Health Care Reform | Employee Benefits | Compliance

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Health Care Reform: Addressing HR Compliance Challenges Requires an Integrated Approach

This insight is from: "Employer Challenges Go Beyond Health Care Reform"



Health Care Reform, the term commonly used to refer to the Patient Protection and Affordable Care Act (PPACA) and the Health Care and Education Act of 2010, is the Obama administration’s response to steady and dramatic increases in health care spending. According to the Centers For Medicare and Medicaid Services, Office of the Actuary, 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. Therefore, it’s not surprising that Health Care Reform has dominated the employer-sponsored employee benefit plan landscape and will continue to have strategic and administrative impact for years to come — especially in the area of HR compliance. This report discusses the challenges and opportunities presented by Health Care Reform, as well as employer considerations in the areas of plan design, exchanges, and shared responsibility for compliance with state and federal government mandates.

Employee Benefits Plan Flexibility Expected to Decrease with Health Care Reform

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 increasingly difficult to use plan design as a differentiator, which means employer-sponsored health care plans will start looking more and more alike. You may be forced to eliminate or reduce coverage, focus on consumer-based solutions or move some employees to exchanges for coverage. According to the author, the overall value proposition for employer-sponsored health care plans is likely to focus less on plan variety and choice, and more on the ability to better control health care costs and ensure a consistent, high-quality participant experience.

Employee Benefits Plan Paradigm: Public and Private Exchanges Are Changing It

As Health Care Reform continues to take effect, you’ll want to consider three types of exchanges. Limited Exchanges, which most employers offer today, are traditional employer-sponsored plans generally limited to three to six health care plan choices. 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. The author 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.

If costs increase at the current rate of 9%, the U.S.  average family health care premiums will likely exceed $27,500 in 2018

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 both 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; help ensure that employees who should be eligible for coverage are actually made eligible in a timely and compliant fashion; and gain ready access to the data needed to track and reconcile with the government for those employees who choose to utilize a Public Exchange. Equally important, these processes will occur seamlessly and consistently — without the need for HR intervention — to help ensure ongoing compliance.

Technology and Process Can Help Employers Address Compliance Challenges.

Health Care Reform presents both opportunities and challenges — many of which will remain even if the law is repealed or modified. It offers an opportunity to rethink how health care benefits should be designed and delivered to allow for differentiation based on participant and service experience. However, controlling costs, engaging employees, and ensuring compliance with applicable federal and state regulations will continue to be key challenges for benefits professionals. The author suggests using technology and process to integrate HR strategy, including health care benefits administration, with HR operations to drive strategic goals and support ongoing compliance efforts. 

*A complete list of sources and citations can be found in the full report.

About This Report: This report was written in 2012 by John A. Haslinger, ADP Vice President, Benefits Outsourcing Consulting.

Keywords: Compliance

Business Types: Research for Small Organizations, Research for Midsized Organizations, Research for Large Organizations

Roles: Research for Human Resources Professionals

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