Finance and HR leaders know that high-quality health insurance benefits are an excellent tool for recruiting and retaining top talent in any industry. But an organization's health care assessment has to take multiple factors — including regulatory compliance — into account to strike the appropriate balance between cost and value.
According to the Kaiser Family Foundation (KFF), the average total annual premium in 2016 was $6,435 for a single employee, and $18,142 for family coverage — an increase of 58 percent since 2006. And while employers still pay the majority of the total premium — almost 71 percent — workers have seen their share of premiums rise by 78 percent over the last decade.
During a health care assessment, how can finance and HR leaders balance the cost of coverage with the ACA's compliance requirements?
Prevent Leakage With Accurate Eligibility Tracking
You need a protocol to ensure you're not paying for health coverage for a worker who's left the organization, or for dependents who are not eligible for coverage. The ACA's reporting requirements will dovetail nicely with your efforts to prevent premium leakage in this case, as ACA compliance requires you to track employee coverage on a monthly basis.
You can verify dependent eligibility with an audit. Ineligible dependents may be on the plan simply because employees didn't realize they needed to alert you to a change in life circumstances (dependent reaching age 26, divorce, etc.), or because the employee is actively trying to cover a person who doesn't qualify as a dependent. Verifying dependent eligibility will help you avoid unnecessary costs, and also comply with ERISA in terms of uniformly applying eligibility rules.
Are your employees eligible for expanded Medicaid?
According to KFF, 31 states and the District of Columbia have expanded Medicaid under the ACA. Coverage is available — with little or no premium and very modest cost-sharing — to adults in those states with household income up to 138 percent of the poverty level. If workers transition to Medicaid, their coverage could end up being more affordable in terms of premiums and out-of-pocket costs, and the transition would also present cost-savings for the organization.
Understand What's Required by the ACA
Although the future of the ACA is uncertain, nothing has changed for the time being. According to the IRS, to meet the ACA's employer shared responsibility provisions, if you are an employer with 50 or more full-time and full-time equivalent employees, you must offer coverage to full-time employees, and the coverage must provide minimum value and be affordable. Affordable means the employee's share of the premium for employee-only coverage can't exceed 9.69 percent of their household income (or, under safe harbors, W-2 income, rate of pay, or the federal poverty line) in 2017, according to the IRS.
Employers subject to the ACA's employer mandate may offer their full-time employees either a self-insured or a fully insured plans. But the percentage of self-insured plans has been steadily rising since the 1990s, due in part to employers' ability to better control costs. According to the Employee Benefit Research Institute, among organizations with at least 500 employees, 80 percent are self-insured.
Balance Employee Expectations
Although cost might make you consider reducing your benefits and employer contributions to the bare minimum to avoid penalties under the ACA, doing so may hinder your ability to attract and retain quality workers. Instead, during your health care assessment, look for ways to reduce costs while still offering significant value to your employees.
Here are three possibilities:
1. Supplemental and Voluntary Coverage
Consider supplemental and voluntary coverage that works in tandem with your major health plan. The ACA generally doesn't regulate supplemental coverage and includes a reporting exemption for certain supplemental coverage, so you may not have to worry about additional reporting requirements or coverage mandates.
2. Health Reimbursement Arrangement
Include the possibility of a health reimbursement arrangement (HRA) in your health care assessment. But be aware of the ACA's impact on HRAs. According to the IRS, an HRA must be integrated with an employer-sponsored group health insurance plan to be compliant with the ACA.
3. Health Savings Account-Qualified Plan
A high-deductible health plan (HDHP) generally has lower average premiums, and HDHPs have been growing in popularity with workers and employers over the last decade. Most employers offering HDHPs also make contributions to their employees' health savings accounts (HSAs), which is an added cost for employers to consider.
It's never easy as a finance leader to manage your health care costs while also keeping your benefits competitive relative to the marketplace. But with solid communication with your HR leaders, careful compliance planning and an array of options for your workforce, you should be able to find a happy medium that suits everyone's needs.
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