Category Archives: healthcare reform

Adapting to the Affordable Care Act

ACAHow are we going to respond to the Affordable Care Act?

That’s the question CHROs have been asking themselves since President Obama signed the ACA into law in March 2010.

The University of South Carolina Darla Moore School of Business recently asked that question of CHROs, in its annual HR@Moore Survey of Chief HR Officers.

Distributed to more than 560 chief HR officers at Fortune 500 firms as well as members of the HR Policy Association, this year’s poll asked these HR leaders to specify the actions they’ve already taken, or plan to take over the next 12 months, as a direct response to the Affordable Care Act.

The answers of the 200-plus respondents indicate that most companies are responding by pushing costs and responsibility on to employees. For example:

  • 73 percent of respondents said they have moved or will move employees to consumer-directed health plans.
  • 71 percent said they have raised or will raise employee contributions toward health insurance.
  • 30 percent of organizations have moved or will move their pre-65 retirees to ACA exchanges.
  • 27 percent have either cut back the coverage eligibility of employees’ spouses and dependents or plan to do so.
  • 23 percent have or will more rigorously ensure that part-time employees work fewer than 30 hours per week.

The study, which the University described as a “definitive look at how medium- and large-sized firms have been affected by the changes to the health insurance and healthcare system,” could serve as a “valuable benchmarking tool” for CHROs weighing their organizations’ options in terms of mitigating ACA-related costs, says Patrick Wright, a professor of strategic human resource management at the Darla Moore School of Business, and director of the school’s annual CHRO survey.

“Up to now there has been only speculation as to [the Affordable Care Act’s] impact on business and workers,” says Wright, in a statement. “This survey provides the facts about that impact and specifics on changes to employment practices as a result.”

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Adding to ACA Uncertainty

ACAA pair of appeals court rulings made just hours apart yesterday seem to have compounded employers’ confusion surrounding the Affordable Care Act.

First, the 4th Circuit U.S. Court of Appeals in Washington ruled in the case of Halbig v. Burwell that the ACA does not permit the Internal Revenue Service to distribute premium subsidies in the 36 states where exchanges are run by the federal government.

Later in the day, a federal appeals court panel 100 or so miles down the road in Richmond, Va., took the opposite view, determining the ACA’s “ambiguity” affords the IRS the authority to issue the subsidies.

Reaction to the contradictory rulings—which seem to pave the way for a likely Supreme Court case—was swift, strong and, politically speaking, true to party lines.

Noting his dissent in the later ruling, D.C. Circuit Judge Harry T. Edwards described the decision as a “not-so-veiled attempt to gut the Patient Protection and Affordable Care Act.”

Meanwhile, the conservative side of the aisle commended the Richmond panel’s decision.

Speaker John Boehner, for example, described the ruling as “further proof that President Obama’s healthcare law is completely unworkable,” saying in a statement that the Affordable Care Act “cannot be fixed.”

For employers in the majority of the U.S., what happened yesterday just seems to further cloud an already uncertain future with regard to the ACA.

“The D.C. Circuit’s decision is significant in that it calls into question whether employers [in the affected states] could be subject to a penalty under the ACA’s ‘pay or play’ penalty scheme,” according to Peter Marathas, a Boston-based partner in Proskauer’s employee benefits, executive compensation and ERISA litigation practice center.

Yesterday’s decisions are “not the final say on this issue,” he says, “but [they] certainly underscore the thin thread much of the employer penalty hangs on, particularly if other courts agree with this decision.”

The matter “seems destined for the U.S. Supreme Court,” said American Benefits Council President James A. Klein, in a statement.

Klein also offered his take on how things may ultimately shake out.

“Since the employer mandate penalty is triggered when employees receive a subsidy, some employers may be relieved of penalties, or may have different levels of penalties, depending on which states their workers reside.”

In addition, some companies have weighed whether employees may be better served through steady coverage in exchanges, especially those who frequently change jobs, said Klein.

