How Employers Should Prepare For 2014
The Affordable Care Act (ACA) was at the center of some of this year’s most heated political debates, and the provisions expected to have the largest impact on businesses have yet to even take effect.
The employer-shared responsibility mandate, first scheduled to take effect in 2014, was delayed until 2015. That means that in 2014, large employers will be nailing down their strategies for whether they will “play” or “pay.”
“Employers got this one-year reprieve, but in 2014 they absolutely need to decide whether it’s in their best interests to offer the majority of their full-time employees affordable, minimum-value coverage, or pay the penalty for not doing so,” says Julie Bunde, director of product management and product and market solutions at Bloomington-based HealthPartners.
According to Greg Thurston, director of benefits at Edina-based Doherty Employer Services, more and more large employers are coming to the conclusion that continuing to offer health insurance under the ACA is a better option than paying the penalties.
Thurston cited data from the International Foundation of Employee Benefit Plans that found that the number of businesses that “definitely will” continue coverage for all full-time employees increased from 46 percent in 2012 to 69 percent in 2013. And for both years, a combined 4 percent of employers said they were unlikely to offer health insurance; the rest were at least “somewhat likely” to offer insurance.
And Thurston believes that trend will continue into 2014 and beyond.
“Employers have reviewed their situation and, if they are a large employer, they’ve realized that the penalties are too great. They don’t want to pay a non-deductible tax of $2,000 per employee,” says Thurston. “And if you’re a small employer, even if you get rid of your plan in 2014, the reality is, some of your employees might not be eligible for subsidies, which means you’re taking away a form of compensation from your employees, so they’re still going to expect some sort of other increase to replace that.”
Small employers won’t be subject to “play or pay” penalties, but they should monitor their headcounts through 2014, as it is next year’s average full-time employee count that determines whether they’re deemed a “large” employer in 2015, and are thus subject to the penalties.
“Some employers might want to actively start managing that full-time employee number by hiring temps, or maybe more part-time employees,” says Thurston.
There are three changes coming in 2014 that plans offered by employers of all sizes must abide by: no waiting periods in excess of 90 days, no pre-existing condition exclusions, and no annual dollar limits on essential health benefits—which comprise 10 categories, ranging from emergency to mental health services. (If a company’s current plan doesn’t include these requisites, their carrier will apply the changes, which take effect January 1.)
While many rules outlined above take effect January 1, another key date that employers are monitoring is March 31, when open enrollment closes on the new health exchanges.
According to Thurston, new plan requirements, along with other changes introduced through the ACA, mean that it is essential for employers to have a clear and simple line of communication with employees in 2014—particularly during open enrollment periods.
“Perhaps, as an employer, you’ve had a significant rate increase after ACA. Well, employees are going to want to know why,” explains Thurston. “They’re hearing that Minnesota has low affordable rates, and that may be the case for a lot of employees, but the reality is that there are going to be some, with the community rates, where their premiums are going to go up, and maybe go up dramatically.”
As a result of those premium increases, employers may need to increase deductibles or employees’ out-of-pocket expenses, or move to a more limited network. And Thurston says the reasons for any of those changes need to be conveyed to employees to help address any worker confusion or frustration.
Finally, proposed rules for reporting requirements—which were just issued in September—should be top of mind for large employers in 2014. The IRS will need to know which employees, if any, have been offered “affordable” coverage, and whether employers will need to pay any penalties for not offering coverage. Bunde says that because the proposed reporting rules just came out, employers are awaiting additional guidance.
“It’s important for businesses to understand that guidance will continue to come out and the law will change over time,” says Bunde. “So employers just need to be prepared for more information coming out and potentially more changes throughout the next couple years.”