Health Care Reform Presents Benefits Administration Challenges and Opportunities for Employers
This insight is from: "Employer Challenges Go Beyond Health Care Reform"
Health Care Reform is imposing new administrative, communications, reporting, compliance, tax, and plan design requirements that impact every employer-sponsored health care benefit plan. Health care costs now account for over 18 percent of the entire U.S. economy and are expected to account for 20 percent by 2015. So when it comes to health care benefits, you’re paying more and getting less — in terms of employee appreciation and satisfaction. Why? Most employers have not applied the same strategic planning process to benefits administration that they have to other parts of the business. Management has control over traditional compensation and can tie it directly to business objectives. But employee benefits plans are not traditionally integrated into the employer’s broader strategic direction, nor are they tied to metrics that show whether they attract, retain, and motivate employees. This report focuses on how Health Care Reform offers the opportunity to re-examine all areas of your employee benefits offerings, including plan design, exchanges, and shared responsibility requirements.
Health Care Reform to Trigger Decrease in Employee Benefits Plan Flexibility
Health Care Reform will require that you re-think employee benefits plan design due to both coverage mandates and the nondeductible excise tax on high-cost health care coverage. Although it seems like a long way off, beginning in 2018 health care benefit costs that exceed $10,200 for individual coverage or $27,500 for family coverage will be accessed an excise tax of 40 percent on the amount that exceeds this level. The reason this is important now is that average plan costs are approaching these levels already, so you need to evaluate your employee benefits plans sooner rather than later and take action to avoid this tax. Rising health care costs will make it difficult to use plan design as a differentiator, which means employer-sponsored health care plans will start looking more alike. Instead you may be forced to eliminate or reduce coverage, focus on consumer-based solutions or move some employees to exchanges for coverage. The overall value proposition for employer-sponsored health care plans will likely shift to the ability to better control health care costs and ensure a consistent, high-quality participant experience.
Exchanges Are Changing the Employee Benefits Plan Paradigm
You’ll want to consider three types of exchanges as Health Care Reform continues to take effect. Limited Exchanges, which most employers offer today, are traditional employer-sponsored plans generally limited to three to six offerings. Private Exchanges offer a variety of plan choices, aggregated by a provider or an outsourcer with employer input as to which ones are offered, and enable you to rapidly embrace a Defined Contribution strategy utilizing a qualified funding vehicle. Public Exchanges, required under Health Care Reform and offered at the state and federal levels, will vary by jurisdiction in terms of coverage, quality and participant experience. John A. Haslinger, the author of the study believes that Private Exchanges combine many of the best aspects of current Limited Exchanges and new Public Exchanges (coming into effect in 2014) to offer the advantages of lower costs and high-quality service.
Health Care Reform Requires Shared Responsibility for Compliance
Health Care Reform does not require you to provide health care coverage to full-time employees, but it will impose a potential penalty on those employers with at least 50 employees who fail to do so. The report explains the requirements — including employer and employee responsibilities — that must be met to avoid these penalties. The author suggests actively managing potential issues by integrating automated time and labor management tools, payroll services, and benefits administration. In this way you can manage assigned hours to reduce exposure to additional health care costs and/or federal penalties; accurately calculate employee eligibility for health care coverage; notify employees of eligibility as law prescribes; and automatically calculate benefit premiums as a percent of W-2 earnings. This level of integration will not only help employers like you to stay compliant, but it will help you better control health care costs.
The Time to Address Health Care Reform Challenges is Now
Health Care Reform presents both challenges and opportunities — many of which will remain even if the law is repealed or modified. Controlling costs, engaging employees, and helping to ensure compliance with applicable federal and state regulations are critical issues for benefits professionals — especially in today’s increasingly competitive global economy. To succeed in this new environment, the author suggests using technology and process to integrate HR strategy, including health care benefits administration, with HR operations to drive strategic goals in measurable ways.