Welcome to the 5th annual edition of the ABCs of Employee Benefits. Given the tremendous amount of activity and volatility in the employee benefits space, this version can be summed up in one sentence: Surround yourself with quality, interested, and engaged help or else 2015 will be a very long and painful year.
Act now. Although the 2016 ACA IRS reporting requirement is months away, start preparing for it now. Why? You may not have the required employee (and potentially dependent) data and your systems/vendors may not be equipped to provide the required information.
Budget appropriately. Annual health insurance budgets have been impacted by significant new costs associated with the ACA. Your 2015 budget could include PCORI and transitional reinsurance fees as well as internal/external support costs associated with preparing for the IRS reporting and play-or-pay measurement requirements. Work with your broker and finance department to determine and estimate the ACA costs that will impact your organization in 2015.
Consider wellness initiatives. According to the 2014 PwC Health and Well-being Touchstone Survey, 71% of employers offer wellness programs (up from 68% in 2013). Some of the most common wellness programs, according to the 2014 Kaiser/HRET Employer Health Benefits Survey, include weight loss programs, gym membership discounts or on-site exercise facilities, biometric screening, smoking cessation programs, personal health coaching, classes in nutrition or healthy living, Web-based resources for healthy living, flu shots or vaccinations, employee assistance program, and wellness newsletters. Focus on gathering and analyzing as much employee data as allowable by law (through health risk assessments, biometric screenings, self-insured claims, etc.) to determine which types of wellness initiatives will have the biggest productivity and cost control impact on your population.
Determine if self-insurance is right for you. Fifty-nine percent of employers with 500 1,000 employees are self-insured, up from 55% in 2013, according to the 2014 PwC Health and Well-being Touchstone Survey. This is not surprising given the increased flexibility afforded to employers who are self-insured, especially around state laws and the ACA requirements. Plus, specific and aggregate stop-loss is available to minimize exposure and risk. If you are a mid-sized employer with fully insured plans, running a self-insured cost/benefit analysis may be beneficial.
Expect more from your broker. If your broker is not providing comprehensive compliance, administrative, communications, and analytical guidance and support, its time to hire a new one. You are already busy enough in your day job and the upcoming employee benefits requirements will be overwhelming to even the most seasoned benefit professionals. Its a buyers market and theres a very good chance you will find a quality firm to support you in all of these areas at the same (or less) fee than you are paying now.
Follow state and local laws. With so much attention being paid to federal benefits compliance (ACA, HIPAA, etc.), its easy to miss the fact that some states and cities are enacting their own legislation (e.g., paid sick leave laws, same-sex marriage opportunities, health care ordinances, etc.). As such, ensure you have the resources in place to assist you with following state and local laws.
Growing interest in telemedicine and technology. Thirty-seven percent of employers are expected to implement telemedicine (exchange of medical information to improve health using two-way video, email, smart phones, etc.) by 2015 with another 34% considering doing so by 2017, according to Towers Watsons 2014 Health Care Changes Ahead Survey. Depending on your demographic, this could be a great opportunity to save health insurance costs by minimizing office and hospital visits.
HIPAA never sleeps. While the primary focus in 2013/14 was on omnibus rule compliance, the attention has switched to Health Plan Identifiers. While the government has currently suspended enforcement of the HPID requirements, it will likely be lifted at some point and you will need to obtain an HPID if you offer a self-insured plan.
Increase in PTO plans. Fifty-eight percent of organizations, compared to 47% in 2010, offer PTO plans allowing employees to better budget their time out of the office, according to the 2014 Employee Benefits: A Research Report by the Society for Human Resource Management. If you are analyzing the pros and cons of moving to a PTO plan, dont forget to review how state and local laws, especially the paid sick leave laws, will impact your PTO plan.
Just waiting and wondering. Between continuing to wait for the ACA nondiscrimination rules for fully insured, nongrandfathered plans and automatic enrollment provision regulations (including an effective date) and wondering what impact the new Republican-led Congress will have on the ACA, uncertainty will continue into 2015. Keep an ear to the ground as there could be some significant developments over the next year.
