To make sense of the past and looming health care reform changes, employers may transfigure into the Roman god Janus this year, with one head focused on the decisions of 2010 and the other fixed on the future.
With Janus' two faces, plan sponsors can fine-tune and better gauge how 2010 Patient Protection and Affordable Care Act changes have affected their plans and bottom lines, while at the same time looking ahead to 2012, 2014 and even 2018.
"There were a lot of mandate changes and a lot of notices sent out [in 2010], and people were exhausted after doing all that," says Kathryn Bakich, senior vice-president and national health compliance practice leader at Segal. "Some of it was done very quickly - once you got the regulations, sometimes you only had a few weeks to implement. We're finding that people are going back and [asking], 'What exactly did we do? Are there things we need to do to fine-tune? And what are the cost implications for what we did?'"
Thankfully, plan sponsors received two holiday gifts late last year from the government, as two major PPACA provisions were delayed until 2012.
One, W-2 reporting on the value of health coverage will be required for W-2s mailed in January 2013. Although employers will need to change their payroll and tax systems to accommodate the requirement, "a delay of one year is welcome," says Tom Lerche, national health reform leader for Aon Hewitt.
Second, non-discrimination testing for insured medical plans has also been delayed (Read this month's Laws & Regs column on page 54 for more on this extension).
"We're seeing a shift in terms of regulatory activity. Now that we are past the provisions that went into effect Sept. 23 [2010] or the first plan year after, we're seeing a return to a more usual process by the agencies to develop regulations and implementation guidance," notes explains Kathryn Wilber, senior counsel for health policy at the American Benefits Council.
"Rather than an interim final regulation, we're seeing requests for information. We just saw one on the value-based insurance design for preventive coverage" in December, she adds.
The Department of Labor plans to do the same for the auto-enrollment provision, which the agency has clarified is not effective until agency rules are issued.
The IRS also is asking for more information from employers and other stakeholders concerning the non-discrimination provisions in the law that apply to insured health plans.
More "welcome news to plan sponsors:" The agencies are allowing more opportunity for plan sponsors to weigh in before proposed rules are issued, says Wilber.
In general, agencies have "tried to be flexible," seconds Bakich, as with the prohibition of health debit card use on over-the-counter prescription drugs. Now individuals can use FSA debit cards as long as they are at a pharmacy, a rule reversed by the IRS.
"I think that as they go through this process, they're going to try to be accommodating," Bakich adds, predicting that the government will give plan sponsors more time to implement more-complicated provisions and enforce the law through voluntary compliance, not sanctions.
"We're expecting to see a continuation of the regulatory flexibility that we saw toward the latter part of 2010," Steve Wojcik, the vice president of public policy at the National Business Group on Health, agrees.
For example, mini-med plan waivers helped some employers maintain coverage until 2014 when the exchanges come into play. There was also more flexibility for non-grandfathered plans with changes to external review, internal appeal and preventive services requirements.
The regulatory hiatus gives employers a cushion of time to focus on the long term.
"Take a deep breath after last fall, when there were so many pieces of guidance issued in such a short time frame," advises Susan Nash, a partner at McDermott Will & Emery. "There's not a lot that goes into effect in 2012, so it's really going to be more clean up of what they already have issued."
Missing guidelines
Regulators will need to clean up guidance already issued, as well as draft up guidelines on provisions of the law that lack direction or clarity. One area of befuddlement is the definition of essential benefits.
"Though the government is not necessarily behind on guidance, it did drop the ball on defining essential health benefits, [which would] help employers determine whether annual limits are applicable to certain benefits," Nash says. "This made it difficult to determine levels for 2011 plans, but [the Health and Human Services Department] has promised to have these out before next year, hopefully before July 1 plan years."
For employers with more than 200 employees, auto-enrollment requirements also could be on the horizon, a serious concern especially for the high-turnover industries. Plans will need sufficient time to change computer systems and adopt procedures necessary for implementation, says Wilber.
