Prepping for the Affordable Care Act

On Jan. 1, key provisions of the Affordable Care Act, or ACA, become law. Passed in 2010 as part of President Barack Obama’s pledge to provide universal health care coverage to millions of Americans who cannot afford it, the law is poised to bring broad changes not just to the way Americans purchase insurance but also to the world of employee-sponsored health benefits.

While initially slated for next January, starting in 2015, any employer with 50 or more full-time employees — those defined as working an average of 30 hours or more a week — must provide coverage or pay a $2,000 to $3,000 fine per employee. Employer costs for coverage often exceed that amount, which means the provision could put some employers in a tough spot.

A sole proprietor of a restaurant with 55 employees, for instance, might consider reducing staff or cutting some employees’ hours so they fall under part-time status to avoid the increased costs. Cost implications are bigger for larger corporations that rely heavily on hourly workers who exceed the 30-hour-per-week threshold.

Paul Fronstin, director of the health research and education program at the Employee Benefit Research Institute, a nonprofit research organization, said most large companies will continue to offer health benefits. But thanks to the exchange-based model of the ACA, there likely will be a shift in mindset about how Americans view buying health insurance. Instead of benefits being oriented through an employer, they may become something employees consider as individual consumers.

Talent Management spoke with Fronstin about what potential role, if any, human resources might play in the changes to health coverage, as well as the potential long-term trends that may arise as a result of the law. Edited excerpts follow.

EDITOR’S NOTE: This interview took place prior to the U.S. Treasury’s announcement in July that the provision requiring employers with 50 or more full-time workers to offer sponsored coverage would be delayed until 2015. The provision was originally slated for 2014.

How do you see the shift into the new health care reform law playing out?
Well, there are different ways you could shift costs onto employees. And what we’ve seen happen over the better part of the last decade is when workers and their families need health care services or go get health care services, they pay a greater amount out of pocket. So people are seeing their deductibles going up, or they’re seeing deductibles introduced; they’re seeing copayments go up or co-insurance rates going up; they’re paying more out of pocket.

The other way is through higher premiums. Whether or not you believe that employers have shifted premiums onto workers sort of depends upon how you interpret the data. If you just look at the dollar amounts that workers pay, you see the dollar amounts increasing. So people say, well, employers are shifting to workers the premium as well as the out-of-pocket payments. But when you look at the percentage of the premium — whether it is for individual coverage or family coverage — you haven’t seen much, if any, real increase in the percentage that workers are paying.

What do you think employees need to know to prepare for the likelihood they’ll have more responsibility for picking the specifics of their health coverage?
They need to keep in mind that most people are used to going to online marketplaces and shopping. We’re used to going to Amazon and Expedia and others and getting apples-to-apples comparisons and prices and different user reviews, different types of information to make informed decisions. Along with these private exchanges, they’re developing similar types of tools that people can use to help narrow down the choices.

I haven’t seen them yet; they’re in development. Maybe there will be a questionnaire asking your tolerance for variations in your payments out of pocket vs. your willingness to pay higher premiums to avoid out-of-pocket expenses. There will be different types of questions like that to figure out what your personal preference is and maybe even tools that will tell you if your doctors are in the networks, if your drugs are on the formulary.

All this is going to evolve and improve over time, and I think people need to take advantage of those resources when they’re available. I don’t see employers just writing you a check and saying you’re on your own. Much the same way defined contribution retirement plans have evolved where there’s lots of information you can have and lots of rates of return on investment and past performance and different things, you’ll have different things that you’ll use to try to make the best decision possible for picking a plan.

What does the HR function need to do when communicating possible changes? What is HR’s role overall?
I think ultimately HR is not going to be directly involved. HR is going to turn to their consultants to help people navigate this new world. That’s what they’ve been doing for a long time. I don’t see this being any different. To the degree HR is distributing materials, a lot of those materials will be developed by third parties.

What’s the silver lining?
The silver lining is that people have the potential to pick the benefits they really want given there might be more choices. Right now, I mean, how many health plans do you have to choose from at work? Two maybe. And do you like the plan you’re on? Would you choose something else?

There’s this whole question of employers picking in some ways a one-size-fits all plan, and that may not be the best choice for everybody. This will give people not necessarily complete flexibility but a step in the direction of more flexibility to choose a plan that they think is more appropriate rather than their employer picking the appropriate plan on their behalf. There’s people that won’t like that; they don’t want to make the decision. But not everyone feels that way.

Do you think employers down the line will eventually abandon employer-sponsored health plans altogether?
Well, when the ACA was passed in 2010 the initial reaction of some employers was, you mean I can get out of this for $2,000 per person? I’m spending $5,000 to $10,000 now, and I don’t have to offer it anymore and it’s only going to cost me $2,000?

Then reality set in — reality being that I’ve been offering this voluntarily for the better part of 70 years, since World War II. And I’ve been doing so for business reasons — I’m concerned about recruitment and retention, worker health and productivity. That hasn’t changed. Maybe this new model with private exchanges is the middle ground employers are looking for.