Per-employee costs for health-care coverage increased 6.9% last year, according to consulting firm Mercer’s 2010 National Survey of Employer-Sponsored Health Plans. This is the highest increase recorded by Mercer since 2004.
Employers appear unconvinced that the Patient Protection and Affordable Care Act (PPACA) will lower the costs associated with employer-based health plans. About 85% of employers think it’s unlikely the provisions under PPACA will reduce the rate of health-care cost increases, according to the Midwest Business Group on Health.
Uncertainty over costs is prompting employers to decide whether to continue offering health benefits and comply with PPACA, or to drop health benefits and pay the penalty. Even though the costs of offering an employer-based health plan are at the root of the play-or-pay decision, employers need to take into account other factors. Their decisions will affect recruitment, retention, morale, productivity, absenteeism, and presenteeism (coming to work sick).
Another issue related to the costs of offering employer-based health plans is the “Cadillac” tax. Beginning in 2018, employers must pay a 40% excise tax on high-value health plans. Plans (health insurance coverage costs and the costs of a wellness program) that exceed a threshold of $10,200 for single coverage and $27,500 for family coverage are considered high-value plans.
Also, discrimination rules under the PPACA prohibit employers from providing executive health plans that go beyond the group health plans offered to staff. In accordance with discrimination rules, employers are required to establish an appeal process for contesting claim payments and coverage refusals.
This new provision generally won’t affect credit unions because they aren’t strong users of executive health plans. In fact, less than 10% of credit unions with assets of $100 million or more provide an executive health plan to CEOs or senior executives, according to CUNA’s 2010-2011 CEO Total Compensation Survey and 2010-2011 Senior Executives Total Compensation Survey.
To get around this provision, however, some employers that offer executive health plans say they might increase executive pay to make up for the reduction in benefits.
Not all of these regulations are set in stone. Expect changes relating to the legislation, due to the turnover of congressional seats in the 2010 midterm elections. In particular, repeals and changes to health-care reform provisions are likely.
The U.S. Chamber of Commerce’s top priorities regarding health-care reform are:
- Repealing the 2011 exclusion on purchasing over-the-counter medication under flexible spending accounts and health savings accounts (HSA);
- Repealing the 2011 tax form 1099 requirement for all vendor transactions exceeding $600;
- Possibly changing the 2012 requirement to report the value of an employee’s health benefits on individual W-2 forms;
- Repealing the 2014 employer mandate to provide health coverage or pay a penalty; and
- Repealing the 2018 excise tax on high-value health plans.
As of Jan. 1, 2011, preventive services, such as annual physicals and immunizations, must be covered fully under the PPACA, unless these services are obtained through an out-of-network provider.
If a service is rated A or B by the U.S. Preventive Services Task Force, it’s deemed a preventive service. Also under the new law, preauthorization requirements for emergency room visits or visits to OB/GYN specialists are prohibited under employer-based health plans.
The intention behind this part of the health-care reform law is to ensure access to services needed to stay healthy and to increase use of these services. Although employers can’t force employees to take advantage of preventive services, they can provide incentives for employees to use them. Employers, for example, can reduce employees’ share of cost-sharing if they use the services.
Though many employers already cover preventive services, most don’t cover all the preventive services with task force ratings of A or B. Employer-based health plans often don’t cover these services in full. While some insurance companies already include preventive services in their plans, the costs of adding any or all of these services will be passed on to plan participants.
The actual cost of the provisions is unknown, due to the range of preventive services already included in employers’ health-care plans, and the range of co-payments and cost-sharing for these services. Also unknown is the number of employees who will use the services. The provisions will increase the cost of the average health plan 1% to 2%, estimates Bill Rosenberg, a PricewaterhouseCoopers director.
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