“The lack of subsidies for workers in some states certainly would change the dynamics in that decision making,” he noted, adding that further uncertainty over the implementation of the healthcare law “chills” the decision-making process for employers.

“The courts need to quickly resolve this critical issue,” he said, “one way or the other.”

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A Few Surprises in Study on Hourly Workers

490136049 -- gavel and clockI met with some folks from St. Louis-based Equifax Workforce Solutions during the Society for Human Resource Management’s conference in Orlando (June 22 through 25) and they shared with me some stats they compiled recently reflecting the potential impact of the Affordable Care Act that even they admitted had some surprises in them.

Working toward Jan. 1, 2015, when the majority of the ACA’s employer mandate takes effect, the company had just released its Equifax Workforce Solutions June 2014 report, highlighting “key indicators of how the ACA will affect business[es] and what they can do to ensure compliance [thereby avoiding penalties] as the regulations continue to go into effect,” as Mike Psenka, senior vice president of Workforce Analytics for Equifax Workforce Solutions (formerly TALX), put it.

For the record, and some important reading, here is the press release and here is the infographic, based on Equifax data culled from 500 million consumers and 81 million businesses worldwide.

Surprisingly — and in keeping with employers making employee-schedule-and-status adjustments to prepare for the ACA’s mandate that all employees working an average of 30 hours or more per week be offered healthcare coverage — 66 percent of the current U.S. workforce is now hourly, accounting for more than 73.6 million active employees, and 59 percent of them are working more than 30 hours per week, according to the study. (Those numbers were higher than anticipated, the folks from Equifax told me.)

Remember, for these workers, employers must track hours for each employee over a 3-to-12-month measurement period to determine healthcare-coverage eligibility. The study found average workloads vary greatly by industry and can be a key indicator of workforce eligibility. “For example,” the report states, “hourly employees in the finance industry work an average of 37 hours per week while those in the restaurant industry work an average of 23 hours per week.”

Also somewhat surprising — to me as well — was the fact that 71 percent of hourly employees have been at their jobs longer than 12 months, which represents “a significant number of workers who may become eligible for coverage after their employer’s first measurement period,” the report says.

And don’t forget employers must also offer affordable coverage to all eligible employees, meaning the monthly premium cannot exceed 9.5 percent of the employee’s income. Based on the average hourly pay rate by industry, as computed by Equifax, estimated maximum premiums can range from $108.80 per month (in the restaurant industry) to $251.20 per month (in the healthcare industry).

The goal here in releasing these stats, Psenka said, is not only to offer employers a few more tools for protection from potential penalties, “but also [to] ensure their valued employees receive appropriate — and affordable — coverage.”

Just bear in mind, as was underscored in an otherwise enjoyable, stress-free SHRM meeting, the clock is ticking and time to get this whole hourly, ACA-eligibility thing right is running out.

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The Problem with Free Health Screening

screeningThere was an interesting opinion piece in yesterday’s New York Times by Dartmouth professor H. Gilbert Welch, who argues that the Affordable Care Act’s incentives for free preventive care may actually work against one of the law’s stated goals of helping Americans become healthier.

Welch, a professor of medicine, says the ACA’s requirement that insurance plans include free screenings, such as mammograms, serve as an incentive for Americans to undergo screening yet do nothing to ensure they’ll follow up should those screenings uncover abnormalities that could be signs of disease. In other words, he writes, the law makes a distinction between screening and diagnosis that means people have an incentive to undergo screening while facing a disincentive to pursue additional tests and treatment should the screening uncover any abnormalities:

So the woman at lower risk for cancer — the one with no signs or symptoms of the disease — has an incentive to be tested, while the woman at higher risk — the one with the lump — faces a disincentive.

In many cases, this leads healthcare providers to, essentially, commit fraud by relabeling diagnostic tests as screening tests so patients don’t have to pay for services that can, in many cases, be quite expensive, writes Welch. Additionally, when screening tests are free, patients are less likely to consider the potential downsides of screening — false alarms, over-diagnosis and the “potential for a lot of out-of-pocket costs down the line.”

