There are positives and negatives as the Affordable Care Act moves toward full implementation.
The business of making health care available and affordable to all Americans is a laudable—but complicated—task. The main issue, these days, is how to make the Affordable Care Act (ACA) work in tandem with employer plans; it’s a puzzle that’s leaving everyone overwhelmed by the administrative burden and worried about the cost of premiums. There have been delays and confusion, not to mention a great deal of administrative red tape, to consider. So it’s no wonder the new law has both supporters and critics. But no matter where you stand on the matter, according to North Bay brokers, the law is here to stay.
On the upside, as a result of the ACA, more Americans now have health insurance. According to the Centers for Disease Control and Prevention, the average number of uninsured from January to September 2014 was 11.4 million fewer than the average in 2010.
The challenge that plagues employers, however, is how the ACA works with their current plans. “The ACA has been an adventure in the early years,” says Terry DeDecker, vice president of employee benefits for Vantreo Insurance Brokerage in Santa Rosa. “After the ACA was passed in 2010, we experienced four years of little pieces coming in,” she adds.
There have been numerous delays, letting employers ease into the change. (See “ACA Delays” below.) “In December 2013, we had the opportunity to ‘early renew,’ meaning keep the current plan designs and rating systems and not move to the ACA plans,” says DeDecker. “The majority of employers chose to early renew rather than move to the ACA plans. Almost all groups did that, because as we priced out January 1 rates, there were significant increases.”
Groups then had an opportunity to “grandmother” or delay making a change in December 2014 and again keep their plans. As a result, most moderate-sized employers (those with less than 50 employees) are still not using the ACA plans, according to DeDecker.
These delays served as a popular mechanism to avoid the ACA plans, adds Keith McNeil, a partner with Arrow Benefits Group, as many employers are still trying to get a handle on the ACA. “Employers are shell-shocked and have been for a long time. The ACA isn’t something they fully understand. A broker is the conduit between the ACA and the employer.”
“The changing role of the broker is to take on more responsibility to work with the client. It’s not just about health rates and funding now, it’s about administration and compliance,” says Jordan Shields, another partner at Arrow Benefits Group. “We compete on service, depth of knowledge and support,” adds Shields. “And not just for large employers, but small employers without a human resources person.”
The current state of the ACA
How does the ACA mandate work? Companies with 100 or more full-time equivalent employees will need to insure at least 70 percent of their full-time workers by this year, and 95 percent by 2016. Small businesses with 50 to 99 full-time employees must start insuring full-time workers by 2016. The mandate doesn’t apply to employers with 49 or less full-time employees.
In July, the rates for the ACA’s five plans were released, each named after a different metal. (See “Metal Levels” below.) “The ACA plans, in general, have higher premiums and out-of-pocket limits,” adds Mark Fess, a partner at George Petersen Insurance in Santa Rosa. “We’re seeing some renewal premiums with 25 percent or higher increases. These increases mostly impact employers with 50 employees or fewer, according to Fess; larger employers aren’t seeing those increases.
“Last year, most [of our employers] delayed going to an ACA medical plan,” says Elaine Madson, senior account executive at George Petersen Insurance. “But most of our clients are going to have to enroll into an ACA plan on December 1 of this year.”
As the ACA continues to take shape, forming a new health care system, there are a number of changes ahead. First, groups with fewer than 50 employees will go to the ACA plans.
Second, the Risk Adjustment Factor (RAF), which once allowed for negotiation, has been eliminated. For example, in the past, plan costs were somewhat negotiable, but couldn’t vary beyond 20 percent. “Next year, with no RAF relief, the new ACA rates will be more expensive,” says DeDecker.
Third, under the ACA, how rates are determined will also change. In the past, rates were categorized by “age bands” of 20 to 29, 30 to 39, 40 to 49 and so on, and the family rates were based on the employee’s age.Under the new ACA plans, the age of an employee, a spouse and each child is rated separately.
