Most Employers Working To Make Their Health Insurance Benefit Plans ACA Compliant, Pending Supreme Court Ruling

Most single employers and corporations (86 percent) will or are likely to continue to provide health coverage to their employees in 2014, the year when most of the provisions of the Patient Protection and Affordable Care Act (ACA) take effect, according to the International Foundation of Employee Benefit Plans’ Health Care Reform: 2012 Employer Actions Update survey. The survey focuses on the most important issues raised by the ACA facing employers this year. Topics addressed include employer concerns regarding plan design and funding, methods for communicating with employees, grandfathered plan status, reactions to health insurance exchanges and the potential impact on health care benefit costs.

“These employers recognize that offering health care coverage is an important benefit that helps retain current employees, attract future talent, and increase employee satisfaction,” said Michael Wilson, chief executive officer at the International Foundation.

“Employers are redesigning their health plans to remain in compliance [with the ACA] and to curb anticipated costs,” added Julie Stich, director of research at the International Foundation. “The research told us that increasing participants’ share of premium costs is the most common technique, followed by increasing in-network deductibles and out-of-pocket limits.”

The research showed that only 1 percent of the respondents will definitely not provide coverage to all full-time employees in 2014. Among the 54 percent of employers that did not state that they will definitely continue to provide coverage to all full-time employees in 2014, the most likely cause for discontinuing coverage would be the cost of providing coverage becoming too expensive (45.1 percent).

Highlights of the survey follow.

Responses To Health Reform

• Nearly half of employers (47.2 percent) are focused on making their plans compliant with ACA requirements. Just under 40 percent are focused on beginning to develop tactics to deal with the implications of reform and 37.3 percent are developing a multiyear approach. Slightly fewer than one-third are taking a “wait and see” stance.
• Organizations with a “wait and see” attitude are waiting for the following events before they make further plans for implementation: the Supreme Court decision on the ACA challenge (80.7 percent), further regulatory guidance (62.4 percent), and the outcome of the 2012 presidential and congressional elections (52.1 percent).
• Respondent employers communicate with employees regarding the ACA mostly through annual enrollment materials (81.1 percent of employers), e-mails to employees (34.8 percent), the company website (24.1 percent), and special written communication pieces (22.9 percent).

Cost Implications

• Nearly half of all employers (47.2 percent) have conducted an analysis to determine how the ACA will affect their health care plan costs. The majority (69.6 percent) of organizations expect the ACA will raise their costs in 2012 as follows: 25.6 percent by 1 percent to 2 percent and 19.8 percent by 3 percent to 4 percent. Employers that have not conducted an analysis of plan costs are slightly more likely to estimate cost increases, the International Foundation noted.
• Extending coverage to adult children until age 26 was listed as the top cost driver among provisions already in place (38.7 percent), while the nondeductible excise tax on high-cost health plans beginning in 2018 would be the top cost driver in the future (19.6 percent). Consequently, some 14 percent of respondents have already started to redesign their primary health plan to avoid triggering the 2018 excise tax.
• Approximately 14 percent of responding employers anticipate making a change (most by adding stop-loss insurance) in their funding approach for their primary medical plan due to changes imposed by the ACA.

Cost Management Initiatives

• Increasing participants’ share of premium costs is the most common technique used to address cost increases caused by health reform (used by 23.1 percent of respondents). In the next two years, 20.1 percent of employers plan to increase employees’ share of dependent coverage cost.
• In addition, 33.4 percent of surveyed organizations either have conducted dependent eligibility audits or plan to do so in the next two years, and another 29.5 percent have analyzed or plan to analyze claims.
• One-third of respondents (33.2 percent) are considering offering the increased wellness incentives allowed beginning in 2014.

Health Insurance Exchanges

• Among respondents considering using the exchanges in 2014, more are likely to direct only some employees to the exchanges and continue to provide coverage for others as opposed to dropping coverage for all employees.
• Approximately one-third of respondents said that the most likely reason they would drop coverage would be that other organizations in their industry or their geographic area are discontinuing coverage (27.5 percent and 4.8 percent, respectively).
• Among organizations that will definitely continue to provide coverage, respondents overwhelmingly chose the following three reasons for doing so: to retain current employees and to attract future talent (55.4 percent each), and to maintain or increase employee satisfaction/loyalty (53.5 percent).

Grandfathered Plans

• The primary health plan of more than one-third of responding organizations (34.3 percent) is a grandfathered plan. However, 46. 9 percent of employers with a grandfathered plan anticipate their plan will lose grandfathered status in 2014 or earlier.
• For respondents, the top advantages of being grandfathered are the exemptions from the following requirements: to provide coverage for preventive care with no cost sharing or annual limits (29.6 percent), implementation of the appeals process (29.6 percent), and providing the essential benefits (28.9 percent).

For more information, visit www.ifebp.org.