUR HEALTH CARE PLAN
As a result of the ACA and additional options that will become available to individual consumers, it is critical we all become more engaged and educated about our health care options. Understanding that accessing an Urgent Care Center and paying a $30 specialist co-pay could be a wiser choice than running to a hospital facility with a $200 emergency room visit fee is just one of many "better than" choices.
3. ENROLL IN OR UTILIZE AN FSA (FLEXIBLE SPENDING ACCOUNT)
For medical expenses that are not covered by your health plan, FSA dollars are a tax- free option for costs that you know you will incur.
4. UTILIZE CARRIER PROVIDED RESOURCES
Employer-provided resources, such as carrier case managers or 24 hour RN nursing support hotlines, can serve as "no cost" support systems.
5. KNOW THE HEALTH CARE ENVIRONMENT
Access health reform websites which can clarify your health insurance options. Healthcare.gov is just one of many reliable and up-to-date resources.
6. ATTEND OPEN ENROLLMENT MEETINGS
Attend and participate in employer sponsored open enrollment meetings. In the past many employees avoided these annual affairs unless they were mandatory. In light of all of the impending changes associated with the ACA these meetings can become a valuable learning experience for employees and spouses.
7. KNOW YOUR PRESCRIPTION DRUG OPTIONS
Generic drugs and mail order prescription plans can save you and your family hundreds, if not thousands, of dollars each year.
TIPS FOR EMPLOYERS
There are a number of options available for employers whose objective is to control employee benefit costs and, at the same time, maintain employee morale. Since the recession of 2008, many HR departments have been tasked with communicating wage freezes, eliminating or reducing 401 (k) matches, increasing health insurance deductibles and premium payroll deductions.
Below are options that employers can use to combat escalating health care costs and government mandates.
1. CONSIDER OFFERING CONSUMER DIRECTED HEALTH PLANS
A high deductible health plan along with a health savings account (HSA) or health reimbursement arrangement (HRA) may prove to be viable alternatives. HRAs may be more suitable for the average employee in the lower to middle income range.
2. EDUCATE EMPLOYEES
Encourage employees to access "in network" providers, urgent care centers, generic and step therapy drug programs. Communicate the advantages of mail order drugs for chronic illnesses such as: hypertension, cholesterol and diabetes which enable employees to obtain more dosages for less out-of-pocket expense.
3. EVALUATE IMPLEMENTING A SPOUSAL WAIVER CLAUSE
A spousal waiver clause allows your company to deny coverage to a spouse who is covered by another employer sponsored health insurance plan. It can also allow for premium contributions to be increased if he/she elects to stay in. This could potentially lead to lower utilization. Be careful and thorough in your evaluation of this option. Pay special attention to the spouses and dependents that might exit your group. If they are young and healthy, their presence could potentially produce a less desirable result.
4. EVALUATE IMPLEMENTING EMPLOYEE CONTRIBUTION SHARING TIERS
By separating employee contributions into 2-4 classes based on type (e.g. Single, Parent/Child, Parent/Children, Employee/Spouse, Family), you can encourage maximum plan enrollment and regulate premium increases. Higher employee participation equals a lower unit rate in employer sponsored plans such as dental and vision.
5. REVIEW YOUR HEALTH PLAN DESIGN
Plan benefits are ultimately responsible for your cost. Some potential configuration changes to consider:
• Increase annual in and out-of-network deductibles
• Increase in and/or out of network coinsurance levels (e.g. 100% in/80% out to 90% in/50% out)
• Implement a single annual "aggregate" deductible per insured contract versus a 3 or 2 per family annual deductible
• Increase Emergency Room co-pay
• Evaluate Self-Funding with Stop Loss/Reinsurance for health, dental, vision and workers' compensation
• Increase employee premium contributions
• Add or enhance voluntary (worksite) benefit programs
• Investigate advantages of adding or enhancing your Flexible Benefit Plan (IRS/Section 125) to enable employees to pay increased out-of-pocket expenses with pre-tax dollars. (Not available to shareholder employees)
• Evaluate the advantage of offering a cash "opt out' benefit to dual covered employees
• Investigate the advantages of onsite workplace clinics and regional Urgent Care Centers
• Determine financial savings and feasibility of offering early retirement incentives to higher income, long-term employees
6. OFFER EMPLOYEES INCENTIVES
This method will help to lower costs and will likely prove popular with many employees. Incentives to consider include:
• Introduce an Employee Assistant Program (EAP)
• Implement or enhance a Healthy Lifestyle Incentive or Wellness Program
• Implement carrier-provided Utilization, Disease and Specialty Drug Management initiatives/programs
7. AUTOMATE HR with WEB-BASED TECHNOLOGY
New technologies are readily available and have proven to be a less expensive alternative to adding more HR employees for benefit administration alone. Suggested functions to explore automating:
• Employee benefit enrollment, changes and terminations
• HR employee record retention
• Performance reviews
• Recruitment
• Paid time off (PTO)
• Training, licensing and certifications
• Time, attendance and payroll
8. GET CREATIVE
While simple solutions may be the most obvious, there are additional steps you may take to achieve a similar or enhanced result.
• Conduct dependent eligibility audits
• Conduct premium payment audits
• Replace/Freeze a defined benefit retirement plan with a 401(k) or 403(b) defined contribution plan
• Reduce 401(k) match
• Review all ancillary benefit plans and pricing
• Evaluate whether or not Health Insurance Exchanges can reduce corporate expenses (retirees, COBRA participants, part- time employees, spouses, smaller employers)
• Allow for competition among carriers and consultants
9. BE PREPARED
Beginning in 2018, a new federal excise tax will be assessed on insurance companies for health plans that are extremely expensive (in excess of $10,200 for self-only coverage, $27,500 for families). Between now and then, employers can adapt those plans so that this excise tax will not apply. This especially applies to employers offering long-term contracts or negotiating with unions need to be aware of how this piece of legislation may affect them.
10. DON'T BE AFRAID TO DISCLOSE COSTS TO EMPLOYEES
Health care is one quantifiable benefit that an employer may offer and yet most employees are unaware of the costs involved in the provision of these advantages. Disclosing your investment in individual employees can bolster morale and create a level of mutual respect in a difficult arena.
11. FAMILIARIZE YOURSELF WITH MINIMUMS AND PENALTIES
The new law will require employers with 50 or more full-time equivalent employees to offer affordable coverage or pay a penalty. The employee's share of premium for this coverage cannot exceed 9.5% of the employee's annual household income. For exact levels of provision and penalties consult the FAQ guidesheet from the IRS.
The simple fact is that no one can accurately predict what the true impacts of the ACA will be on the insurance industry, corporations and employees or the government itself. Benefit knowledge, ACA comprehension and historical planning experience are the necessary skills to navigate through the complex maze of health care reform. Partnering with an experienced benefits professional can provide solutions, strategies and true understanding of the implications of federal and state regulations. An accomplished advisor can help you maximize your benefits, minimize your costs and deliver reassurance you are moving in the right direction in an ever-changing workplace.