The government has indicated that it intends to request information this spring in anticipation of developing regulations or guidance implementing the auto-enrollment requirements, she continues.
Since PPACA didn't specify an effective date for auto-enrollment, Lerche doubts regulations will be issued this year.
Another regulatory mystery is the CLASS Act, the voluntary long-term care program set up through PPACA. It was supposed to be functional in 2011, but no guidelines have been set forth, and the administration of the program shifted from the HHS to the Department of Aging last December. As such, Lerche doesn't expect it will be rolled out in 2011, either.
So, what federal guides are on track? For one, the new uniform benefit disclosure form is scheduled for March 23 by HHS, says Bakich. The form is designed to be a standardized benefit summary no more than four pages. It will be a template issued by the government for plan sponsors to use in 2012.
Employers also will have to give 60 days advance notice for changes to plans, something that rarely is done now, so this will be a big change.
To plan, employers should consider their grandfathered status as more regulations and interim rules emerge. Bakich recommends employers look ahead to see if they could lose their status and make changes accordingly.
In the short term, the government has pushed back dates to July for internal review for non-grandfathered plans. Anecdotally, approximately half of Wiber's employer members indicate they will retain status, which is consistent with consultant surveys on this question. Some employers may wait for final rules on internal appeals and external reviews (not applicable to grandfathered plans) to decide whether they will relinquish grandfathered status for 2012.
2011 as a strategy year
"2010 was a year largely focused on compliance and bringing plans up to code for the new minimum benefit mandates," says Mike Thompson, principal and head of the New York-metro health care practice in the PricewaterhouseCoopers human resource services practice. "2011, I think, will be much more of a strategic year, where companies are looking at their plans with a broader focus on where they want to be longer term."
In terms of strategy, Thompson says, "We're seeing companies go back to basics and better defining where they want to be with their plans and understanding what the impact on them is if they maintain the status quo."
He adds: "[They are] putting plans into place to mitigate any issues that might hit them as a result of health care reform, particularly the free rider penalties, but also considering what their options are as the overall health care environment changes. Now is the time to better formulate where [employers] want to be long term with their benefits programs as well as their overall people strategy around health benefits."
Lerche believes that if group medical costs are high single-digit or low double-digit, it will be a major concern for the next three to five years. With that trajectory, employers can't continue the current program as designed; they need to rework to mitigate costs, he says.
Therefore, 2011 will be a time to review and update health care strategy and deepen employee engagement in wellness and health management programs.
Many employers are modeling plans to determine what they will look like when the exchanges are up and whether they will incur the excise tax in 2018, says Tom Billet, senior consultant and leader, health & group benefits at Towers Watson.
If they make changes now and plan now, he argues, they can make small changes incrementally, thereby easing their employees into the health care reform overhaul.
Employers also should be focusing on how to continue attracting and retaining top talent, Billet says.
Most will continue to play, not pay, he predicts, so they will need to consider how they will improve and present their plans in 2014 after the exchanges are in place. In other words, what will be the differential value of private employer-sponsored health plans once exchanges come into play?
Among the options, Billet suggests employers could use concierge benefits health and wellness programs to set themselves apart from exchange coverage.
As for the exchanges, the government will start to dole out grants to states to establish exchanges. This could change if Congress intervenes and defunds it in the House, but if no state exchange is deemed adequate or not built, it defaults to the federal exchange.
No matter the political rhetoric, Wojcik advises employers to plan to continue as normal, as the fall elections and legal battles won't have an immediate impact on employer plans, or any at all.
For certain, the fate of the law and its effect on plan sponsors remains to be fully seen. And the changes the Republicans are focusing on don't come until 2014 anyway, so don't expect any immediate alterations.
Even in this "environment of uncertainty," says Paul Fronstin, director of the Employee Benefit Research Institute's Health Research and Education Program, employers "have no choice but to assume the law will go forward as is."
