Posted 8/12/2013 12:00 am
Updated 12 months ago
Although many provisions of health care reform began in 2010, the biggest changes brought about by the new law will start taking effect in 2014. For employers, the most significant changes will be the “play or pay” penalties (although the Obama administration has announced that these rules will not be enforced until 2015) as well as the new rating rules and coverage requirements, which apply to employer groups with 2-50 employees until 2016 and then apply to employers with 2-100 employees. From a financial perspective, there will be winners and losers.
In determining how reform will impact your employer group, your considerations include whether or not your group is grandfathered and how the new rating rules will affect your premium.
Grandfathered Employer Groups
If you have maintained your health plan’s “grandfathered status,” you have more flexibility in dealing with the impact of the new law. If your health plan was in place prior to March 23, 2010 (when ACA was signed into law), and you have not made any substantial changes to it, your plan is considered a “grandfathered” plan.
There will be employers who are disadvantaged by the new rating rules. Generally, these are the employers with younger, healthier workforces. If the employer’s health plan still is grandfathered, nothing has to change and the new rating rules don’t have to be applied.
These employers should just maintain their current coverage until a better option is available.
If you have a grandfathered health plan but will benefit under the new rating rules (in other words, the new rules lower your premium costs), it will likely be in your best interest to move to one of the new health plans at the new, lower rates as soon as the law allows (Jan. 1). It is wise to be aware of the pitfalls involved in giving up grandfathered coverage before dropping it, as once you drop grandfathered coverage, you can’t get it back.
Non-grandfathered Employer Groups
If your health plan is non-grandfathered and the new rating rules mean lower rates for your group, you will want to move to the new rates and health plan benefits on Jan. 1.
If the new rules work against you and your plan will be more expensive, you might consider moving to a Dec. 1 anniversary to allow a few extra months to consider your options before you have to make a decision around changes to your health plan because the rules won’t be effective until the first anniversary after Jan. 1.
Employer Health Coverage — A Valuable Benefit
Maintaining employer health coverage will continue to be important for your company for the foreseeable future. There are a number of reasons for this. Your more highly compensated employees are likely to find coverage through the new health insurance marketplaces a much more expensive option.
Most will not receive enough (if any) advance premium tax credit (subsidy) to offset the higher premium cost.
If you increase the income of your employees to help offset the loss of your health insurance contribution, you are replacing a benefit that is tax deductible for both you and your employees (health insurance) with one that is taxable for both you and your employees (more W-2 income).
Additionally, in the early years, the health insurance marketplace is not likely to run smoothly or efficiently. Employees at all income levels may find the process challenging.
Premium levels also may be unstable as two of the three federal programs, which will serve to stabilize the individual insurance market, expire after 2016.
No question, the new health care law is complex, many of the guidelines for implementation still are not final, and there are likely to be changes still to come in the regulations.
Employers are faced with many tough decisions during the next several years in this historic transition in health care. Stay informed and seek guidance from a trusted resource.