As John Greenbaum, senior vice president for Risk Strategies Company says, “A combination of several years of slow or non-existent economic growth coupled with providers’ response to the specter of further regulation under the ACA have combined to damp healthcare inflation at present.”
A Delicate Balance
Employees, notes Greenbaum, once accustomed to annual cost increases may become complacent when these increases are minimal, as is the case now. “They conclude that costs have leveled off and may resist employer efforts to control future expenses through wellness initiatives or benefits plan design management,” he says.
“The potential for breaching the Cadillac tax thresholds plays directly into this as employers have few options other than reducing the value of benefits though higher deductibles,” says Greenbaum. The so-called “Cadillac tax” is a tax that was initially designed to discourage employers from offering what might have been considered excessively “generous” healthcare benefits. “If employees perceive small rate increases as evidence that plans are running well, they may find benefit reductions to reduce Cadillac tax exposure to be in conflict with their expectations.”
That puts HR professionals between a rock and a hard place, trying to control costs, avoiding the Cadillac tax and meeting employee needs at the same time.
Which Employers Are Impacted?
The ACA’s employer mandate went into effect on January 1. The mandate requires that any business with 50 or more employees provide health insurance to at least 95 percent of its staff members, and their dependents, who are full-time. Any business that fails to do so risks penalties.
In 2015, only employers with 100 or more employees fall under this requirement and face penalties if they fail to provide “affordable and adequate” coverage to at least 70 percent of their full-time employees and dependents. Employers with more than 200 employees must automatically enroll all new employees in coverage once final regulations are issued. An obvious area of focus for employers is identifying, and managing, their full-time employees to ensure ACA compliance.
A Focus on Hours and Status
“This means a number of things for HR,” says Matt Straz, founder and CEO of Namely, an HR, payroll and benefits platform. “For starters, it means tracking your employees’ hours and attendance so you know exactly how many full-time equivalents (FTEs) you have at all times,” he says. “Make sure the health plan you offer is actually affordable.” And, of course, HR professionals need to make sure that they put processes in place to track employee payroll information and stay up-to-date with required reporting.
In terms of reporting requirements, Gloria Ju points out, that the ACA requires employers to file annual reports in compliance with Internal Revenue Code (IRC) Sections 6055 and 6056. IRC Section 6055 pertains to the minimum essential coverage provided by an employer and to the individuals to whom such coverage was provided. Meanwhile, IRC Section 6056 relates to the terms and conditions of the health care coverage an employer provides to its full-time employees.
Sustaining the Employer-Employee Relationship
One critical area of risk for organizations is the potential to damage the employer-employee relationship as companies attempt to control costs and balance the definition of “full-time” workers with practical concerns. Health coverage is an important employee benefit; employers need to guard against adversely impacting employees by threatening their coverage benefits. It’s a delicate balancing act, and one that needs to be supported through ongoing, honest and transparent communication.
Staying On Top of Compliance Requirements
The third annual Guardian Workplace Benefits Study, released in 2015, reveals that most employers feel overwhelmed by the enormity of change brought about by the ACA, and they expect the compliance and administrative burden to be great. Many, according to the report, are seeking outside expertise to help them navigate these changes and considering new options “like self-insuring and moving to exchanges, to manage what they predict will be substantial cost increases as a result of the ACA.”
It’s a rocky and ever-changing terrain out there and HR pros need to turn to trusted advisors for reliable and up-to-date information. XpertHR offers a number of resources, including a detailed white paper that provides “7 Steps to Prepare for the ACA”, with information on key ACA requirements and regulations.