Health Care Reform: Eight strategies for employers

Much has been written about the sweeping health care reform law and its immediate and long-term effects on employers. While there is still much confusion and interpretation surrounding the law, it is clear that the law will impact costs and employers should strategize how to maximize benefits and minimize adverse effects. Here are eight strategies for employers to consider now:

1. Grandfathered plans
   A “grandfathered health plan” is any group health plan that was in effect on the date of the law’s enactment, March 23, 2010. While it is known that new employees can be added to grandfathered plans and covered employees can add dependents, there is limited guidance about what modifications can be made to existing plans without jeopardizing grandfathered plan status.
   
   There are definite advantages to maintaining a grandfathered plan in that they escape some scrutiny under the minimal essential plan requirements. For now, the best strategy is to be very cautious about making changes to grandfathered plans until regulations clarify the situation.


2. Tax credit for small employers
   Small business owners with fewer than 25 employees (more if you have part-time employees) and less than $50,000 in average wages should plan to take advantage of the tax credit worth up to 35% of contributions to health insurance. Additional information is available here.


3. Retiree reinsurance subsidy
   There will be limited funds available to reimburse employer-provided insurance plans for 80 percent of claims between $15,000 and $90,000 for pre-Medicare retirees ages 55 to 64, for a given year. Administered by the U.S. Department of Health and Human Services (HHS), it is funded with $5 billion. Because the program will begin in mid-June and end when funding is exhausted, interested employers should discuss with their accountant the benefit of the program and be alert for announcements about how to participate. Identifying early retirees with chronic high-cost histories and gathering data on claims costs can give you a head start.


4. Fit for duty exams
   Under the new law, insurance companies will not be able to limit exposure, so fit for duty exams take on increased importance. Undertaking a pre-hire medical examination, in conformance with ADA and other applicable laws, to assess the ability to perform the essential job functions with or without limitations can reduce the insurance exposure for both health care and Workers’ Compensation.


5. Look at health provider networks
   When it comes to health insurance, many employers look to provide access to a broad network for their employees. Employers should reassess this approach and begin to identify networks of doctors and hospitals that provide quality, cost-efficient care. This is similar to Workers’ Compensation, where studies have shown that care by occupational medicine professionals can reduce costs.


6. Focus on health and wellness initiatives
   Using wellness initiatives to curb the cost of health insurance increases in value as costs rise. The expanded coverage requirements beginning in January 2011 will accelerate the escalating trends in health care costs. Employers that focus on creating a ‘culture of health’ in the workplace now will better control their future health spending. Under the law, grant money will be available for small businesses to implement comprehensive workplace wellness programs. Eligible employers (fewer than 100 employees who work more than 25 hours a week) who do not currently have a wellness program can apply for these grants from a $200 billion, five-year program beginning in 2011. Sec. 1048 details that required program components include the following:
   • screenings and assessments
   • mechanisms to encourage employee participation
   • “initiatives to change unhealthy behaviors and lifestyle choices” which would include counseling, seminars, and online programs
   • improving the workplace environment with polices to encourage healthier lifestyles.
   Furthermore, beginning in 2014, employers can offer increased incentives to employees for participation in a wellness program or for meeting certain health status targets. The law will permit rewards or penalties such as premium discounts of up to 30 percent of the cost of coverage.


7. Evaluate early retirement plans for employees
   The lack of annual and lifetime limits on health insurance coverage will mean that costs of insurance will rise. Furthermore, according to the Employee Benefit Research Institute new subsidies for individuals enrolling for coverage through insurance exchanges, increases in the cost of providing drug benefits to retirees, and enhanced Medicare Part D coverage for individuals are likely to create significant incentives for employers to drop coverage for early retirees and drug coverage for Medicare-eligible retirees.


8. Plan for W-2 reporting
   For tax years beginning in 2011, employers must report the value of employer-provided health benefits on W-2s. While this does not take effect until next year, employers will want to be sure that the plans are in place to meet the requirements.