Middle Market Employers Get an ACA Reprieve, but Longer Term Impact on Comp Plans Remains Unclear
Mid-sized companies got a reprieve – for now. In April, the Federal Government announced a second delay in the Affordable Care Act (ACA) deadline for mid-sized companies— those with 50 to 99 employees. These companies are still subject to the "employer mandate," but they do not have ot start insuring workers under it until 2016.
Mid-sized companies now have until Oct. 1, 2015, to sign up for ACA-compliant healthcare plans to be in compliance by 2016. In the meantime, they can renew their existing plans (if the plans are still available).
If this sounds like a big win, it is. It gives companies that took early renewal in 2013 more time to make decisions about an ACA-compliant plan. Since the Affordable Care Act changed many aspects of group medical insurance – and made many of them more complex – this reprieve is welcome.
ACA Deadlines Based on Company Size
Companies with 100 or more workers have to start insuring workers with ACA-compliant plans in 2015.
Meanwhile, companies with 1 to 49 full-time equivalent workers fall into a different category—the “small-group” insurance category. They are not subject to the employer mandate. But any new plans they select have to comply with certain new ACA regulations.
Some Mid-Sized Companies Already Switched
Some medium-size companies had already switched. These companies took on new ACA-compliant plans at the end of 2013—at a time when the launch date was 2014. Most of these companies did not make their selection through the Federal Small Business Health Exchange, called SHOP. This exchange was working in the fall of 2013, but companies couldn’t sign up through it; they had to apply by snail mail. Most relied on their brokers to sort out the various group health insurance offerings and signed up through them. After President Obama suddenly announced a deadline extension for mid-size companies, and asked insurers to allow these companies to keep their old plans, it was too late. Most insurers refused to go along with this deadline delay for companies that had already converted, since they had put so much work into new plan development.
Some mid-size employers converted to ACA-compliant plans last year. Others have remained in limbo - taking early renewal with older plans in 2013, while trying to sort out the pros and cons of the new plans.
Tough Going for Compensation Plans
One thing is clear with ACA: there are many variables to consider, many of which will likely impact compensation programs. So it’s critical to keep this in mind while reviewing your options and structuring a new plan. Meanwhile, here are a few of the variables that should be on your radar no matter what size your company when examining the new plan options:
Metallic Tier Structure Adds Complexity
ACA-compliant plans must fit into a set of metallic tiers structures labeled bronze, gold, and platinum. Insurers have worked hard to come up with new plans that reflect former plans and fit into these categories. Nonetheless, many of these new plans are more expensive, have higher deductibles, and are not quite as benefits-rich as the plans they replace.
As an employer, you may find yourself struggling to develop total compensation and benefits packages that provide healthcare coverage to your employees, without cutting salary or other benefits.
Premium Cost Calculations Change
Formerly, insurance companies based their premiums on "blended" rates which allowed employers to average out the risk of the entire workforce. Health history and gender were two key factors in the equation. Under the ACA, these elements no longer determine the rates. Each employer must now provide an “updated census” as the basis for rate calculations. The census must include individual calculations for all family members of the insured.
This makes the calculation much more complex for the insurer and will likely require you to allocate HR resources to managing the census process.
Having Hourly Workers Poses Challenges
Companies with many hourly workers may find themselves in a bind. If these the hourly workers can buy insurance more cheaply as individuals on a federal exchange, they may choose not to join the company health plan. If less than a certain percentage of insured employees do not go with your company plan, your company may not qualify for group rates. ACA allows states to set this percentage. Here in New Jersey, for example, 75% of employees must opt in to your company plan.
A high number of opt-outs may have a detrimental impact on your ability to offer healthcare coverage to your employees.