Employers Working to Avoid Obamacare Requirements
Employers with large part-time and low-wage populations — especially retailers — are more likely to take measures in order to avoid triggering a costly requirement to provide health care coverage to employees that used to be ineligible.
According to a survey released Wednesday from consulting firm Mercer, 67% of retail/wholesale employers expect they’ll be making changes to their workforce structure so they can dodge a coverage eligibility requirement that's part of the Patient Protection and Affordable Care Act.
Under that requirement, in 2014, employees working 30 or more hours per week will be considered full-time and therefore must be offered employer-based health care coverage.
If employers don’t offer health care and they have 50 or more full-time employees, they’ll have to pay a $2,000 penalty for each worker that isn't offered coverage and receives a subsidy to purchase a policy within a state-run health insurance exchange (employers won’t have to pay a penalty for the first 30 workers that receives a subsidy).
Those purchasing health insurance through an exchange are eligible for a premium subsidy if their income falls between 100% and 400% percent of the federal poverty level.
Employers with part-time and low-wage populations expect that health care reform requirements will push up costs by at least 3% in 2014, and another third don’t yet know what the impact will be.
"With health benefit costs already rising at twice the rate of general inflation, an additional increase of 3% or more will be very tough for employers to absorb,” said Sharon Cunninghis, leader of Mercer’s US Employee Health & Benefits business.
Walmart, the largest retail employer, stirred backlash last year because it started refusing health care to part-time employees who work less than 24 hours per week and raised premiums for full-time employees.
While there is no penalty if a part-time worker (someone working less than 30 hours per week) receives an exchange subsidy, the number of part-time workers can affect whether an employer is considered a "large employer."
For example, if a firm has 35 full-time employees and 20 part-time employees who all work 24 hours per week (96 hours per month), the part-time hours would be divided by 120, and would be equivalent to 16 full-time employees.
With 51 "full-time" employees, that company is now considered a large employer. If the 35 actual full-time employees receive a subsidy for a health care exchange plan, that employer will be have to pay a $10,000 penalty.
On top of the eligibility requirements, the health care coverage that employers are required to offer will face greater scrutiny to meet certain requirements. The cost of premiums, for example, can't exceed 9.5% of the employee's income for self-only coverage.
Employers also won't be meeting requirements if their plan pays for less than 60% of covered expenses. The Congressional Budget Office estimates about 1 million individuals per year will enroll in an exchange plan and receive a credit because their employer's plan was unaffordable.
“Extending coverage to more employees will be a significant new expense for these employers,” said Tracy Watts, US health care reform leader for Mercer. “Especially because other provisions regulate how much an employer can require employees to contribute to the cost and how good the coverage must be.”
Additionally, Mercer says, in companies where pay is low, employees who are eligible for coverage are more likely to opt out of enrolling. For example, among large wholesale/retail and health care employers, opt-out rates average 19% and 18%, respectively, compared to just 8% percent among transportation, communication and utility companies, where pay is higher.
Once the individual mandate goes into effect – which will require all individuals who can afford coverage to obtain it (or pay a penalty) – employers with high opt-out rates could experience a significant increase in enrollment.
Mercer also points out that employers that were counting on some of their low-paid employees qualifying for Medicaid when it expands to include individuals with household income less than 133% of the federal poverty level may have to rethink their plans in light of the Supreme Court ruling that makes it easier for states to opt out of the expansion. A fifth of survey respondents have benefit-eligible employees earning less than 133% of FPL; in industries with large part-time populations this rises to as much as 50 percent.
“Because state Medicaid eligibility already varies greatly, it’s difficult to predict what states will do about expanding their programs to more individuals, and the impact of their decisions on employers,” said Branch McNeal, leader of Mercer’s Government Consulting business.
The Mercer survey highlights the scope of outcomes between various industries. For example, few survey respondents – 6% – believe it is likely that they will drop their medical plans after the public insurance exchanges come online. This rises to 9 percent among retail and hospitality employers.
And while almost 70% of retail/wholesale employers will try to avoid the 30-hour per week threshold, 41% of manufacturing employers will likely to take this approach.
“Sometimes lost in the furor surrounding health reform is the fact that the Patient Protection and Affordable Care Act (PPACA) will affect some employers far more than others,” Mercer said in a statement.
Preparing for reform:
- Employers have a lot to do to prepare for reform – especially those that were waiting to develop a strategy until the Supreme Court decision (56% of survey respondents). While 11 percent will continue to wait until after the November elections, most will now move ahead.
- Short-term, employers need to produce and distribute summaries of benefits and coverage (SBCs) and more than a third of respondents (36%) say they haven’t yet begun or are behind schedule.
- Employers are doing better with other near-term tasks, include preparing for 2012 W-2 form reporting in early 2013, implementing the new $2,500 cap on health care flexible spending account contributions and implementing coverage with no cost-sharing for women’s preventive services under non-grandfathered plans – about three-fourths say these tasks are on schedule or complete.
This article was originally posted on BenefitsPro.com, a sister site of Credit Union Times.