One of the more popular features of the ACA was that parents could keep their children on their health plans until age 26. “This was the most successful piece of the ACA legislation,” says DeDecker. “It gave everyone the opportunity to keep their kids covered [on their health insurance] after graduation from college.” However, with the new rate structure, it may not be financially viable to keep older children on a family plan.For example, if you’re a family of four with a 22-year-old, you must now pay for your older child according to his or her age. On the other hand, if you have a family of four, then you pay the per-child rate for the first three children, and the fourth child is free. (Unless that child is older than 19, then you’re charged for the additional child.)
What does this mean in terms of health insurance? If the lowest adult age rate, for example, is $300, then the ratio can be no more than one to three, according to ACA legislation. This means the highest rate can’t exceed $900. “With the new ratio, younger adults will pay more than they have in the past to average out. So that means, in general, younger people will pay more, and older people will pay less,” says DeDecker.
Vision and dental plans
Under the ACA, vision and dental coverage is now mandated for children, according to DeDecker. While they’re not required for adults under the ACA, it’s a good idea for employers to offer these benefits, if you want to attract and retain employees, according to Shields. Employers tend to buy fully insured products, adds Shields, but these are benefits employers can reimburse on their own or use a third-party administrator.
“Employers think self-funding is a large risk, but the largest claims aren’t that large,” adds Keith McNeil. “A lot of companies don’t think of self-funding, but should.” (A self-funded plan means a plan that’s paid by the employer’s funds without any insurance protection. It’s usually administered by an insurance company or third-party administrator.)
As health care costs continue to rise sharply, many employers have initiated wellness programs; the ACA even has specific provisions relating to wellness. Inactivity, poor nutrition, tobacco use and frequent alcohol consumption are driving up the prevalence of chronic disease such as diabetes, heart disease and chronic pulmonary conditions, according to a recent RAND employer study mandated by the ACA. (RAND Corporation is a nonprofit institution that helps improve policy and decision making through research and analysis.)
About half of U.S. employers offer wellness programs, and larger employers tend to have more complex programs, according to research from employers selected for the study. What’s more, while programs have been implemented by employers to improve employee health for decades, many companies still struggle with getting employees on board with lifestyle changes.
“There are some jagged pieces missing in our health care system,” says Shields. “One of those pieces is education.” To support its clients, Arrow Benefits Group launched the Arrow Community Wellness Series to promote health and wellness. Arrow partners with local health care leaders to offer lectures and classes on healthy eating and work-health programs. In February, the group began offering classes for cardiopulmonary resuscitation (CPR) and automated external defibrillation (AED). (AED is a portable electronic device that automatically diagnoses life-threatening arrhythmias.) CPR combined with AED is the best strategy to save a life.
“These wellness programs help show employees that their employers care for them,” says Andrew McNeil. “And from an employer standpoint, it can also help with absenteeism.” The CPR class is the most popular. The program is free of charge and offered to its clients as well as anyone in the community.
Do wellness programs work? You can’t tie a direct return on investment in most programs, which is the case for most small companies, because you can’t truly know the quantitative impact since you don’t know what diseases or serious conditions may have been prevented, says Shields. “You can, however, more easily correlate wellness to reduced absenteeism, greater ‘presentee-ism’ and even Workers’ Compensation cost reductions, if you reduce workplace injuries caused by aggravating existing medical situations. It’s not a strict correlation, but you can certainly point to a generally positive impact.
“What’s overlooked in search of ‘cost data’ is the qualitative effect wellness can have on your employee community,” he continues. According to Shields, when a business shows its employees it cares by offering programs that encourage fitness and wellness, it has a positive impact on employees.
Case in point: One of Arrow’s clients implemented a program to promote wellness for its young charges and found that modeling healthy living for children paid off for its employees. (See “A Culture of Health,” below.)
