The Rundown

• The Patient Protection and Affordable Care Act is the lawof the land, but it's still uncertain how health care reform willaffect credit unions.
• HR leaders and experts are certain, however, that healthcare insurance premiums will keep increasing because of newmandates, fees and taxes.
• Private health care exchanges, defined contribution plans,high-deductible options and workplace wellness program can helpbetter manage health insurance.

It's clear that the Patient Protection and Affordable Care Act,otherwise known as Obamacare, is the law of the land. But it's notso clear yet how the new law will impact credit unions over thenext two years when the bulk of the health reform laws go intoeffect.

That uncertainty is creating more challenges for credit union HRleaders like Monica Horger, vice president of human resources forthe $681 million Michigan First Credit Union in Lathrup Village, Mich.

In addition to the law's mandates, fees and taxes that areexpected to increase insurance premiums, Horger said Obamacare isincreasing the credit union's administrative costs. But other HRexperts like Brad Pricer, human resources process leader at CUNA MutualGroup in Madison, Wis., said there are opportunities for creditunions to control and predict health care costs year over yearthrough the emergence of private health care exchanges and definedcontribution health care benefits.

“We are trying to control the costs internally, but I don'tthink that will be feasible under the health care reform act,” saidHorger. Up until two years ago when the new law was passed,Michigan First paid the entire health insurance premium for its 250employees, who are now required to share premium costs.

Horger said administrative costs are rising as her HR departmentspends more time finding answers to health care insurance inquiriesfrom employees because of ambiguities in the Obamacareprovisions.

For example, the law allows parents to keep their children ontheir health care plan up to the age of 26, but it doesn't specifywhether that includes dental and eye care benefits. Michigan Firstwanted to find out if it could charge more to provide thosebenefits. To get an answer, the credit union hired a lawyer who didthe research and determined Michigan First could charge extra fordental and eye vision coverage because it wasn't legally obligatedto provide those benefits under the health reform law.

“It's a whole different ball game than it was in the past,”lamented Horger. “It's our mission to continue to provide healthcare benefits for our employees, but they will have to share theburden of increasing costs in some manner.”

While some provisions of the health care reform law are alreadyin effect, the bulk of its mandates that will have the biggest costimpact on employers and their employees will kick in this year andin 2014.

It's anticipated that Obamacare will increase health care costsover the next few years for businesses because billions of dollarsin various fees and taxes will be imposed on health insurers,high-wage earners, medical devices and brand name medications thisyear and in 2014.

However, the Obama administration contends the health carereform law will control escalating costs and eventually reducepremiums by $2,000 per family by 2019 for all businesses.

In the meantime, health care insurance costs continue to climb.Annual premiums for employer-sponsored family health coveragereached $15,745 in 2012, up 4% from 2011, reported the KaiserFamily Foundation. Moreover, employees are paying more than $4,300toward the cost of their coverage. Since 2002, premiums haveincreased by 97%, outpacing the growth of wages and inflation.

Because of these rising costs, Dennis Witherspoon, an associateprofessor of banking and finance at Northwood University inMidland, Mich., and a former credit union executive, said somecredit unions might be compelled to hire more part-time employeeswho usually are not eligible for health care benefits.

“The downside is that member service can be affected by this,”said Witherspoon. “I am a bit concerned that you may see some ofthat slip as more credit unions are forced to go with part-timestaff to alleviate some of the health care requirements.”

Nevertheless, most companies are expected to continue to providehealth care insurance because it is an essential retention andrecruitment tool, according the CUNA Mutual Group's Pricer.

Pricer said it's important for credit unions to determinewhether their health care plans are affordable and provides minimumcoverage. If the plan doesn't meet these two requirements,the credit union would be required to pay a penalty tax of upto $2,000 per employee come Jan. 1, 2014.

The CUNA Mutual Group website features a health care reform pay or play calculatorthat can help determine if the insurance is affordable and offersadequate coverage. A credit union health care plan is deemedaffordable if all employees pay less than 9.5% of their incomes forcoverage. Second, the health care plan provides adequate or minimalcoverage if it pays for at least 60% of covered health careexpenses.

The tax penalty does not apply to credit unions with fewer than50 employees, who will have the opportunity to buy their own healthcare plan on state-run or federally run exchanges. These exchangesare essentially websites that will feature several health care planoptions and provide information about how to select a plan thatbest suits the employees' needs.

By March 1, employers must provide a notice to employeesregarding the availability of health care reform insuranceexchanges. The U.S. Department of Health and Human Services hasindicated that it plans on issue model exchange notices foremployers to use, according to CUNA Mutual Group.

Under a defined health care plan that most credit unions havebeen offering employees for years, CUs bought just one plan foremployees, and its cost increases were tied to how the planperformed. If there were high employee claims against the healthcare plan, premiums would increase. If employee claims were low oraverage, premiums would stay the same or increase at a lower rate.

“The defined contribution approach allows employers to giveemployees a set amount of funds and allow them to pick out a planon a private exchange that best suits their needs,” explainedPricer. “Through a defined contribution approach, the amount theemployer gives to each employee isn't necessarily tied to how anyone individual plan performs. This allows credit unions year overyear to anticipate what their health care will cost them.” Anotheradvantage is that private health care exchanges can reduceadministrative burdens on companies.

High-deductible health insurance plans and workplace wellnessprograms are additional ways employers are controlling health carecosts.

Over the past two years, offerings of high-deductible healthinsurance plans have increased from 17% to 22% among all employers,and from 23% to 36% of employers with 500 or more employees,according to a survey of employers by Mercer Consulting.

“I know some larger credit unions have high-deductible plans,and I've seen other credit unions headed in that direction,” saidWitherspoon. “What it means is that credit union employees willhave to set aside more money for their health care. While there are[flexible spending accounts] that can help them, it will still costthem more.”

In 2013, the tax-free contributions employees are allowed tocontribute to an FSA drops from a maximum of $5,000 to $2,500annually. That's not good news for people with high-deductibleplans managing chronic illnesses or health care needs of theirchildren. Plus, if they don't use the FSA funds, they are lost atthe end of the year. But a report in Forbes magazine said the useit or lose rule may be modified by the federal government.

Studies suggest high-deductible plans cut spending onunnecessary care. Other studies, however, have found when peoplehave to shell out more cash for their health care, they may forgotreatments or tests they need or should have, according to a recentreport by Kaiser Health News. But what may counter this problem isthe rise of workplace wellness programs.

Mercer Consulting research found that nearly 80% of largeemployers are supportive or very supportive of wellness programsthat can help employees monitor their health and perhaps preventmajor medical problems through cholesterol and blood pressurechecks, cancer screenings, exercise and weight managementprograms.

Pricer advises credit unions to work closely with their healthcare broker who can help guide them through the maze ofclarifications and proposed rules of the health care reform lawthat will be coming from the U.S. Department of Health HumanServices throughout the next two years.

“Credit unions need to make sure their plans are in compliancewith all the different requirements that come with health carereform,” advised Pricer.