With annual benefit enrollments on the horizon, employers need to be prepared now for the changes that health care reform is bringing. Hopefully, employees already know that as of Jan. 1, 2014, they must have health insurance coverage. Beyond this mandate, however, what are some of the other issues of which employers should be aware?
The Affordable Care Act requires employers to tell their employees in writing by Oct. 1 about the new public health care exchanges and how these relate to their workplace benefits. This requirement applies to all employers subject to the Fair Labor Standards Act.
Under the law, employees need to know that they may be eligible for a tax credit and cost-sharing reduction if their employer's plan does not meet certain coverage and affordability requirements and the employee purchases a qualified health plan through a public exchange. Employers must also inform workers that if they choose to purchase their coverage through an exchange, they may not receive any employer contribution toward their premium, nor any related tax advantage.
Employees may still be confused about the exchanges by the time of enrollment. For the most part, those who work for large employers will see little impact since the subsidies offered for a qualified employer-sponsored medical plan will make the choice moot. However, employees of small- to medium-sized companies where health insurance is not available, or isn't affordable, will have to make a decision about whether to go to a public exchange for their coverage. For these employers, it means telling their workers what their options are and are not.
Despite the recently announced one-year delay in the employer shared responsibility requirement, employers still have obligations for 2014 and they'll have to review their medical plans carefully to ensure they meet the essential health benefits mandated by the law. In addition, the plan cannot have any annual coverage limits; cannot exclude people with pre-existing health conditions; must extend coverage to children up to age 26; and must comply with limits on deductibles and out-of-pocket expenses, among other requirements. It is also important to note that the requirement for essential health benefits applies only to individual and small group plans; the requirement does not exist for self-insured plans.
With the pay-or-play delay, employers will not be penalized if their plans do not cover at least 60%, on average, of an employee's health care costs in a given year, or if an employee's premium costs exceed 9.5% of his or her income. Those employees may still be eligible for tax credits on the public exchange, but for 2014 employers will not be subject to penalties if employees receive those tax credits.
It's clear that shifts in financial responsibility will continue to affect today's benefits picture. As employers feel the pressure of rising costs and enrollments in their health plans, they are likely to further fuel the already rapid growth of consumer-directed health plans. In fact, 52% of employers surveyed recently anticipated introducing high deductible/consumer-driven health plans in the next three to five years.
Employers should be aware that employees will see any loss of medical coverage or increase in cost sharing as a reduction in compensation. Consequently, employers will need to pay more attention to their company's total benefits package and consider ways to preserve or increase its value.
Above all, during this transitional period of health care reform, employers must clearly communicate benefits options and their value to employees. Employees need to understand that in most cases, their health benefits will remain the same and they won't have to go to the public exchanges for their coverage. They should also be educated about the need for disability coverage and its value.
Using multiple enrollment methods and a variety of learning tools will help ensure a successful benefits enrollment. In fact, research shows that participation is highest when employees have at least three weeks to absorb their benefits-education information, with at least three different ways to learn about their choices.
Andrew Molloy is AVP, health management and insurance programs with Unum. He can be reached at firstname.lastname@example.org.
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