Welch suggests a fix: Eliminate the “mismatch between screening and diagnosis” by having patients share the cost of screening and diagnosis:

We need people to consider medical care carefully, and that’s what cost sharing is all about. Patients already share costs on what is arguably the most important preventive service, treatment for really high blood pressure, and for procedures as necessary for setting a broken leg. Why would we treat a much closer call — screening — any different?

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Will Employers Stop Offering Health Benefits?

Ezekiel Emanuel (an oncology doctor, professor of ethics at Penn and brother of Chicago mayor Rahm Emanuel) was one of the architects of the Affordable Care Act — which, as we all know, mandates that employers with at least 50 full-time-equivalent employees provide health insurance. So it’s a bit surprising to learn that Emanuel has just written a new book in which he predicts that, as a result of the ACA, most employers in the United States will have stopped offering health benefits to their employees by 2025.

Why will companies stop offering health benefits? Because, Emanuel argues in the book — Reinventing American Health Care: How the Affordable Care Act Will Improve Our Terribly Complex, Blatantly Unjust, Outrageously Expensive, Grossly Inefficient, Error Prone System (how’s that for a title?) — the online insurance exchanges will provide employers with a viable alternative for doing so. Now, after you’ve picked yourself up off the floor from laughing so hard at the idea of Healthcare.gov being described as a “viable alternative” (although many of its worst bugs appear to have been fixed), note that Emanuel does acknowledge the botched rollout of the federal online exchange and some of the state ones, yet he describes others (such as Connecticut’s state exchange) that are working well. If all of the exchanges are fixed to the point that consumers can obtain health insurance by spending only 30 minutes or so enrolling, he says, then companies will indeed have a viable alternative to the expense and administrative hassles of providing benefits and can instead simply give their employees money to go out and purchase benefits on their own. The ACA’s excise taxes on high-cost health plans scheduled for 2018 are yet another incentive to get out of the health-benefits game, says Emanuel.

Private exchanges, which are essentially a defined-contribution approach to health benefits, have certainly sparked a lot of interest among employers lately. As many as 33 percent of respondents said private health exchanges would be their preferred approach to managing health care in the next three to five years, up from 5 percent now, according to Aon Hewitt’s Health Care Survey of more than 1,230 employers covering in excess of 10 million employees (Aon happens to be one of the vendors that offers a private exchange; others include Towers Watson, Buck Consultants and many smaller vendors). Brian Poger, CEO of consulting firm Benefitter, said at the just-concluded Health & Benefits Leadership Conference in Las Vegas that for many employees — especially low-wage workers with families — the health coverage available on public exchanges might be a better deal than that provided by their employers, considering that many have cut back or eliminated coverage for spouses and families.

Jettisoning traditional health benefits has yet to become a major trend among U.S. employers: Accenture estimated that 1 million employees enrolled in private exchanges last year, a tiny percentage of the nation’s workforce (although it also estimated that number could grow to 40 million by 2018). There is also the risk that employees on private exchanges will “buy down” — that is, purchase less-costly plans that may ultimately leave them with less coverage and worse health outcomes than traditional health plans, which tend to have “marginal” price differences, Mike Thompson, healthcare practice leader at PwC, told me last year. Companies that switch to private exchanges may also risk breaking the linkage between benefits and wellness, he said.

The expression “paradigm shift” is an overused cliché, but it’s clear we’re in one now when it comes to health benefits. Rest assured we’ll continue to cover this area closely.

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Innovation Central

One of the most dynamic sessions at this year’s Health & Benefits Leadership Conference was the “Ideas and Innovators” session, in which experts from a variety of fields give five-minute presentations summarizing their thoughts on what HR leaders should do differently with regard to benefits.

Here’s a sampling of what some of them had to say: Lindsey Pollak, a millennial workplace expert and spokeswoman for The Hartford insurance company, called on companies to encourage mentoring between baby boomers and millennials. “Ninety percent of the millennials we surveyed said they appreciated guidance from boomers,” she said. “Millennials are digital natives, so they can mentor boomers in the use of technology.”

