ACA Compliance, Private Exchanges and Wellness: Insights From the bswift Benefits Study
By Don Garlitz, Senior Vice President, bswift
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The 2015 bswift Benefits Study explores numerous topics of interest for HR executives -- including the short-term imperatives of ACA compliance and the longer-term prospects of private exchanges and wellness initiatives. The study was based on the results of a survey conducted by SourceMedia, which polled 500 benefits decision makers at organizations of 50 or more employees that offer health benefits.
ACA Compliance -- Forms Due In January
The ACA requires that large employers report specific information to employees on IRS Form 1095 in January 2016. This is similar in concept to employers' annual distribution of W-2 forms. For 1095 forms, employers must document the "affordability" of health-coverage options based on the lowest-cost plan available (for employee-only coverage) for each employee. Self-insured employers must also report on month-by-month "coverage" for every enrolled individual, including dependents, retirees and COBRA beneficiaries.
These complex data requirements are often challenging to pull out of core systems. The affordability test requires benefits eligibility and cost data for each employee, as well as compensation information. In addition, the calculation of the lowest-cost plan may be affected by employee location, employment classification and available wellness credits or surcharges. The month-by-month coverage reports require the tracking of more than just summary-level data: if an employee elects family health coverage, for example, the employer needs to document each dependent's coverage by month.
In the bswift benefits study, large employers (those with more than 500 employees) responded that the primary source of data necessary to complete Form 1095 will come from benefits administration systems (25 percent), carriers or TPAs (18 percent), payroll systems (18 percent) and HRIS systems (16 percent). Most payroll systems and many HRIS platforms neither track the comprehensive eligibility nor the dependent coverage data required to complete the forms. Therefore, some employers that rely on payroll and HRIS systems to produce Form 1095 may be surprised to discover they must pay to obtain necessary data from another source, or even multiple sources, to satisfy the requirements. New vendors specializing in ACA compliance will face similar challenges.
Private Exchanges -- Modest Start, No Common Definition
Many pundits have been predicting rapid employer adoption of private exchanges on the premise of presenting employers with a radically new and different value proposition. The results from the Benefits Study show adoption rates for private exchanges are more modest than have been widely publicized and predicted. Instead, employers are increasingly investing in technology and other initiatives to shift their benefits programs away from traditional employer paternalism and toward consumerism where employees "own" their individual benefits.
In the aforementioned survey, 5 percent of large employers reported they currently offer a private exchange. Among those that do not have private exchanges, 6 percent are considering one for next year. These results are impacted by the absence of a standardized definition of the term "private exchange" and also by many employers taking a phased approach to adoption of exchange components rather than a complete replacement of their current benefits programs.
The increasing use of tech-enabled choice is emerging as a significant trend among employers. For example, defined contribution -- where employees receive funds from employers to choose benefits from a menu of options -- is currently offered by 10 percent of large employers, with 17 percent considering it for 2016. The research also shows that employers are adding health insurance choices for employees such as more health plan designs (especially high-deductible health plans), more carrier options and more network options, including high-performance networks. To help employees make informed selections, 33 percent of large employers now provide decision support tools to help guide consumers through the shopping and enrollment process.
The use of technology in benefits continues to grow. Among large employers, 83 percent now offer online enrollment for open enrollment, while 75 percent offer it for new hire enrollment. These figures are up from 80 percent and 71 percent, respectively, in the prior year.
Wellness -- Shifting Ownership To Employees
On the wellness front, the shift in ownership of benefits from the employer to the employee is also taking hold. Forty percent of large-employer respondents with wellness incentives offer annual incentives of $500 or more, up from 29 percent in 2013. Additionally, employers are increasingly using social tools, such as fitness challenges, to engage employees in these programs. Among large employers with wellness programs, 34 percent now offer social challenges to employees, up from 17 percent two years ago.
To learn more, download the 2015 bswift Benefits Study at www.bswift.com.