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Blog by: Jeanne Hines, SPHR

Beginning January 1, 2014, employers with 50 or more full-time equivalent employees who do not offer medical insurance to their employees will be required to pay a penalty.  Some employers are fearful of how the Affordable Care Act will affect their cost or force them to make workforce cutbacks or scheduling changes to keep employees either over or under the hourly requirement threshold for offering health insurance.  It may seem more cost-effective to just pay the penalty and discontinue offering health insurance, but savvy employers know that their benefits do more than just pay claims.  The decision comes down to three basic issues, cost, culture and competitiveness.  Today’s blog will discuss these issues that employers will want to consider before making their decision.


COST

  • Productivity:  Employers risk an increase in presenteeism and a loss of productivity if they discontinue benefits.   Employees will have to fend for themselves with regard to their benefit plans; they will need to spend more time than they do now resolving claims issues and ensuring that their premiums are paid on time.  If this becomes too burdensome, they may decide to drop coverage.  With no coverage, they may not seek medical help as quickly, thereby staying away from work longer when they’re ill.
  • Taxes:  There is a direct financial impact for employers as well.  Employers currently receive tax advantages for contributions to a health insurance plan.  No plan, no tax credit.  The lost tax advantage also carries through to employees enrolled in benefits plans.  The premiums for many voluntary plans are paid with pre-tax dollars.  If employees have to seek coverage on their own they could lose their tax break, and the contribution the employer makes toward the plans in which they’re enrolled.  That means more money out of their pockets to pay for coverage, which may lead to pressure on the employer to provide additional compensation to cover their increased costs.
  • Plan design:  Changes could be made to the plan design that would satisfy employers and their workforces.  Although employers would need to provide coverage to employees who work 30 hours per week or 130 hours per month on a regular basis, the mandate only requires employee only coverage during 2014.  In 2015 employers are required to offer coverage to dependents (children up to age 26 and NOT spouses). Affordability requirements could be addressed by offering a choice of plans or restructuring cost-sharing.
  • Reporting requirements:  Employers will be required to report information to the federal government, partly for them to determine whether any penalties are owed.  In addition, state exchanges will be seeking information for verification purposes for those who purchase their coverage through the exchange.


CULTURE

  • Morale:  Anything an employer stops doing is viewed being taken away by employees who participated.  Employees who need to find their coverage elsewhere may feel undervalued or abandoned by their employers.  As a first-time buyer of health insurance, employees may be puzzled about what to buy.  If there are subsequent issues with their coverage, they may be disappointed and blame the employer. 
  • Wellness:  More than 75% of employers’ health care costs and productivity losses are related to employee lifestyle choices.   Pairing a great health insurance plan with a wellness plan can improve productivity and employee health.  Employees who are healthy are generally more satisfied in their work, more productive and able to give more energy to their work.  The Affordable Care Act offers employers an opportunity to increase incentives for structured wellness programs.

 

COMPETITIVENESS

  • Brand:  Given a choice between a job with rich benefits and one without, employees will most likely choose the former.  To be competitive in the marketplace, employers need to meet or exceed what is being offered by competitors so the best people will want to work for them.  Employers risk damaging their employment brand when they reduce benefits, making recruitment more difficult.  Once lost, it is difficult to rebuild a strong brand. 


The list above is not exhaustive, but will provide some insight into the considerations to make.  If you haven’t discussed your strategy with a licensed insurance professional, I encourage you to do so as soon as possible.  Insurance professionals can provide you with detailed information about the Affordable Care Act and what it means for your business. 

Keep watching our website for more information both in our Health Care Reform section as well as upcoming webinars.  On March 6th, we’ll be offering a webinar on the Injured Employee’s Rights and Responsibilities.  Our next health care reform webinar will be on April 3rd, at which time we’ll present more information on affordability requirements, minimum essential value requirements, fines for employers and the requirements for tracking  hours. 

 

Posted 12:00 PM  View Comments

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