Millennials want the ability to customize their benefits, she said: “Millennials weren’t given teddy bears as kids; they were taken to Build-a-Bear workshops — they’re used to having things tailored for them.”

The same Hartford survey found that 70 percent of millennials consider themselves leaders, whether in their families, workplaces and communities. Companies can harness this leadership spirit for health and wellness, said Pollak — yet must keep in mind that millennials have also proven to be slow to sign up for benefits such as disability insurance. “Millennials aren’t taking advantage of these benefits — you must reach them on this.”

Brian Poger, founder and CEO of consulting firm Benefitter, urged employers to consider getting out of the business of providing health benefits (perhaps an odd thing to hear at a conference devoted to employee benefits). “Most employee raises are being absorbed by rising healthcare costs,” he said. “Why not offer cash instead of health benefits?”

Poger cited a McKinsey survey that found 85 percent of employees would stay with their employer even if they stopped offering health benefits. Many employers are charging signficantly higher premiums for spousal and family coverage or dropping it altogether, he said, which can be a major hardship for families earning the U.S. median household income of $51,000 a year. “Giving employees cash to purchase a family policy on the exchanges may be a better deal for them,” he said.

Lexie Dendrinelis, health promotion and wellness leader at manufacturing firm Barry-Wehmiller Cos., discussed how her company has made leadership and culture — rather than exercise and eating well — the centerpiece of health and wellness. “People can’t focus on their personal health if they’re stressed out about an unsafe workplace,” she said. “Building trustworthy leaders and cultures is the best intervention.”

At Barry-Wehmiller, the company has committed to building a “caring culture” where “we are committed to sending our friends home safe, well and fulfilled.” The company uses incentives and rewards to highlight positive behaviors and takes a “holistic approach” to caring for its employees and families, said Dendrinelis. “We are looking at creating a thriving culture that will bring down healthcare costs.”

 

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Lessons from a Trusted Source

Consumer Reports has been a trusted source of information for folks in the market for a new car, a toaster oven or a snowblower. So why not healthcare?

I could be mistaken, but as a long-time subscriber, I’ve been noticing an increasing number of healthcare-related articles in Consumer Reports as of late. Articles86507521 like “Six Last-Minute Health Insurance Buying Tips” and “Six Tips for The Last Month of 2014 Health Care Open Enrollment.” But as Tara Montgomery made quite clear in her March 18 keynote during HRE‘s Health & Benefits Leadership Conference at Caesars Palace in Las Vegas, CR‘s commitment to healthcare these days goes well beyond an article here or there.

In its very first issue, Montgomery pointed out, CR covered healthcare, with a story on Alka Seltzer and whether it lived up to all of its claims.

But it wasn’t until around 2003, she explained, that CR expanded its efforts in the healthcare arena. Then, five or six years ago, she said, CR really stepped up its efforts as quality data started to emerge.

Montgomery, who is senior director of health partnerships and impact at CR, walked attendees through the multitude of products CR offers, and the partnerships it’s engaged in, that are aimed at informing consumers and giving them tools for making better decisions. (HRE also recently interviewed Montgomery, if you’d like to read more.)

Leveraging the trust inherent in the CR brand, Montgomery said, “We want to teach consumers how they can become better shoppers for healthcare.”

Near the end of her presentation, Montgomery offered attendees some of the lessons CR has learned along the way, including:

  • How valued its brand is to employees. “There’s a lot to be said for using a trusted messenger in this alienating healthcare system,” she explained.
  • There are a lot of good, positive stories that can be told regarding health and well-being, and people who have taken responsibility for their health.
  • You have to “push” your messages, because people are not out there seeking this kind of information, just yet.
  • When you put the right tools at the point of decision-making, good things happen.
  • Personalize what you do.  “One size fits all is not very helpful,” she said. “Don’t talk to everyone at once, but segment your audience.”
  • Use entertainment and humor in your communications. The organization is able to take advantage of its team of journalists, who are talented storytellers—and that is much better than sending out official documents.
  • Put safety first, which almost always results in cost-savings, too.
  • Write your materials at the 7th grade level. CR‘s research has found that even consumers with a high literacy level are extremely comfortable with communications at that level and didn’t feel the material was dumbing down to them. (Also, don’t make it text heavy and use graphics.)
  • It’s OK to incorporate games, but make sure that they’re truly helpful and not just gimmicky.
  • Make sure your messages have cultural relevance. “Don’t just show generic individuals sitting in the doctor’s office,” she said.
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Employers’ ‘Scariest Issues’ in 2014