On the horizon
While the nation moves forward with the ACA, there’s confusion among employers, numerous details to smooth out and the costs are problematic. “Our clients are confused, frustrated and not seeing the affordability of this act. It’s not in their premiums or benefits. It’s accessible, but not affordable,” says Madson.
As for California’s health care exchange—known as Covered California—it’s more progressive than other states. “The issue of state exchanges has been widely discussed at the national level,” says Keith McNeil. “Covered California is one of the most successful state exchanges, but even Covered California is dealing with possible funding problems due to lower-than-expected enrollment.”
Currently, rates for the ACA plans are high—sometimes alarming.
“One of the best features of the ACA is that more individuals have access to medical coverage, but it’s expensive,” says Fess. “In time, we hope the rates can be lowered. The main idea is to get more individuals covered by the ACA plans, which, in turn, should help control premium costs. But this will take time.”
It’s forcing [insurance] carriers to produce more plan options to help with the ACA plans, deductibles and out-of-pocket costs, adds Madson. “There have to be deductible plans in-between the currently offered ACA plans to get prices and out-of-pocket expenses more reasonable. Out-of-pocket costs can’t go any higher than $12,000 or it will bankrupt families.”
What can we anticipate in the years ahead?
“Seventy-five percent of health care costs are ultimately attributed to lifestyle decisions,” says Keith McNeil. “The ACA is positive in certain directions, but it ignores the impact of health care costs due to lifestyle decisions such as poor nutrition or lack of exercise. If we’re to make a concerted effort to lower costs, there must be a reward [to the insured]. The potential for lowering costs through changing negative lifestyle choices is huge.”
“The ACA and how it works with employer plans is a work in progress. “It will continue to morph and refine,” says DeDecker. “It’s new territory and we’re still struggling with the employer responsibility. Things will continue to change. You have to go with the flow.”
A Look Back
The Affordable Care Act (ACA) is a United States federal statute signed into law by President Barack Obama on March 23, 2010. It was enacted to increase the quality and affordability of health insurance, lower the uninsured rate by expanding public and private coverage, and reduce the costs of health care for individuals and the government.
It introduced mechanisms such as mandates, subsidies and insurance exchanges. The law requires insurance companies to cover all applicants within new minimum standards and offer the same rates regardless of pre-existing conditions or gender.
In 2011, the Congressional Budget Office projected that the ACA would lower both future deficits and Medicare spending. In June 2012, the United States Supreme Court upheld the constitutionality of the ACA’s individual mandate. However, the court held that states couldn’t be forced to participate in the ACA’s Medicaid expansion under penalty of losing their current Medicaid funding.
There are five categories, or “metal levels,” of coverage under the ACA.
Bronze: Your health plan pays 60 percent on average. You pay about 40 percent.
Silver: Your health plan pays 70 percent on average. You pay about 30 percent.
Gold: Your health plan pays 80 percent on average. You pay about 20 percent.
Platinum: Your health plan pays 90 percent on average. You pay about 10 percent.
Catastrophic: Offers basic coverage and is available to people under 30 or those who have a hardship exemption.
The ACA, together with the Health Care and Education Reconciliation Act amendment, represents the most significant regulatory overhaul of the U.S. health care system since the passage of Medicare and Medicaid in 1965, according to an online search. The legislation initially provided federal health insurance for the elderly (age 65 and older) and for poor families.
The programs became the first U.S. public health insurance program. The legislation was vigorously opposed by the American Medical Association until it had been enacted, after which, the AMA cooperated in its implementation.
Did You Know?
The Affordable Care Act (ACA) is officially named the Patient Protection and Affordable Care ACT (PPACA), but it’s more commonly referred to as the ACA. Since it was signed into law, it’s become known colloquially as Obamacare, and is sometimes referred to as Health Insurance Reform and Health Care Reform.
Trying to make sense of what’s happening with the ACA and all those delays? Here’s a rundown from Vantreo Insurance Brokerage.
