With big fines looming, employers aren’t backing away from healthcare benefits
Employers are looking to play instead of pay.
With key provisions of health care reform set to kick in Jan. 1, local business groups and benefits consultants here say they’ve seen no signs of an avalanche of employers here preparing to bail out of providing health insurance benefits and instead pay penalties.
But higher premiums for spouses are among design changes workers may see.
Starting Jan. 1, employers with 50 or more workers must offer coverage to a least 95 percent of their workers who work 30 hours or more a week and their dependent children up to age 26 or be subject to an annual penalty of $2,000 per full-time employee. The penalty applies if an employee gets subsidized coverage in a healthcare exchange.
The law also requires that employers offer at least one plan option that is affordable and provides minimum value. That means no more than 9.5 percent of the employee’s income goes toward buying self-only coverage, and the plan must be of minimal value, meaning it covers a least 60 percent of the expenses under the plan. If those conditions aren’t met, employers would face $3,000 annual penalties for employees who go to an exchange and get a subsidy.
“We have not seen very many employers take that route [of getting] out of providing health benefits,” says Melissa Junge, who heads up the Chicagoland Chamber of Commerce Small Business Healthcare Task Force and is senior associate in the employee benefit and executive compensation practice at law firm Drinker Biddle & Reath.
Employers offer benefits, “to attract and retain quality employees, to keep people healthy and improve productivity,” notes Michael Wojcik, senior vice president of Orland Park-based insurance brokerage and consulting firm The Horton Group. “All of those [reasons] still remain the same today. Employers are saying, ‘No, we’re not going to drop benefits, but we’re going to adopt benefits that are hopefully going to be sustainable for the long-term,’” when factoring in costs, he says.
That’s the case at South Holland-based municipal engineering consulting firm Robinson Engineering, which has worked with a broker consultant to make sure its programs are compliant.
“We know with the plans we have right now we’re going to be okay,” says Denise St. Pierre, organizational development manager at the firm, which employs 104 workers, offers PPO and Health Savings account plans to its employees and pays all of the premiums.
But some employers, particularly in retail and hospitality, who don’t now offer health insurance benefits to 30-plus-hour employees are considering reducing the hours of workers, so those workers wouldn’t be eligible for health care benefits to keep the lid on costs, says Kristen Stagaman, principal with benefits consultant Mercer in Chicago.
“There are a handful of people out there who are thinking about” that, says Angela Adams, director of human resource services at the Management Association of Illinois. “They feel like they can’t afford it.”
She has been discouraging them from pursuing that route because of concerns about potential legal action they might face.
“We’ve heard rumblings from plaintiffs attorneys that if employers try to carve specific people out by reducing their hours, they’re going to try to come up with some reason to sue based on that,” she says.
Often people who are working a part-time schedule, such as 32 hours a week, are women, “so if you’re trying to create a class of people who work less than 30 hours a week specifically to exclude them from insurance, there’s the potential they might say, ‘You’re discriminating against us because we’re female,” she says.
Reducing hours likely isn’t an easy fix, contends J. D. Piro, a senior vice president at Lincolnshire-based benefits consultant Aon Hewitt.
“If you need people to work more than 30 hours per week just due to the nature of the business, that need doesn’t change as a result of healthcare reform,” he says.
Plan design changes employers are considering and pursuing to control rising costs as the law goes into effect include making changes to spouse coverage. The law does not require coverage for spouses.
“We have not seen a shift to drop spouses,” says Wojcik.
But if spouses have coverage available at their employers, in some cases, they wouldn’t be eligible or they might be required to take their employer’s coverage first, he says. In other cases, coverage would be available, but with a hefty surcharge.
Employers also are moving more towards high deductible, consumer driven health savings accounts to control costs, benefit experts say. In some cases, they’re helping seed those accounts, says Wojcik.
Employers are “saving on the premiums because the plans cost less, but they’re taking those premium savings and helping the employees establish an HSA program.”
Robinson Engineering’s HSA plan carries a $5,000 deductible for single coverage and $10,000 for family coverage. But the company provides $2,000 of the deductible for single coverage and reimburses $1,500 if the employee meets the deductible, St. Pierre says. For family coverage, it provides $4,000 on the front end and reimburses $3,000 if the deductible is met, she says. That combined with wellness programs have helped control costs, she says.
Photo by Rich Hein