I don’t know how frightened you are by all these. I do know you’re aware of each and every one of them. But I thought I’d share them anyway.

465250769 -- frightenedWhat intrigued me about this free downloadable list of the 11 (not 10, mind you) Scariest Issues Employers Face in 2014 from XpertHR is how cleanly they’re all packaged. And the list itself seems pretty accurate as well: medical (and, yes, recreational) marijuana in the workplace, same-sex marriage, technology in the workplace, healthcare reform, immigration and Form I-9 compliance, misclassification of independent contractors, minimum wage and overtime violations, curtailing background checks, emerging protected classes and curbing workplace discrimination, employee leaves and reasonable accommodations, and expansion of “protected concerted activity.”

Whoever put this together knows a little something about HR leaders’ sleepless nights, I’m thinking.

I also like the way each topic is broken down into two parts: “The Issue” and “What an Employer Should Do.” Hey, those are certainly two of the most important points we need to cover in our features and news analyses here at HRE.

The same-sex-marriage section was especially helpful, laying out specifically how United States v. Windsor (in which the U.S. Supreme Court declared Section 3 of the Defense of Marriage Act unconstitutional) impacts employers:

Following this landmark decision, both the Internal Revenue Service and Department of Labor adopted a state of celebration rule, meaning that a valid same-sex marriage from another state must be recognized for federal tax purposes in all states. Thus, even if an employee resides in a state that does not recognize same-sex marriage, that employer must comply with IRS regulations regarding the tax treatment of employee benefits. The DOL has pronounced that in the wake of Windsor, same-sex spouses are now eligible for the same benefits and protections as opposite-sex spouses under employer health plans, retirement plans and other benefits covered under the Employee Retirement Income Security Act. Same-sex spouses are also entitled to leave under the Family and Medical Leave Act if living in a state recognizing same-sex marriages.”

Kind of wraps it up nicely. The advice to employers is what you’d expect, and what we’ve written about, but it’s still nice to see it packaged concisely as well:

Accordingly, employers should review their employee handbooks, policies and procedures — particularly pertaining to discrimination, benefits and leaves — and make any necessary revisions regarding the treatment of same-sex spouses. Further, employers should know what types of same-sex relationship their states recognize, the tax benefits provided to an employee’s same-sex spouse or partner, and whether the state follows or departs from federal law under Windsor.”

Also helpful, and in one place, is a chart listing where every state stands on legalized marijuana, same-sex-marriage recognition, minimum wage (with each state’s wage listed) and adoption of Ban-the-Box (criminal background) legislation.

Again, you may not learn anything startlingly new, but armed with brief rundowns and good advice on each of these “scary issues” might help alleviate some trepidation.

I know I plan to hang onto it for some handy frames of reference.

 

 

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Do Workers Value Their Benefits?

disgruntledThe latest Mercer Workplace Survey finds that the perceived value of employee benefits among workers who participate in their company’s health and retirement benefits is starting to erode — especially among the younger generation. Workers under the age of 50 who say their benefits are “definitely worth it” in terms of what they pay out of pocket has “dropped precipitously” in two years from 45 percent to 30 percent, according to Mercer.

The survey, which is based on input from 1,506 employees enrolled in their companies’ health and retirement benefits, finds that benefits are still critically important: 93 percent agree with the statement “My health benefits are as important as my salary” while 86 percent disagree with the statement “My benefits don’t matter much to me.”

