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One Healthcare-Reform Mystery Ends, Another Continues

The U.S. Supreme Court's 5-4 decision to uphold the healthcare-reform law ends one mystery, but it also leads to more questions for employers moving forward.

Thursday, June 28, 2012
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By virtue of its stunning 5-4 majority vote, the United States Supreme Court on Thursday resolved the mystery that had many U.S. employers guessing during the past three months. President Barack Obama's Patient Protection and Affordable Healthcare Act remains the law of the land.

As it stands, the individual health-insurance mandate, the ACA's centerpiece and chief economic engine, is constitutional. The majority opinion, written by Chief Justice John Roberts, upheld the mandate as a tax -- an alternative to the original mandate set up as part of Congress' commerce clause power.

With its narrow decision, the Supreme Court may have resolved one mystery, but now a second, even more complex mystery remains: What does the Court's decision mean for employers now and into 2014, the year in which the ACA will be fully implemented? As they say, the devil is in the details, which have been part of the employer guessing game since the ACA became law in March 2010.

Legal and HR experts agree that, now that the shock of the decision has passed, it's time to get back to thinking about ways to implement and comply with the ACA's upcoming deadlines.

In fact, J.D. Piro, senior vice president at Aon Hewitt in New York, says, with the ACA ruled constitutional, it should be "full speed ahead" for implementation by employers.

"There was uncertainty before Thursday, but all the discussion about the commerce clause and such is settled," he says. "From a business standpoint, the status quo that existed at 10 o'clock Thursday morning remains today, both for the short- and long-term."

There are many ACA compliance issues that still must be carried out, Piro says, and many involve questions that existed before the Court's decision.

"Long-term, employers are going to need a healthcare strategy that reduces costs and improves employee health," Piro says. "That was not part of the decision; employers have to put that into place on their own. They need to determine how to truly get costs under control. Compliance [with] the ACA makes the trains run on time, but strategy tells you where you are going."

Steve Wojcik, vice president of public policy at the National  Business Group on Health, whose group represents nearly 350 large U.S. employers, says Thursday's ruling "clears up the legal uncertainty surrounding the law, and, as a result, employers, insurers, the healthcare community, the states and the federal government can all move forward with preparing for the upcoming provisions of the law."  

Wojcik agrees that there still is a critical need to push more aggressively for cost controls on healthcare delivery to ensure affordable coverage for the uninsured in 2014 and lower costs for all those currently covered.   

 "If we cut out all the wasted and unnecessary healthcare spending, we would have more than enough to cover the uninsured, even without the healthcare law," Wojcik adds.

According to Washington-based Jeff Munn, vice president for benefit-policy development at Fidelity Investments, the short-term compliance challenges remain the same as they were before Thursday's decision.

Some of those challenges include:

* Employers that have waited for the Court decision to address the issuance of ACA-mandated summary benefit and coverage statements, due this year, will have less time to make sure those processes are in order.

* Employers must also continue taking their normal steps to prepare W-2 form health-plan reports at year-end 2012, and finalize healthcare-spending-account limits. Other implementation tasks, such as patient-centered outcomes, trust-fund fee calculations and "Cadillac tax" accounting, should stay on track to reduce the risk of non-compliance.

* On the horizon for 2014 are the health-insurance exchanges and the obligation to inform employees of their services.

"These and other substantial reporting requirements facing employers are only just beginning to be addressed with guidance from the government," Munn says. "Employers who decided to take a 'just-in-time' approach rather than a 'just-in-case' approach may now find themselves at risk, with very aggressive compliance calendars for the remainder of the year and beyond.

"If an employer delayed these issues and others, it's time to get back on schedule," he says.

Vincent Ashton, president and CEO at HealthPass New York, a private, commercial health-insurance exchange, says the ruling maintains small businesses' ability to access health-insurance exchanges and the tax credits available through them.

"Those are two features of the law that will enhance not only healthcare access and affordability, but small-business economic development as well," Ashton says, adding that the ACA's intended consequences will likely improve conditions somewhat. "But the inevitable unintended consequences will determine the law's ultimate success or failure."

Shawn Nowicki, director of health policy at HealthPass New York, explains that, in the long run, the ACA will help lower the indirect costs of offering healthcare benefits for small businesses.

"It takes the burden of offering healthcare to employees [away] from small business because the exchange handles that responsibility," he says.

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Nowicki adds that, while the insurance-reform aspects of the ACA get the most media attention, there are many other healthcare issues, also part of the law, that are fundamentally important to changing the country's current healthcare system.

"Health-insurance costs will undoubtedly remain too high until we find ways to significantly reduce the cost of providing healthcare rather than [figuring out] how we pay for it," he says.

John McGowan, a benefits/employment attorney and partner at Baker Hostetler in Cleveland, says that with the Court's decision, employers, and those insurers that sell to employer groups, now have 18 months left to comply with ACA's employer mandate. Within specific employer groups, he adds, the mandate's impact will be the most dramatic.  

"Service-sector businesses are among those most likely to find themselves out of position," McGowan says. "Businesses that operate restaurants, bars and catering companies, retail and wholesale outlets, and hotels/motels and resorts, depend heavily on employing unskilled and semi-skilled workers, but provide affordable health coverage to few of them."  

In its current form, he adds, the ACA creates natural winners and losers within such industries, depending on how the businesses have structured themselves and their workforce.  

For example, employers that historically employ a mix of full-time and part-time employees now find they have a powerful financial incentive to restructure their workforce to limit the number of full-time employees they have and, thus, limit their overall labor costs.   

In addition, those that employ large numbers of unskilled workers will discover it is more cost-effective to pay overtime, increase the number of part-time employees, or have certain jobs performed off-shore (such as call centers), rather than have more full-time employees who must be offered coverage under the mandate.  

Peter Marathas, a Boston-based partner at Proskauer in the employee-benefits and executive-compensation group, says that, since passage of the ACA in 2010, employers have been faced with much uncertainty with respect to implementation, costs and impact on business.

"But the uncertainty as to whether the law would be upheld by the Supreme Court has now been eliminated," Marathas says. "ACA is a valid law. As with any valid law, employers will need to continue to monitor the interpretive guidance from the federal regulators and work with competent advisers to implement required changes."

In addition, he says, employers should consider that increased premium costs are almost a certainty in 2014, as various mandates are implemented.

"Our experience in Massachusetts has been that mandates -- such as the elimination of pre-existing conditions and evidence of insurability -- will lead to increased, not decreased, insurance costs," he says. "Employers need to be thinking strategically now about implementing cost controls that will work under ACA to help them in their efforts to keep their insurance programs affordable."

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