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Lesa Caputo: Avoid the Health-Care Reform Law Riptide with Sound Advice

Is there a “safe harbor” to avert the health-care reform “cliff”? If there were, I think that all employers would unanimously be steering their vessels in that direction right about now! Unfortunately, there is not a harbor big enough to house those lost in the sea of health-care reform, and many employers are still feeling like they have a new “cliff” to set their sights on.

Lesa Caputo
Lesa Caputo

With the exchanges set for open enrollment on Oct. 1, there are as many new questions arriving each day as there are answers. However, at the end of last month, employers received a small Happy New Year gift in the form of proposed regulations from the IRS. These new rules addressed many of the outstanding issues relating to the Patient Protection and Affordable Care Act (PPACA) “play-or-pay” mandates, and included the following clarifications:

» The announcement of a “substantial compliance” measure for employers that do not offer coverage to all of their full-time employees. If an employer offers coverage to at least 95 percent of its full-time employees (and their dependents, defined to only include children under age 26, but not spouses, beginning in 2015), it will be considered to be offering coverage to all full-time employees. (The employer will owe the $3,000 penalty on a full-time employee in the excluded 5 percent if the employee receives a premium subsidy.)

» A transition period during 2013 to allow employers that currently only cover employees to extend coverage to dependents. Such employers must be on track to offer coverage to both employees and dependents and take the actual steps to do so during their 2014-2015 plan year.

» For noncalendar-year plans (that were currently in place on Dec. 27, 2012), some relief has been provided in that the play-or-pay mandates will be effective on the first day of the play year commencing after Jan. 1, 2014.

» Controlled-group rules apply for purposes of determining whether an employer is a large employer (more than 50 full-time-equivalent employees) and that the “reduction of the first 30 employees” for purposes of the play-or-pay mandate penalties will be done on a controlled-group basis. However, the determination and assessment of the penalty will be done on a member-by-member basis.

» Employers with fiscal (noncalendar) plan years may amend their Section 125 plans to treat midyear transfers into the exchanges or new elections of employer-provided coverage as qualifying change in status events.

Employers continue to paddle their canoes upstream, despite the strong current of business challenges, and health-care reform is on the horizon as one of the many cliffs to avoid. While it is easy for employers to become consumed with the looming enormity of health-care reform compliance and forecasting, it is critically important that they not fall victim to this full-time task. Employer clients consulting with UBA Partner advisors are being given the tools and the outlook to rise above the clouds and see the landscape of health care for all its “beauty” and to plan for a future that is navigable. How?

» UBA benefit advisors use a sophisticated and intelligent predictive modeling tool designed by health actuaries to demonstrate the different scenarios under the pay-or-play mandate and the associated cost impacts. The customized impact study qualifies the effects of PPACA in 2014 and 2018 for longer-term planning.

» Keep perspective of the big picture by stepping back to analyze how benefit costs benchmark to other employers of similar size, industry and geography with the UBA Health Plan Survey —the nation’s largest annual health plan benchmarking survey. As employers are honing in on potential per employee penalty costs, a highly credible reference as to how total annual plan costs respond to PPACA’s effects will be most valuable.

» Everywhere you look, consolidation for economies of scale in doing business are taking place. UBA sees the value of its approved Strategic Partnerships, which drive down premium costs. Employer clients represented by UBA advisors feel the effects of that collaboration as well. As carriers are looking for their most cost-effective options for doing business in the health-care reform era, they are considering the productiveness of their broker relationships, and UBA advisors are valued for the collective premium they represent.

Whether fiscal or health care, there will always be a “cliff” to worry about. But just remember this: many of us stayed awake the night of Dec. 31, 1999, with Y2K concerns, but on that beautiful morning of Jan. 1, 2000, indeed our alarms did work and the world continued to spin on its axis. Cliff averted!

— Lesa Caputo is a benefit advisor with Beneflex Insurance Services, the primary instructor for the Santa Barbara Human Resources Association Insurance Academy and a two-time past president of the Santa Barbara Association of Health Underwriters. Click here for more information, or contact her at 805.684.5100 x116. The opinions expressed are her own.

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