These rising levels of discontent can at least be partly attributed to cost-shifting by employers, says Mercer’s Beth Umland:

Out-of-pocket expenses for employees are likely to continue to rise. We’re seeing more cost-shifting and rapid growth in high-deductible consumer-directed health plans as employers are asked to cover more employees under health reform.”

Employees are also undoubtedly peeved about cutbacks in 401(k) matches and delayed matches by many companies. Although AOL has reversed its decision to delay its 401(k) match (CEO Tim Armstrong had originally said the delay was needed to compensate for the cost of “distressed babies,” among other things), other large firms like JPMorgan Chase, Oracle and Caesars Entertainment have reduced or delayed payment of their 401(k) matches and lengthened vesting schedules for their DC plans, according to an analysis of hundreds of government filings by Bloomberg News.

IBM shifted last year to a lump-sum payment of its 401(k) match, similar to what AOL originally did. Oracle stretches out the vesting schedule for its DC plan participants: employees are 25-percent vested after their first year of employment, another 25 percent vested after a second year and fully vested after four years with the company, according to Bloomberg.

These measures can make it much harder for employees to save enough for retirement, Brigitte Madrian, a Harvard professor who studies retirement policy, told Bloomberg:

There’s been an implicit contract for years and years — workers save and companies match — but now they’re changing the rules. Most individuals can’t do it on their own. We’re going in the wrong direction.”

The Mercer findings directly contradict a new survey from Guardian Life Insurance Co. which finds workers value their benefits plans more than they did two years ago.

Guardian says this increase in perceived value “suggests that American workers are valuing their benefit packages more than ever and reaffirms the value of workplace benefits for employers’ business strategy, especially for retaining employees.”

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Medical Costs Continue to Plummet

health moneyTwo major new studies indicate that the rate of growth for health-plan costs is at near-historic lows, thanks in part to the effects of the Affordable Care Act and new strategies by employers to limit costs and encourage better price-awareness among employees.

Segal’s Health Plan Cost Trends Survey finds that projected cost trend data is now growing at the slowest rate in 14 years. Meanwhile, PwC’s Health Research Institute projects a medical cost trend for this year of 6.5 percent – even lower than in 2013, itself a year of slowing cost trends. Both studies attribute at least some of the trend to Obamacare, as well as the tepid economic recovery and employer initiatives. Here’s Ed Kaplan, Segal’s national health practice leader:

Although it remains to be seen if the deceleration of projected trend data is influenced by short-term economic forces, the influence of the Affordable Care Act, improved efforts around lifestyle changes such as weight loss and smoking cessation, early detection of disease, or some factor not yet identified, there continue to be changes in the system that could have long-term implications for healthcare costs.”

The Segal report notes that provider reimbursement arrangements are beginning to shift from fee-for-service to alternative payment models such as bundled payments, that participants are becoming more educated consumers and that costs are becoming more transparent.

PwC says the slow recovery and decreased personal wealth has reduced some of the demand for healthcare and has resulted in a “new normal” in healthcare spending patterns. It notes that individual consumers, who are bearing more responsibility than ever for their own healthcare costs, are questioning the need for and sometimes delaying procedures, imaging and elective services. Hospitals are working hard to hold down expensive readmissions (and thus avoid getting hit by the ACA’s penalties in that area) while employers are creating high-performance health networks for major procedures such as heart surgery and spinal fusion, in which employees travel to select providers for these specialized services. Companies expect these high-performance networks to save them money, even with travel costs factored in.

However, there’s no reason for complacency: Both reports note that other trends will exert upward pressure on health costs in the near future. These trends include ongoing consolidation among hospitals and clinics, PwC notes. The rate of consolidation among providers has increased by 50 percent since 2009, which can lead to price increases of up to 20 percent or more, according to the report. Expensive and complex biologic drugs may also push up costs, as more new drugs continue to be introduced to the market, says PwC. Segal’s Kaplan notes that although cost trends continue to decelerate, overall health plan costs are still on the rise. “Plan sponsors must be ready to implement new requirements introduced by the ACA, and will need to play an active role to continue to get the most for their benefit dollars.”

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