Keep the C-suite satisfied. According to Towers Watsons 2014 Health Care Changes Ahead Survey, two-thirds of CEOs and CFOs will be more directly involved in health care strategy decisions than they were three to five years ago to help control costs and reduce exposure to the 2018 Cadillac tax. If you would like to continue holding the organizations health insurance reins, you will need to learn how to speak your CEO and CFOs languages and proactively communicate and present the ACAs impact on organization health care costs, including the actions you propose taking to mitigate such costs. Your broker should be able to assist.
Learn new strategies. Employers are starting to seriously evaluate value-based payment methods where payment is based on criteria for improving efficiency, quality, and outcomes (29% for 2015) plus the use of value-based designs and differentials that drive employees to high performance or narrow networks for medical care (14% will use value-based designs by 2015 and 20% will offer benefit differentials by 2015), according to Towers Watsons 2014 Health Care Changes Ahead Survey. Evaluate whether any or all of these are viable strategies for your organization.
Mitigate costs. According the 2014 HR@Moore Survey of Chief HR Officers, companies are taking the following approaches to help mitigate rising healthcare costs: have moved or will move employees to high-deductible health plans (73%), have raised or will raise employee health insurance contributions (71%), have or will move their pre-65 retirees to ACA exchanges (30%), have or will cut back coverage eligibility (27%), have or will more rigorously ensure part-time workers work fewer than 30 hours per week (24%), have or will increase the proportion of part-time workers (12%), and have or will limit the number of full-time hires (10%). You may find these approaches valuable when developing short- and long-term cost mitigation strategies for your organization.
Never underestimate ERISA 510. ERISA 510 was enacted to prevent unscrupulous employers from discharging or interfering with employees rights to benefits. With the new employer mandate provision under the ACAs play-or-pay mandate, some employers have considered limiting employee hours to below 30 per week to avoid having to offer health insurance benefits. That said, any employees impacted, especially those that had been working 30+ hours per week, may attempt to make an ERISA 510 claim. To minimize exposure and risk, consult with counsel before making any business decisions that could result in an ERISA 510 claim.
Overload ahead. Over the next year, the administrative requirements associated with employee benefits are going to become unmanageable for one HR or benefits department to handle on their own. The ACA play-or-pay benefits eligibility tracking process and IRS reporting requirements alone will introduce hours of work never seen before. As such, request administrative support from other departments (payroll, IT, etc.), your broker, and external vendors. If not handled appropriately, your risk for penalties and audits will increase. Examples include learning the administrative requirements from your broker and utilizing external vendors to assist with the play-or pay mandate and IRS reporting requirements.
Prepare for the Cadillac tax. Twenty-five percent of employers have already started to redesign their primary health plan to avoid triggering the 2018 Cadillac tax, which is a steady increase since 2011, and more than 33% are considering action, according to the IFEBP 2014 Employer-Sponsored Health Care: ACAs Impact Survey. Run a financial projection to determine if your organization is expected to be impacted by the Cadillac tax. If yes, develop your glide path to minimize the tax impact by 2018.
Questions and more questions. Given the significant activity and media coverage associated with the ACA, employee questions will continue to increase. According to the IFEBP 2014 Employer-Sponsored Health Care: ACAs Impact Survey, some of the top employee questions are:
1. How does the law affect me? Do I need to do anything?
2. What will this cost me? Why are my costs going up?
3. Will I have an average 30 hours per week and qualify for benefits in 2015?
To minimize the impact of such questions on your daily workload, be sure to inform employees that you (and not the news, Internet, or a neighbor) are in the best position to help answer their questions and then be prepared to answer these very types of questions. Plus, if you have a first-time benefits-eligible population (due to the ACA play-or-pay provision), offer a Benefits 101 session as they may be completely unfamiliar with benefits.
