Surviving a 'Reformed' Open Enrollment
While the effects of healthcare reform will translate to extra work for organizations' HR functions, this year's open-enrollment period also offers employers a valuable opportunity to help employees make informed decisions best suited for both sides.
By Kecia Bal
Open-enrollment season may still be months away for many organizations, but experts are urging employers to prepare now to successfully guide employees into a new era of healthcare-reform-mandated options -- and with it, potentially overwhelming amounts of information and misinformation -- to begin Jan. 1.
Taking effect at the same time is the federal requirement that large businesses - employers of the equivalent of 50 or more full-time workers -- must either offer qualifying health insurance to employees who work at least 30 hours a week or pay fines of $2,000 per worker, excluding the first 30 employees.
Those companies likely will offer affordable coverage since penalties are not tax-deductible and they already have funding budgeted, says Kim Hollis, director of Business Solutions at Tilson, a national PEO firm.
"Evaluating whether or not the cost of coverage meets the definition of affordable based upon the Safe Harbor Rules will be important for all size companies," she says. "Companies subject to penalties will want to pass the test for at least 95 percent of their employees. Companies that are not subject to penalties may want to fail the test so lower paid employees can obtain subsidies on the exchange."
Companies classified as large that do not currently offer coverage are in the most challenging position because they do not have an existing budget item for health benefits, Hollis says. Some of them are considering reducing their full-time workforce to less than 30, selling some of their companies, increasing work hours for those who work more than 30 hours weekly or decreasing hours for low-performing employees, she says, adding that other ideas include reducing hourly pay to cover the penalties or using variable hour rules.
In the "pay or play" strategy, those who decide to "play" and offer continued health insurance benefits need to ensure their open enrollment communications include providing all the law's required information to employees, says Steve Wojcik, vice president of public policy at the National Business Group on Health.
"Employers will be required to provide a notice of the availability of state exchange coverage and employees' potential eligibility for federal subsidies for that coverage," he says.
"This requirement seems to be a potential recipe for confusion for many employees whose employers' plan to offer coverage in 2014, for a number of reasons," he says. "First, since the message about exchange coverage is coming from their employer, some employees may think their employer is no longer offering coverage or at least wonder whether their employer is sending mixed messages about whether it will continue offering coverage in the future.
"Second, many employees may not even be eligible for subsidized exchange coverage in the first place, because their employer offers coverage that meets the government requirements, which makes their employees ineligible.
"Third, other employees make too much money to qualify for subsidized exchange coverage. So it seems many employees could be getting government-required notices from their employer that don't even apply to them."
This year, more than ever before, clear communication during open enrollment is key, Wojcik says, and even those companies who choose not to offer benefits should update employees on new health insurance regulations. Federal and state agencies are preparing materials to help companies navigate changes.
"If you are not offering qualified coverage or you believe that some of your employees may qualify for subsidized exchange, reach out to the states where your employees are located, and to the federal government, which is developing materials, communications, apps and other electronic media tools to guide employees about the eligibility process, the plan options available, costs and enrollment procedures," he says.
Even before the added choices and requirements of the new law, the global consulting firm Mercer found that understanding health plans is getting more difficult for workers, according to the company's 2012 Workplace Study, completed last June. Only three out of four of the more than 1,600 employees surveyed said that understanding the features and choices in their health plan is very or somewhat easy -- down from 83 percent in 2011, the study notes.
"Communicate early and often," Wojcik says, "and be ready for lots of questions."
For some companies, private exchanges, an alternative market place similar to the current group marketplace and the government run marketplace (to open next year), will add another option if they are implemented as scheduled this October.
Wojcik says each employer will have to weigh whether the private exchanges are suitable.
"This is entirely up to the employer, since private exchanges are only in the group market at this point," he says. "There are no individual private exchange options outside of those for retirees. If the employer is not planning to offer private exchange coverage, that is one less thing to deal with for open enrollment. If they are planning on offering it, they are probably working with the private exchanges to create and coordinate communications and enrollment materials."
To add to the abundance of information to share with employees, health insurance companies likely will be competing for attention, with amped-up promotions and ads, as well, Wojcik says.
"You may also have to contend with heavy marketing by the insurance plans offered on the state exchanges in your area," he says. "Your employees may come to you with questions after they see ads or promotions for various plans."
The most difficult aspect of this year's open enrollment may be that the law continues to evolve, even as deadlines for implementation approach, says C. Logan Hinkle, a partner at Burr & Forman in Birmingham, Ala.
"Time is running out and there are sure to be changes and new regulations before year end," he says. "Employers should do whatever they can to get ahead of the curve now so they have more time to react to changes. Monitor, monitor and monitor. Health care reform has been and continues to be a moving target."
New aspects and complexities in the regulations continue to be discovered and clarified. For example, a $63-per-employee fee has been largely unknown until recently, because it was labeled as a reinsurance premium according to Rob Wilson, president at HR outsourcing company Employco USA. The fee takes effect in 2014 and the costs are expected to be passed on to employers through increased premiums, he says.
"The fee will apply to millions of Americans and hit most large U.S. employers," Wilson says.
Hollis recommends seeking professional guidance to stay on top of changes. Tilson is offering free seminars to educate clients and prospects.
"The regulations that have been released extend to many thousands of pages and updates are ongoing," she says. "Seek an expert to help navigate the ever-changing landscape."
On top of the new mandates, as well as public and private marketplaces, Medicaid eligibility is to be expanded in participating states, effective Jan. 1. (Read more on Medicaid and other upcoming implementation deadlines from global consulting firm Deloitte here.)
The expanded coverage in some states is to include individuals with income up to 133 percent of the federal poverty level, which again emphasizes the need for careful communication, Wojcik says.
"If you are offering them coverage too, they may ask you about Medicaid," he says. "As with Medicare, be sure to comply with rules. There are rules against encouraging employees to drop employer coverage and take up government coverage."
Extra work aside, this year's open enrollment still offers employers a valuable opportunity to help employees make informed decisions best suited for both sides, Hinkle says.
"Big picture, I think that it's important to keep in mind that the reasons companies offered health insurance in the past (to attract and retain good employees) remain the same," Hinkle says. "Health care reform doesn't change that, although it might make health coverage more costly and burdensome from an administrative perspective."