The Patient Protection and Affordable Care Act will change work life as we know it. Prepare.
By the Editors
Given the far-reaching effects that the recently signed Patient Protection and Affordable Care Act (PPACA) will have on U.S. employers of all sizes, the ADP Research Institute, in association with SharedXpertise (publisher of HRO Today) conducted a survey in July/August 2010 to gauge U.S. employers’ reactions to the act. Employers responded from 680 U.S. private-sector (non-government) companies, including senior executives in small (1 to 49 employees), mid-size (50 to 999), and large organizations (1000-plus).
A full analysis of the research results will be published in the near future. However, the initial findings can help HR leaders both benchmark against peers in similarly sized companies and determine critical next steps to prepare for the act’s implementation. (To request a copy of the full report, visit www.adp.com/hcrsurvey.)
First, ask yourself: Where is my organization in relationship to the trends reported here? How can my organization prepare for the coming shifts? And start now: Some changes are taking effect in 2010.
Becoming familiar with, and getting prepared for, the act’s key provisions—such as employer mandates, extended dependent coverage, and Cadillac health plans—is likely more important than for less well-publicized provisions. Predictably, large employers are more familiar with, and prepared for, the act than are mid-size employers. Small employers are the least familiar and least prepared.
It is vital that employers of all sizes become familiar with the main provisions of the act, as early as possible, in order to understand the potential ramifications. Employers in all size groups (64 percent to 71 percent of the three groups surveyed) expect to need guidance in analyzing the act’s impact on their companies. Adequate preparation for implementation of some provisions of the act will require significant data gathering and analysis.
Provision: Employer Mandate
This provision essentially requires employers with 50 or more employees either to offer healthcare coverage or to pay a penalty.
While the majority of employers of all sizes (91 percent to 96 percent of the three groups surveyed) that currently offer their employees health insurance expect to continue to do so, one-third of those employers are somewhat likely/very likely to scale back on healthcare benefits. At the same time, the act does not appear to be compelling many employers that do not currently offer health insurance to do so, as less than a third surveyed say they are likely or very likely to begin offering coverage.
Although this provision is not planned for implementation until 2014, smaller employers will want to keep this provision in mind as they consider their growth plans. Mid-size employers must undertake careful analysis to determine the relative merits of providing healthcare benefits versus paying the penalty—keeping in mind cost, competitive advantage, and their ability to attract and retain employees.
Provision: Cadillac Health Plan Tax
This provision imposes a tax on insurers of employer-sponsored Cadillac plans (plans with aggregate value that exceed $10,200 for individuals and $27,500 for families).
Because relatively few companies offer Cadillac health plans, this provision has limited impact on employers. Among the employers that do offer these plans (in our sample set, only 24 percent of large employers, 12 percent of mid-size employers, and 6 percent of small employers), the impact of this provision appears to be small.
Employers that currently offer Cadillac health plans appear likely to continue to do so, indicating that these plans are important to the recruitment and retention of certain employee groups. Employers that offer these plans will want to calculate the actual increases to ensure that offering these Cadillac plans provides value that exceeds the additional cost.
Provision: Dependent Coverage
This provision calls for companies that offer health insurance benefits to extend coverage for adult children to the age of 26 for all individual/group policies.
More than one-third of each employer group says this provision will most likely or definitely impact whether or not they offer healthcare coverage. Among those who say that this provision is likely to impact the healthcare benefits they provide, the majority are more likely to scale back rather than eliminate benefits.
This provision is currently being implemented. Determining the cost implications and identifying opportunities to offset potential added costs is most vital. At the same time, any employer that might anticipate scaling back on health plans should explore options with its insurance brokers/providers and begin the process of developing related employee communications.
Costs: Benefit and Compliance
Employers of all sizes anticipate that the cost of providing healthcare benefits will increase as a result of the implementation of the act. Large and mid-size employers think that both the provision that requires employers with 50 or more employees to provide coverage and the extended dependent coverage provision will increase benefits costs; small employers express the most concern about the provision for extended dependent coverage.
Consult with your benefits broker or trusted advisor on benefits costs. Employers should begin working with their brokers or consultants now to calculate the actual impact of these provisions on benefits costs (based on the demographics of their employee population) and develop an appropriate strategy to absorb or offset additional costs.
On compliance costs, large employers anticipate increases as a result of every major provision of the PPACA, while mid-size employers have mixed expectations. Small employers are the least likely to anticipate such increases. All three groups expect the extended dependent coverage provision to increase compliance costs more than the provision requiring employers with 50 or more employees to provide health benefits coverage.
Now is the time for employers to analyze the compliance cost implications of the act’s provisions in order to identify ways to be smarter about how to manage those costs. Evaluate additional administrative options to help lower overall plan costs while remaining compliant. For example, partnering with an HR outsourcing organization offers one way to relieve employers of increased compliance burdens.
Employers in all three segments are divided as to whether their HR groups/departments are under-staffed or appropriately staffed to implement the terms of the act.
The implementation of several provisions of the act designed to help provide access to affordable care, improve quality, and lower costs are already in place. With more than 90 provisions set to take effect between now and 2018, employers are only just beginning to feel the full impact of the act. It is essential for employers to assess their existing resources within HR, to begin communicating any plan design changes to their employees, and to consult their trusted HR advisor. Smart employers of all sizes will take action sooner rather than later.
Immediate Action Items
Several important provisions of the PPACA are in effect as of September 23, 2010, including strong consumer protections and more choices in healthcare. These reforms will apply to all new health plans and to many existing health plans as they are renewed. As an employer, you can take immediate steps to help prepare and familiarize yourself with the impact the PPACA will have on your business today and beyond.
1. View an interactive timeline showing the major provisions of the PPACA at www.healthcare.gov/law/timeline.
2. Focus on near-term compliance with insurance market reforms.
3. Model the long-term holistic impact of the PPACA on group coverage costs.
4. Leverage resources for an action plan.
5. Consider new health and wellness strategies or programs.
6. Evaluate additional administrative options to help lower overall plan costs.
7. Decide on a communication approach/ strategy to inform employees of the impact of the PPACA.
8. Continue to stay informed regarding the plans of federal agencies charged with enforcing the provisions of the PPACA.
To request a copy of the full research report please visit www.adp.com/hcrsurvey.
Visit www.adp.com/healthcare. Visit the Society for Human Resource Management (SHRM) Online at www.shrm.org/healthcare. The federal agencies charged with enforcing the act include the U.S. Department of Health and Human Services (HHS), U.S. Department of Labor (DOL), and the Treasury/Internal Revenue Service (IRS). To help employers understand and comply with the act’s provisions, these departments regularly release information that explains portions of the law or supplements previously released information.
1 U.S. Department of Health and Human Services (HHS): www.healthcare.gov
2 U.S. Department of Labor (DOL), Employee Benefits Security Administration: www.dol.gov/ebsa
3 Treasury/Internal Revenue Services (IRS): http://www.irs.gov
The Henry J. Kaiser Family Foundation has developed its Health Reform Source website dedicated to the PPACA, providing nonpartisan information about the act, plus the latest news, research, and analysis, including a state-by-state view of healthcare reform implementation: http://healthreform.kff.org.
The Patient Protection and Affordable Care Act will change work life as we know it. Prepare.