Employers Are Caught Up in the Five Stages of Health Care Reform Ruling

While most employers have come to terms with the U.S. Supreme Court’s decision in late June to uphold the Patient Protection and Affordable Care Act, those that haven’t or those hoping for its repeal after the November election—assuming a Republican win—”need to get their heads out of the sand” immediately and prepare to implement the law’s 2013 provisions, one benefits consultant says.

“Employers may be waiting, but the clock is ticking and the first items start hitting in 2013,” says Gary Kushner, an human resources strategy expert and presidential adviser on health care reform based in Portage, Michigan.

Kushner compares employers’ slow acceptance of the law with psychiatrist Elisabeth Kubler-Ross’ five stages of grief: denial, anger, bargaining, depression and acceptance.

“A lot of employers, but not all, have finally reached Phase 5—acceptance. The court has ruled. It’s the law. Some organizations are just now getting quickly into gear doing analyses that their competitors have a 2- to 2 ½-year head start on. Waiting time is over.”

In a survey of 4,000 employers conducted by consulting firm Mercer immediately after the June 28 Supreme Court ruling, most said they did not have a strategy for complying with the law’s 2014 provisions. About 40 percent said they had been waiting for the court’s decision before starting to plan and 16 percent said that they would continue to wait until after the November elections, a move that Kushner says makes no sense.

“Even if [presumptive Republican presidential nominee Mitt] Romney is elected in November and even if the House remains in Republican hands, and if the Senate was to see a 12-seat swing putting the Republicans in the majority, as long as there are 41 Democrats willing to vote as a bloc they would be able to stop any repeal of the” Patient Protection and Affordable Care Act, he says.

Kushner says that what employers need to be thinking about now is fall open enrollment season and making sure they comply with the law’s 2013 requirements, such as distributing new summaries of health benefits to employees and reporting the value of health coverage on 2012 W-2 forms, which will be distributed next year. Also, as of Jan. 1, 2013, companies must establish a $2,500 cap on the amount that employees can contribute to health care flexible spending accounts.

Compliance for 2014 becomes a bit murkier because of the lack of regulatory guidance on issues such as the definition of a full-time employee or determining a health plan’s affordability and minimum value, says attorney Amy Bergner, head of consultancy Mercer’s health and benefits team in Washington. That’s also the year employers will start interacting with state health care exchanges, or marketplaces, which the law established to help individuals not covered by their employers to purchase health care, as outlined in the individual mandate.

Employers must provide full-time employees with health care coverage that meets certain requirements. While full-time work is generally defined as at least 30 hours per week, employers with a large part-time or seasonal workforce for which hours often fluctuate will have difficulty figuring out who is eligible for coverage, Bergner says.

Also, companies with 50 or more full-time workers or the equivalent number of part-time employees will have to pay a penalty if their health care plan fails to pass an affordability and minimum value test. So far, the Department of Labor, the Department of Health and Human Services and the Internal Revenue Service have not finalized rules on the test.

“Many employers will need more definition and guidance around these questions,” Bergner says. “We’ve had a few sets of informal ideas in the form of notices and FAQs, but it was more in the line of the regulators throwing ideas out and asking for comments. So far, there’s been no regulatory certainty. It will take employers awhile to ramp up once the final rules are developed.”

Bergner says another key issue that employers are not prepared for is the expansion of the Medicaid program for low-income people. The law asks states to expand their programs to cover virtually everyone earning up to 133 percent of the federal poverty level (about $31,000 for a family of four) or lose all federal financing for Medicaid.

The U.S. Supreme Court ruled that states could opt of the Medicaid expansion and some, such as Florida and Texas, have already rejected the plan. That means that large numbers of poor people could be left without coverage and that could have a big effect on employers with low-wage workers, Bergner says. She calls the Medicaid expansion a “sleeper issue” for employers.

The law provides tax credits to help people with incomes of 100 percent to 400 percent of the federal poverty level (about $23,000 to $92,000 for a family of four) buy private insurance. But there is no provision to provide subsidies for anyone below the poverty line because it was assumed that those people would be covered by expanded Medicaid.

Employers in states that don’t expand Medicaid will have to make sure their workers are covered or pay penalties, says Kushner, the Michigan HR strategy expert, but the larger issue is that more uninsured people means higher costs for everyone.

“Those costs will be added to mine when all the providers have to make up for not getting reimbursed by Medicaid or by private insurance,” he says. “No one pays directly, but we all pay indirectly. While it [not expanding Medicaid] might score political points for employers and their employees, there will be a huge cost to employers that do offer coverage.”

Rita Pyrillis Workforce Management’s senior writer. Comment below or email editors@workforce.com.