Ready for ACA play or pay? Hopefully yes, given the compliance effective date for many applicable large employers is January 1, 2015. However, if not, take the necessary steps to become compliant as there are significant penalties for noncompliance, plus your benefits eligibility will need to be correct in order to report accurate employee benefits information to the IRS in early 2016. Employers have generally focused on the following areas as they have prepared for play-or-pay compliance: effective date, measurement period process (for determining employee full-time eligibility), plan affordability and minimum value, transitional relief opportunities, and any new benefits-eligibility cost impact.
Study employee health metrics. To ensure effective health insurance cost control, you need to determine the key drivers of such costs within your organization. By gathering employee health data (to the extent accessible and allowable by law) and developing employee health metrics, you will learn the drivers. This will maximize your ability to develop value-add solutions, such as plan changes, plan eligibility and design modifications, and targeted employee wellness programs.
Take benefits compliance very seriously. The governments magnifying glass over your health insurance plan will significantly increase over the next few years, especially given the new ACA play-or-pay and IRS reporting requirements. Thus, if your employee benefits program is not currently compliant, you will want to develop a master employee benefits compliance project plan and start taking action now. Some common areas of compliance include: developing and distributing appropriate employee benefits materials (ERISA documentation, notices, and reporting, Section 125 documentation, ACA documentation), nondiscrimination testing, and HIPAA privacy and security.
Understand your new job description. Its safe to say that ensuring compliance with the ACA requirements are now part of your everyday job. That said, if you have not taken the time to learn the ACA yet, here are some reasons to do so: 1) You can ensure benefits program remains compliant with the law; 2) You are in the best position to develop short- and long-term benefits strategies and solutions; 3) You can effectively address any employee compliance questions or issues; 4) You can assist employees and dispel any myths they are hearing or reading; 5) You can appropriately budget; 6) You can validate the information/guidance you receive from your broker; and 7) You can lead, as opposed to follow, ACA initiatives with your C-suite.
Virtual benefits information is available. Given it is very difficult for you to leave your desk to attend association meetings and conferences, yet you want to remain up-to-date with what is occurring in the employee benefits space, bookmark and sign up for free online benefits information. Some website with valuable information include:
Wait-and-see approach to private exchanges. A National Business Group on Health survey of large U.S. employers showed just 3% plan to use private exchanges for active employees in 2015 while another survey conducted by Benfield Research of large and midsize companies found that 4% of the large employers and 6% of midsize companies plan to move to private exchanges in 2015. Its safe to say that many employers are waiting to see if these exchanges can effectively meet their needs before making such a major business decision.
X-amine skinny plans. Understand the risks and communication requirements before introducing a skinny health insurance plan (a plan that is deemed to be minimum essential coverage but does not meet the 60% minimum value test). In addition to the potential plan disruption (if the government decides to abolish these plans), it may be markedly different than the plan you historically offered to the affected employees (e.g., mini-med (with some level of hospital indemnity) vs. skinny (with no hospital coverage or indemnity).
Year of ACA transitional relief. 2015 is shaping up as the year of ACA transitional relief. For example, if you are a midsized employer (50-99 full-time and full-time equivalent employees), you may be able to delay compliance with the ACA play-or-pay provision until 2016 or if you offer a noncalendar year health insurance plan, your play-or-pay provision compliance date could be the first day of your plan year in 2015. That said, in order to delay or minimize the impact of the ACA, work with your broker to determine if any transitional relief applies to your health insurance plan/s.
Zero in on your numbers. With your CFO and CEO more involved in employee benefits and significant new costs on the horizon, prepare a five-year financial model of projected health insurance costs which will serve a number of different purposes: 1) You will be speaking the CFOs language; 2) He/she will get to see the dramatic financial impact of the ACA over the next five years, including the expected Cadillac tax impact; and 3) You will have the opportunity to develop, present, and gain approval for short- and long-term strategies to mitigate the financial impact of such requirements.
Ed Bray, J.D., is senior vice president of compliance with Ascension Benefits & Insurance.
