Controlled chaos and business-as-usual appear to be the prevailing sentiments among health care industry experts when discussing the much-anticipated opening day of the public health care exchanges which, at press time, was a little over one week away.
"When you implement large technology, things aren't perfect on day one," says John Kelly, principal business adviser with Edifecs, an exchanges technology provider. "The fact that the requirements that the feds are spitting out were coming in almost in real time as people were designing and building [the exchanges] - and, in some cases, requirements had to go back and be revised as recently as May and June - there's a lot that's going to be bare bones about the initial [launch]."
Richard Moore, director of professional services for Array Health, agrees, saying that on Oct. 1, "we're not going to have an exchange infrastructure set up online and ready to go. I think that message is pretty clear at this point, from the public side."
Many also believe the launch of the public exchanges will, for now, have little effect on employer-sponsored health care coverage. "I don't think [employers] are losing sleep over it right now," says Don Garlitz, executive director, exchange solutions, for bSwift, the technology vendor behind Vermont's SHOP exchange. "My sense is that they're in a little bit of a wait-and-see mode, just like everybody else in the world."
Karen McLeese, vice president, regulatory affairs with CBIZ Benefits & Insurance Services, concurs with that sentiment. "I tend to think that at least initially there won't likely be significant impact on employer-provided coverage," she says. "I think, by and large, employers that have offered coverage will continue to offer coverage, at least for the near term, and maybe for the longer term."
Nevertheless, the public exchanges have brought several issues to the fore of employers' minds - the required exchange notice and potential employee confusion around it, being a prime example - and they are bracing for challenges over the coming months. As the public exchanges prepare to launch, here's what we know about where things stand.
Marketplace notices
By October 1, employers were to have provided employees with written notice concerning the public exchanges and employees' potential eligibility for federal subsidies. While the Department of Labor recently issued an FAQ stating that employers who fail to provide the exchange notice by the Oct. 1 deadline will not be fined, McLeese still advises caution. "I think employers need to be careful about that because there could be some other arguments that employees weren't given all the accurate information that they needed - not even from an Affordable Care Act point of view, but maybe from an ERISA point of view," she says.
She maintains employers should make certain that all information contained in the marketplace notice is accurate and that they "don't bind themselves to something that they may change in the future. In other words, the notice asks for information about what the plan might look like next year, and if the employer doesn't know, they shouldn't feel compelled to put something down."
Conversely, she says, once an employer does know with certainty what the plan design will look like in 2014 - whether it will meet minimum value and affordability standards - that information should be communicated.
Steve Wojcik, vice president, public policy with the National Business Group on Health, says large employers are concerned about the communication aspect of the public exchanges. "Especially since they know that they're offering coverage that disqualifies their employees from any kind of federal assistance or coverage on the [public] exchange," he says.
The launch of the public exchanges presents an opportunity for employers to reinforce the value of the benefits they're offering employees, says Mike Thompson, principal and NY-metro health care practice leader for PricewaterhouseCoopers' human resource services practice. Still, the DOL's model exchange notice is simply the minimum requirement. "More importantly, [employers] need to customize the communications around how their employees are impacted, and assure them that they will most likely want to continue to get their coverage through the employer," he says.
SHOP exchanges
While the majority of workers at companies with more than 50 employees will likely continue to get their health coverage through their employers, it's still uncertain how the SHOP exchanges - created for small employers with fewer than 50 full-time equivalent employees - will play out.
"The jury is still out on whether what they can buy through the marketplace is going to be more attractive than what they can buy in the private sector," says McLeese. "If it works out to be that what's offered through the SHOP is more safety-net in nature, and if the employer is interested in continuing to offer coverage, I think the private sector market will likely be attractive.
"Conversely," she adds, "if what's offered through the public marketplace works out to be something attractive, then the fact that the employees might have more choice might make that an attractive option."
Choices on the SHOP exchanges will vary by state and while most states will, this year, only have one option available, it's expected multiple plans will be available on the SHOP exchanges in 2015.
"There are definitely some plans that we're dealing with that have looked at it as a real opportunity to move into the retail health care market, not as onerous government intervention," says Kelly.
The challenge with the SHOP exchanges, says Garlitz, is that it's still unclear how plans will be rated.
