Check-up, Change and Choice

There are both challenges and opportunities in the new era of healthcare reform, experts say, so employers should continue to monitor the situation closely. Beginning in the fall of 2013, employee communication and enrollment should include information about subsidies, exchanges, Medicaid and enrollment options.

Monday, July 9, 2012
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Although the U.S. Supreme Court has upheld the healthcare-reform law's individual-coverage mandate and left virtually all other provisions of the law intact, the Patient Protection and Affordable Care Act will continue to be a matter of sharp debate for the November elections.

Nonetheless -- and, more than before, when uncertainty about ACA's immediate survival was reason enough to wait and see -- employers are under pressure to make the best strategic choices as they estimate how the law will affect their business. For all employers, the first order of business should be a healthcare-reform check-up to assess the impact of healthcare reform on their benefits and business strategies.

Indeed, ACA's key elements have been complicating things since 2010, when the bill's requirements for dependent coverage, no lifetime dollar limits, no rescission of coverage and various tax and accounting changes regarding Medicare and retiree coverage went into effect for many employers.

Already, form W-2 reporting for health coverage must be tracked for W-2 forms provided in early 2013; and in August 2012, coverage for additional women's preventive care services must be offered, while additional standards for new healthcare plans are taking effect.

Next year, employers must notify employees about health-insurance exchanges, a higher Medicare payroll tax goes into effect for high earners (those above $200,000). By 2014, the individual mandate is slated to begin, along with additional reporting and disclosure requirements, HIPAA wellness limit requirements -- all of it building to 2018, when additional standards and full implementation begins, with a 40-percent excise tax on high-cost employee coverage.

Meanwhile, one of the most crucial aspects of reform moves along in fits and starts: the creation of public health-insurance exchanges by the individual states. According to a recent report from the Kaiser Family Foundation, 14 states had established exchanges as of February, four had made plans to, 22 were studying their exchange options, while nine had no significant exchange activity and two decided not to create them at all. States can make use of a federal exchange alternative if they aren't ready or choose not to create their own public exchange.

Employer Strategy

Given these complexities, we expect that employers will maintain as much control of their health care plans and costs as possible and continue to navigate through the uncertainty. Between now and 2018, many employers will stay focused on their competitive goals, paying attention to the impact of their health and benefit offerings on attraction and retention of key talent and a healthy, productive workforce.

On one hand, they can avoid the employer tax penalties and costs associated with the public exchanges by meeting the minimum plan design and contribution requirements, and by keeping employees in their employer risk pools and out of the public exchanges. . On the other, they could facilitate lower-wage workers to get tax credits to buy coverage through the public exchanges.

For employers who would simply choose to offer a minimum plan (which pays for no less than 60 percent of total plan costs), some caution is warranted. For example, a minimum plan design could offer high deductibles, a health-savings account, and 50-percent coinsurance costs. But employers will have to be sure that the plan includes essential health benefits, as required by ACA.

Thus, against this backdrop of health reform's many requirements and unknowns, employers that we've interviewed are proceeding with bold steps to manage costs in anticipation of reform -- and in general. They are, for example, planning to add or re-emphasize CDHPs as a core or default plan for employees and newly eligible part-time workers. They are starting to narrow their benefit spending by implementing high-quality network plans; making more employer-paid benefits voluntary (vision, dental, etc.); and reducing spending on dependent coverage. They are also looking to add or improve wellness and health-management programs, and favoring health plans with better coordinated care management for high-cost patients.

New Choices

The realities of the health reform era bring new choices to light for employers. They can simply choose to "pay" -- that is, to exit the system, stop offering health plans and pay employees to buy from state exchanges. Or they can "play" -- aggressively managing healthcare costs by applying enhanced versions of traditional solutions, as we've described. They can also play in a new way, moving toward more of a defined-contribution health approach, re-defining the healthcare roles of employer and employee, funding and facilitating healthcare for employees rather than managing plans themselves.

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To those ends, innovative programs are emerging to provide efficient solutions. For example, third-party service providers are making it possible for employers to reduce their health care costs by offering select networks with providers chosen for their quality and cost effectiveness. Providers are also offering new decision-making support tools designed to help organizations with offer workers more options with less administrative responsibility. And private exchanges will emerge that provide employers of all sizes with an opportunity to continue offering coverage -- with more choices and decision-making responsibility for employees.

Plan and Monitor

As we've noted, there are broad challenges and opportunities in the new era of healthcare reform, and so employers should continue to monitor the situation closely. Beginning in the fall of 2013, employee communication and enrollment should include information about subsidies, exchanges, Medicaid, and enrollment options.

Throughout the process, it's important to consider the competitive impact of other employers' changing strategies and how they may affect attraction and retention of employees. For employers, that means a continuing emphasis on consumer engagement and accountability; health improvement and care management; and quality providers.

Maintaining a proactive stance can go a long way in successfully navigating the shifting tides of healthcare reform in the United States.

Tracy Watts is a partner in Mercer's Washington office. A consultant with Mercer for 25 years, she is the Client Solutions Leader for the health and benefits business in the South. She also is a national leader for Mercer's healthcare-reform resources. Sharon Cunninghis is Mercer's U.S. Health and Benefits Regional Business Leader and is based in New York. She is also an actuary and senior partner. In addition to her U.S. business responsibilities, Sharon works with a number of Mercer's key clients helping set program strategy for healthcare and other welfare programs.



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