Initial Delay: On July 3, 2013, the U.S. Treasury Department delayed the Pay-or-Play mandate from January 1, 2014, to January 1, 2015, for all employers with 50 or more full-time equivalent employees.
Second Delay: On February 12, 2014, the U.S. Treasury Department delayed the Pay-or-Play mandate from January 1, 2015, to January 1, 2016, for all employers with 50 to 99 full-time equivalent employees.
Effective January 1, 2015: Only employers with 100 or more full-time equivalent employees will be subject to the Pay-or-Play mandate in 2015. These employers must offer coverage to at least 70 percent of their full-time employees (and dependents). If the offered coverage is deemed unaffordable or as not meeting a 60 percent actuarial value, the employer is subject to a fine if an employee receives a subsidy when purchasing through Covered California.
Effective January 1, 2016: Employers with 50 or more full-time equivalent employees must comply with the Pay-or-Play mandate. Coverage must be offered to at least 95 percent of their full-time employees (and dependents). If the offered coverage is deemed unaffordable or as not meeting a 60 percent actuarial value, the employer will be subject to a fine if an employee receives coverage through Covered California.
Transition Relief: Transition relief is also available to employers. Contact an insurance broker for more information.
A Culture of Health
North Bay Children’s Center (NBCC), headquartered in Novato, has seen positive results by adopting a culture of health. In 2007, NBCC initiated a program called Garden of Eatin’ as part of a comprehensive childhood obesity prevention program. As it implemented this program for the young charges in its care, it recognized the need to walk-the-talk and to model what it’s teaching.
The curriculum it developed was to help younger children learn about the food they eat, make healthy food choices and enjoy physical activity. “We wanted to help kids make healthy lifestyle choices and understand where food comes from—which isn’t a car window,” says Teri Clark, educational resource director at NBCC.
At NBCC, children are routinely given lessons on nutrition and the importance of daily physical activity. “We teach the children that there are ‘go foods’ [almost anytime foods];‘slow foods’ [sometimes foods]; and ‘whoa foods’ [once in awhile foods],” she adds. “Many NBCC programs serve two of the three meals children eat each day. The meals we serve are healthy and nutritious. We use fresh produce as much as possible.”
At lunch, teachers talk to the children about what they’re eating and where it comes from. What’s more, you won’t see staff members popping open a can of soda or munching on a bag of chips.
Parent education is also offered through the program to support families at home with health and wellness. What the children learn at school is reinforced at home thanks to NBCC’s partnership with the Redwood Empire Food Bank and the Marin Food Bank, says Clark. What’s more, once per week, volunteers pick up produce and kids are able to take it home and share with their families what they’re tasting at school.
How’s the program working? At first, some parents and staff balked about the policy changes, but they eventually saw the benefits. “Our parents and staff have gotten creative with healthy alternatives to classroom celebrations and on-board with this philosophy, because they realize their children are learning about making healthy changes.
What’s more, employees benefit, too. On staff development days, NBCC includes topics on personal wellness. “We’ve had registered dietitians visit to discuss good nutrition, personal wellness plans and healthy food shopping. We’ve also had a facilitator speak on skills for managing on-the-job stress and healthy employee communication,” says Clark.
Its commitment to health and wellness is a win-win for everyone at NBCC—children, staff and parents. A study by UC San Francisco on NBCC’s Garden of Eatin’ program concluded that parent and staff’s knowledge and attitudes on positive food choices had improved since the program began. (For more information, see the article in the American Journal of Public Health, February 2014.)
As for Clark, she’s noticed a change among staff. Typically, when teachers work around children all the time, they tend to get sick. But since starting the program, fellow employees seem healthier. In addition, some teachers now take a short walk at lunchtime, join monthly walking groups and support one another in making healthy choices throughout the day. Or, if they want a snack, they step into the garden to pick a plum or some sugar snap peas.
While it’s not a formal wellness program as some companies have started in the North Bay, its culture of living works. “It’s part of who we are,” says Clark. “We care about the wellness of our children, families and staff.”
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