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As Health Reform Continues – Five Strategies for Employers to Consider Now
Please welcome our guest blogger , Carolyn Lewis, CEO of the Lewis Group. Carolyn has been recognized as an industry leader whose deep insights in the healthcare marketplace and broker channels mark her as a sought-out speaker and consultant.
- Self-Funding for Smaller Companies. Beginning in 2016, the Affordable Care Act or ACA will re-define companies with 51-99 employees as “small groups.” This will essentially eliminate a key risk to self-funding health insurance for mid-sized organizations. Self-funding a company group plan works by taking the medical premiums paid to a fully-insured medical plan carrier and breaking them into 3 parts: stop loss insurance, administration, and direct payment of medical claims. The problem hasn’t been finding stop loss policies for “healthy” self-funded plans; it’s been how to manage exposure when a few claims push the financial limits of the medical plan. The ACA in 2016 will allow mid-sized companies to move into the fully-insured guaranteed-issue small group market. That means a self-funded plan with high claims experience will no longer be “stuck” with significantly increased reinsurance premiums. Some advantages of self-funding for employers are:
- Avoidance of ACA premium taxes that range from 1.5% to 3%.
- Companies can create their own medical plan design and avoid some ACA requirements that apply only to fully-insured plans.
- Access to group medical claims leads to cost savings and better wellness program impact.
- Many employers save on annual plan cost compared to fully-insured plan premiums.
- Avoiding the ACA Cadillac Tax. In Mercer’s 2013 National Survey of Employer-Sponsored Health Plans, nearly a third of large employers say that concern over the excise tax influenced health plan decisions for 2014. In 2018, the cost of ACA’s Cadillac tax, a 40% tax on the value of medical benefits over a set threshold amount, will vary depending on the number of enrollees and the plan’s costs. Companies likely to hit the tax threshold have time to plan for a “soft landing” by phasing in changes that will reset benefit cost a a level below the threshold. The most common strategies from the Mercer survey are adding, or building enrollment in lower-cost consumer-driven health plans and eliminating the highest-cost plan offered today.
- Re-Thinking Dependent Coverage Strategies. New rules have relaxed the requirement for large companies to offer dependent coverage until 2016, but the ACA definition of “dependent” affects both large and small companies. Since a “spouse” is not included in the ACA definition of dependent, the law does not require that spouses be offered subsidized affordable coverage by large or small companies. Unfortunately, if any employee has access to coverage that could include their spouse, that spouse is prevented from receiving subsidized coverage through a state or federal healthcare exchange marketplace. This is known as the ACA “dependent glitch.” Plan sponsorship strategy should now include analysis of the pros and cons of allowing spouses and/or children for small group, to “peel off” and purchase coverage on an exchange.
- Next-Generation Company Wellness Strategies. The best way to stabilize premiums and reduce plan costs is to improve employee health and wellness. Most large companies have some sort of wellness program in place, and implementation for smaller firms is becoming more accessible and even integrated into small-group fully-insured plan designs. The ACA allows employers to increase the value of incentives from 20% to 30% of total plan costs, so many companies are planning to expand their programs in 2014. The Mercer Survey indicates a shift from participatory plans to those that focus on rewarding employees for improvements on measurable health standards. This means that wellness, as a key way to engage employees, will become more integrated with company culture and will require more structured year-round communications tied to benefits education.
- Growth in Defined-Contribution Approach & Year-Round Benefits Communication. Traditionally, companies pay a certain percent or dollar amount towards the cost of a narrow range of medical, dental, vision, and any other ancillary plans. In a defined contribution approach, the employer provides each employee a set amount of dollars to spend on a much-expanded variety of benefit plans. This allows employees to essentially “go shopping” to design a custom package based on their own needs. Because the ACA has significantly increased employee interest in learning more about their benefits, many employers are shifting to the new defined benefit strategy that capitalizes on this trend to consumerism. The ACA rules governing plan designs have also driven benefits to become more commoditized. One way to keep a group benefit plan attractive and competitive is to expand choice and allow employees to have more control on how they put together their annual elections. Investing in improved communication is supported by the latest annual Met Life Employee Benefit Trends Study that reports that 54% of Gen Y and 38% of Gen X employees say they need more help understanding how their benefits work and how they help meet their personal and family needs. Responding to these trends with a defined benefit approach can offer these advantages:
- A more predictable, stable benefits budget.
- Better engaged, happier employees.
- A more competitive benefits package to recruit and keep top talent.
The Lewis Group is an award-winning team of employee benefit, HR, technology, and compensation specialists committed to delivering unique solutions that are specifically tailored to an organization’s goals. They analyze and match businesses to exceptional brokers recruited from top agencies in California to boost in ROI on benefits spend and align with company goals for growth and profit. CEO, Carolyn Lewis, has been recognized as an industry leader whose deep insights in the healthcare marketplace and broker channels mark her as a sought-out speaker and consultant. She began her career as a senior executive at the innovative Sacramento non-profit now known as WellSpace Health in Sacramento. She then worked for 10 years at a senior level for a national insurance carrier and spent 8 years as a broker/consultant both at her own company and with the highly-regarded Benefits Done Right Insurance Agency. Carolyn earned her BS from the College of William & Mary in Virginia and her MBA from the Santa Clara University Leavey School of Business.