Employers have options for ACA

For employers who like to delay the inevitable, there’s some hope. Compliance with Affordable Care Act mandates has a few options to postpone one’s fate.

Between 2014 and 2015 lurk dramatic differences in mandates. Starting on the first day of 2015, companies with 50 or more full-time-equivalent employees must offer health insurance coverage with essential health benefits.

With the mandate delayed, next year amounts to a free pass for employers: Companies of any size do not have to offer health insurance. That being said, for employers who already do offer health insurance, the rules of the game have changed.

Upon a renewal date in 2014, that coverage must include services within at least the following 10 categories: ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental health and substance use disorder services; prescription drugs; rehabilitative and habilitative services and devices; laboratory services; preventive and wellness services and chronic disease management; and pediatric services, including oral and vision care, according to HealthCare.gov.

For 2015, health insurance must include all of the above, in addition to 100 percent of preventive care, 100 percent of contraceptives, and more.

On the individual side, all Americans must have health insurance for nine of the 12 months next year or face a penalty.

Tax subsidies are available for individuals or families earning less than 400 percent of the federal poverty level, or less than $92,700 for a family of four.

If employers don’t provide insurance, employees can go to the Colorado Health Insurance Exchange for insurance — and they may receive subsidies to reduce the cost, depending on their income level, said Jeff Ahrendsen, senior vice president and client executive, HUB International.

ACA regulations define affordable health insurance as costing an employee less than 9.5 percent of his or her annual household income for individual coverage, not including dependents.

Caveat emptor: If an employer offers an affordable health insurance plan for an employee only, in other words a single plan, not family coverage — then the rest of the family is not eligible for a tax subsidy.

For example, in a household of four, if a husband and wife each earn $30,000 annually, and the employer charges him $200 per month for individual insurance (which is less than 9.5 percent or $475 of monthly household income), then that family still has three people to insure on the exchange or elsewhere.

“Any way you want it, it will cost them $600-900 a month, even with the ACA,” Ahrendsen said. “There’s no way to cover more services and have it cost less — that’s not economic reality.”

Options for smaller employers

1. Carry on with the status quo — continue providing insurance, absorb some of the cost, pass some of the cost on to employees, without charging more than the requisite 9.5 percent of household income.

Of course, safe harbor for employers would mean charging slightly less than 9.5 percent of the employee’s annual income, not his or her household income, in case someone else in the family loses or quits a job, Ahrendsen said.

2. Offer a choice of plans and make sure the least expensive one doesn’t cost more than 9.5 percent of the lowest-paid employees’ annual income. This allows employers to “offer richer benefit plans that cost more money and still meet ACA guidelines,” Ahrendsen said.

3. Be creative with the health insurance plan by using a combination of health reimbursement arrangements and health savings account programs.

For instance, provide a health plan with a much larger deductible. Take the savings and use that to self-fund a portion of that larger deductible for an employee with large health care bills.

4. Drop your health insurance and have employees make use of the Colorado public health exchange or a private exchange. Some employees may end up paying less by claiming the tax subsidy.

“In some cases, the tax subsidy available to an employee may be greater than the employer contribution to that employee’s current health insurance plan,” Ahrendsen said.

5. Discuss with your insurance broker the benefits of renewing your plan on Dec. 1, 2013, because this allows employers with 49 or fewer employees to delay the compliance date of ACA until Dec. 1, 2014. If part of your compliance strategy includes renewing your health insurance plan on Dec. 1, it’s certainly time to speak with your benefits consultant.

One local employer did exactly that.

“We’ve changed our plan start date [with HUB] to Dec. 1,” said Chris Blees, CEO of BiggsKofford, one of the largest locally owned accounting firms. “It’s a way to buy yourself time for another solution.”

Lately, it’s been a popular option for employers. At Wells Fargo Insurance, 75 percent of Benefits Consultant Brian Smith’s clients (with 49 or fewer employees) already made that decision.

“It puts a Band-Aid on it and lets you delay the change,” Smith said.

Retaining talent or culture changes

Practicality might be one of the best ways to approach such a large change in regulations.

Consider why, as an employer, you offer health insurance in the first place. Arguably, to attract and retain the best talent possible.

“With rising costs, exchanges and plans out there, high-quality employees and talent rely more and more on employer-offered plans,” he said.

Smith cautions employers when they’re contemplating changes. Public health exchanges are not beneficial for middle- and high-level employees. With their income, they’re not qualified for subsidies, so the plans may cost them 2-3 times more than traditional employer plans, he said. On average, the subsidies phase out at $45,000 per year income.

Although 2014 will be a learning curve for employers in the brave new world of health care reform, business culture remains one of the factors that may shape decisions.

Of course, by 2015, all companies with 50 or more employees must offer health insurance or face large monetary penalties. But fees don’t comprise all the danger.

“The big risk no one ever thinks about [other than the fine] — you may also lose your top employees,” Smith said.

For those with 49 or fewer employees considering abandoning insurance, increased wages that employers should pay employees so they can get health coverage elsewhere may well cost more than paying for insurance.

Premiums are tax-deductible for employers, whereas paying additional wages or paying the federal penalty isn’t a tax write-off. The fine is $2,000 per employee per year — less the first 30 employees, Smith said. Therefore, 100 employees equals 70 times $2,000, or $140,000.

“Or you could put a qualified plan in place and get something for that money,” he said.

“It’s a huge risk for employers who don’t plan. Employers need to be dynamic and not set in their ways,” Smith said.

By being proactive and minimizing cost increases, employers can stay ahead of the curve and their competitors who haven’t.

As politics and government continue changing, the writing on the wall won’t cease, especially as much of the 2,500-page health care reform bill hasn’t been defined. Eventually, the exchanges are likely to become more streamlined and employers will be advised to either retain their plans or have employees seek insurance through the exchanges.

One thing seems certain in the competitive culture of attracting, hiring and retaining top-notch employees: Insurance makes a difference.

“Offering benefits to employees allows [a company] to remain an employer of choice,” Ahrendsen said.