"When a small employer eligible for the SHOP exchange goes out and looks at what it will cost to put his people on a particular plan or set of plans, how will that price compare with the price that it would cost those employees to buy individual coverage on their own without group insurance sponsorship?" he says. "That's the open question in all 50 states right now. Although a lot of the preliminary data I've seen in several states would show that it's likely that individual products are going to come back less expensive than group products, which turns the market on its head."
Employer mandate delay
The employer mandate delay - announced in July - was widely touted as providing employers with some much-needed breathing room to prepare for two reporting requirements:
1. Whether the plan offers minimum essential coverage, which individuals must maintain in order to avoid a financial penalty; and
2. For large employers, whether the health plan meets minimum value and affordability standards.
The proposed IRS regulations regarding the reporting requirements provide for a testing period employers can use to determine whether the employee will qualify as full-time and thus require an offer of coverage.
McLeese cautions employers not to take too much of a laissez-faire approach to the employer mandate delay because they will still need to start their measurement periods within the next couple of months.
"Let's assume they have a calendar-year plan and they want to use a measurement period of 12 months, but they want some time between the calendar year and the end of the measurement period to kind of figure things out," she says. "They probably would want to pick a measurement period of, say, November through October, and then have November and December of 2014 to figure it out. [That would] allow people to enroll if they're going to make coverage available to them."
Chris Ryan, vice president, strategic advisory services with ADP, also cautions employers not to get lulled into a false sense of security by the employer mandate delay.
"The IRS had provided a six-month safe harbor for companies that were using a 2013 look-back period, where they said that you could establish a one-year look-back period but, for the purposes of the first year, you could actually run a six-month look-back period," he says. "We don't think that safe harbor is going to be provided next year. If you want to establish who is and is not eligible for coverage by Sept. 1 [2014] with no more than a 90-day waiting period so they're signed up by Jan. 1 [2015], you'd better be implementing your look-back period right now."
Retiree exchanges
Several large employers - Time Warner, GE, IBM - have recently announced plans to move retirees to health care exchanges. Retiree coverage can be expensive and represents a huge unfunded liability for many employers.
Interest in private exchanges for retirees "has already been very clear," says Christi Wise, senior vice president, health solutions product management with Fidelity Investments. Fidelity announced in February it was entering into a partnership with private exchange provider Extend Health to offer its employer-clients the option of moving retirees to that system. "Employers have been looking at the private exchange for retirees now for quite a while."
The launch of the public exchanges has fuelled interest in private options, says Alan Cohen, chief strategy officer with Liazon, which runs the Bright Choices private exchange. "We certainly think that a proliferation of the public exchanges will lead to much higher levels of adoption of not just public but also private options," he says.
Aon Hewitt announced last month it will be offering health benefits to more than 330,000 U.S. employees this open enrollment period. A total of 18 employers, including Walgreen, Sears Holdings and Darden Restaurants, will use the consulting firm's private exchange.
Still, bSwift's Garlitz says he expects the adoption rate of private exchanges to be modest this year.
"The one exception to that would be for retiree populations," he says. "I think there's going to be an increasing level of activity around getting retirees off the active employee's health plan and on to something that could involve a private exchange offering Medicare products, Medicare Advantage and other types of products like that."
Other ACA notices
And while all eyes are on the launch of the public exchanges, there remain several other important compliance deadlines ahead in 2014.
* Summary of Benefits Coverage. While employers had to issue this summary to employees for the first time last year, McLeese says the SBC for 2014 has to indicate whether the plan meets minimum value standards.
* PCORI fees. The first round of Patient-Centered Outcome Research Institute fees was due in July, for plans that ended in October, November or December 2012. The amount is $1 for each individual covered under the group health plan. The next round will be due July 2014, for all plan years ending in 2013 and the fee increases to $2 per covered individual.
* Transitional reinsurance fee. This fee, designed to help stabilize the individual health insurance market, will be $63 per covered life in the plan in 2014.
Regardless of whether the public exchanges get off to a rocky start Oct. 1, employers will have their hands full. "I would suggest that people start preparing for success because, if [the exchanges] are successful, that's when their world is going to get turned upside down," says Kelly. "The whole point of ACA was not to build exchanges. In fact, the legislation doesn't explicitly say 'let's build exchanges.' It says, 'let's create a retail market for health care.'"
