Five benchmarks employers & HR execs can use to calculate exposure to health reform from human capital catalyst blog, the decision-making resource for human resources executives & CFOs
NEW YORK, May 2, 2012 /PRNewswire-iReach/ -- During a recent discussion I had with Lockton's ERISA attorney, Mark Holloway, five areas of exposure emerged related to employers and how they will react to health reform requirements in 2014. You've no doubt heard that 2014 is the year employers with 50 or more full-time employees are mandated to provide qualifying and affordable health insurance to every full-time employee, regardless of pre-existing conditions or any other exigency, or face a fine of $2,000 per full-time employee for failing to provide such coverage.
Mark provided five benchmarks employers and HR execs can use to calculate their potential exposure in 2014 and beyond.
Compliance: Employers must offer an affordable and qualifying health care option to every employee averaging 30 or more hours a week in 2014. That's the law. How it's carried out is another story. Many employers and HR execs must grapple with the financial issues of either greatly expanding or eliminating health care benefits, while balancing public relations and reputation management issues related to their actions in 2014. "No one wants to be the first to jump, when it comes to eliminating health care benefits," says Mark.
Administrative Costs: Administrative costs are another gambit for employers and HR execs. The decision to self-fund and outsource claims administration was a no-brainer for larger companies during recent years, but how will these same companies handle mandated automatic enrollment for a far-flung workforce who must "opt-out" rather than opt-in to health coverage? What's more, auto-enrollment is likely to drive administrative costs up as more and more people join the plan.
CFO vs. Human Resources turf wars: If CFO's were free to operate independently of human resources, the decision to provide health coverage at a cost of $7,000 to $10,000 per employee—or take the $2,000-per-employee hit for failing do so—would be a relatively easy one. But viable businesses don't operate this way, especially when workers are considered to be the most important asset. Nevertheless, a tug-of-war is predicted as CFO's seek to balance the bottom line against the concerns of human resource executives looking to uphold the employee deal and avoid a rush to the nearest exit. HR faces great exposure in the areas of employee engagement, morale and retention.
Industry verticals and other bellwether issues: Some industry verticals will be affected worse than others, including the restaurant and hospitality industry, where managers often receive benefits that other frontline employees do not. How will this decision affect the fast-food restaurant industry? Should they extend health care benefits to the many full-time employees who don't have them today or pay the excise tax? The actions of big box retailers like Wal-Mart will be a significant bellwether to watch as well, as their actions or inactions in 2014 will provide justification for others to follow. Companies with union and large retiree populations will also face unique challenges requiring additional analysis.
2018 tax on high value health plans: The plan needs to be qualified and affordable, but if it's too good a 40% excise tax will be applied in 2018.
"A 40% excise tax will be applied to high value health plans that exceed $10,200 single coverage and $27,500 for family coverage in 2018, and that number is indexed to regular inflation not healthcare inflation," says Mark.
"Tax revenue has to come from somewhere, and health care reform will require one trillion dollars—that's 1,000 billion dollars," he adds.
HR consulting organizations like Lockton can help employers and HR execs navigate health care reform, calculating their exposure to 2014 and 2018 health care reform through actuarial modeling: "We built a black box, taking into account plan design and expected costs, especially in self-funded situations. We look at these factors and suggest alternatives to hold down costs and still meet the law's requirements," says Mark.
"Then we put a plan together with mitigating solutions, helping employers to make their health plans qualifying and affordable," he adds.
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