October is a big month for the Affordable Care Act (ACA). There are many in the healthcare industry who welcomed the delay of ACA’s employer mandate. While that did take some pressure off employers, it’s important to understand how decisions your organization makes in 2014 will impact 2015.
Providing affordable health insurance for employees of skilled nursing home facilities (SNF) has always been a challenge. Some have stopped offering group coverage, while those that do offer coverage report that less than 50% of their employees enroll. Poor participation is mainly the result of unaffordable premiums. Other factors like plan design and network availability also influence employee decisions; however, when premiums are unaffordable, enrollment will decrease and the plan will become unsustainable.
In a few short months ACA’s individual mandate will go into effect. It requires all Americans to have health coverage or pay an individual penalty. Many SNF employees who waive or do not have access to benefits today will be evaluating their options closely due to this new federal requirement. Here are a few things to consider if you currently do not offer coverage or have a high number of employees who waive coverage:
- Employees who do not have access to group coverage will be eligible to purchase health insurance in the public exchanges effective January 1, 2014.
- There are no employer penalties in 2014 for not offering compliant coverage; however, the penalties will begin on January 1, 2015.
- Waiting to offer compliant coverage could push employees unnecessarily into the exchanges where they are eligible for subsidies.
- There is a $3,000 employer penalty in 2015 for every employee who receives a subsidy.
- It could prove challenging to pull employees out of the exchange in 2015.
There are several strategies business owners should consider for offering affordable coverage to their employees.
- (MEC) Minimum Essential Coverage plans: MECs satisfy the individual mandate requirement for employees and are also designed to satisfy the affordability and essential benefit requirements in ACA, exempting the employer from the $2,000 penalty. Premiums are very affordable and the benefit levels are flexible and designed to cover the everyday expenses incurred by individuals.
- Defined Contribution: This financial strategy can be combined with a number of plan design options. Employers fix the dollar amount that they contribute toward an employee’s insurance plan. The amount is typically tiered, depending on the employee’s status (individual, spouse, family, etc…). Employees select the insurance options that best fit their needs, and if their selections are more expensive than the employer’s contribution, the employee pays the difference. This approach removes the owner from picking plans they think will work for the majority and empowers employees to choose the coverage they want and need. Importantly, this approach delivers more budgeting predictability.
- Self-Funding: More organizations are moving to a self-funded insurance model to escape ACA’s compressed 3:1 rating band, which is expected to impose significant rate increases on younger, healthier groups. In addition to avoiding this rating band, self-funded plans also avoid ACA’s new Health Insurance Tax. Since self-funded plans provide any surplus claims funds back to the employer, they also provide significant incentives for groups that embrace health and wellness programs that work to reduce claims.
- Smarter Wellness: On a positive note, ACA creates new flexibility to provide greater incentives and rewards for wellness program participation. Coupled with better tools to identify health risks, quantify costs and deliver targeted programs to reduce risks, SNFs have more reason than ever to invest in wellness programs, particularly if they are self-funding.
The individual mandate requires all Americans to have health coverage by January 1, 2014 or be penalized. Employers who would have provided credible coverage in 2014 can wait a year to offer coverage without penalty this year; however, they should understand and evaluate the financial impact this will have in 2015 if their employees choose to find coverage on the public exchange. SNF owners should consider offering affordable coverage in 2014 to avoid the pitfalls that will develop when the ACA employer mandate penalties for employees that have enrolled on the public exchange are enforced in 2015.
Matt Scott is Senior Vice President for HDH Group.