With PPACA ‘Cloud of Uncertainty’ Lifted, Employers Look Ahead for Clarification
- Key Topic: High court ruling reduces some employer uncertainty about new rules for providing health benefits.
- Key Takeaway: Employers are looking ahead to clarification on implementation of upcoming PPACA provisions, such as automatic enrollment and wellness incentives.
By Kristen Ricaurte Knebel
The U.S. Supreme Court’s decision to uphold the 2010 law overhauling the nation’s health care system means it is back to business for employers working to implement the law’s many provisions, and now employers are eyeing the regulatory agencies for clarification on provisions looming on the horizon, employer groups told BNA June 28.
“This obviously lifts a big cloud of uncertainty over the law, but for practical purposes means that employers … will now focus squarely on their future obligations and the need for clarifications of the employer responsibility provisions and many other provisions of the law that are coming up to be implemented,” Paul Dennett, senior vice president for health care reform at the American Benefits Council in Washington told BNA June 28.
In a 5-4 decision, the Supreme Court upheld the individual mandate that is the centerpiece of the Patient Protection and Affordable Care Act (see related story in this issue). The court held that Congress was authorized to impose the mandate under the U.S. Constitution’s Taxing and Spending Clause. The mandate, which goes into effect in 2014, will require virtually all U.S. citizens to obtain health care insurance or pay a penalty.
Steve Wojcik, vice president of public policy at the National Business Group on Health in Washington, agreed that the decision cleared up uncertainty surrounding the law and said employers now need to set their sights on the big provisions coming into effect in 2014 and 2018.
The employers “know that they need to go forward preparing for the upcoming provisions. Some of the bigger ones are coming up in 2014 and 2018. They can continue to expect that those are going to come online and they’ll have to make whatever adjustments or changes or decisions they need to make on those,” Wojcik told BNA June 28.
One upcoming provision, the automatic-enrollment provision, has so far only received guidance in the form of frequently-asked-questions and answers released by the Department of Treasury and Internal Revenue Service, as well as by the Department of Labor (27 PBD, 2/10/12; 39 BPR 299, 2/14/12).
PPACA’s auto-enrollment provision requires large employers subject to the Fair Labor Standards Act that have at least 200 full-time employees and offer health coverage to enroll each new full-time employee automatically in one of the plans that it offers, unless the employee affirmatively opts out or elects a different option.
“I think with the major constitutional issues now resolved, we think that what employers will do is now focus squarely on those both short-term and longer-term responsibilities that they have under the law, and it really underscores the importance of them getting further guidance, particularly from the agencies, particularly related to the penalty provisions and the auto-enrollment provisions and other provisions that begin in 2014,” Dennett said.
Gretchen Young, senior vice president for health policy at the ERISA Industry Committee in Washington, told BNA June 28 that auto-enrollment is a common practice for retirement plans but does not translate well to health care.
“Auto-enrollment … is a common provision now in retirement plans, and it has been very effective in getting people into plans. I think the reasoning was that would be great to get people into plans on the health [side] as well. It really doesn’t work well,” she said.
One question that auto-enrollment raises is how employers will automatically enroll an employee with a family, because it is unclear whether the employee should be placed in a single or family plan, Young said.
“There are lots of different decisions that have to be made, and you have to allow people to back out [of auto-enrollment]. … It’s a very intricate, detailed rule that will be difficult to write in an effective and simple manner. We’re very concerned about what those rules will be, but luckily, they’re not going to become effective until they’re out,” Young said.
Although PPACA’s “Cadillac tax” does not take effect until 2018, it is still on employers’ minds because many already have “projected out their costs trends for 2018,” Wojcik said.
Starting in 2018, PPACA will levy a 40 percent excise tax, dubbed the “Cadillac tax,” on health coverage costs exceeding $10,200 for single coverage and $27,500 for family coverage (185 PBD, 9/23/11; 38 BPR 1755, 9/27/11).
Employers are “not waiting until 2018, they’ve already started, but now it means with this ruling that they definitely have to continue on that road to reduce the cost of their benefits or the value of their benefits so that they can stay under that threshold,” Wojcik said.
Wojcik said this can be tricky because simply shifting costs to employees will not get an employer out of paying the tax.
“A key part of the law is that it’s the total cost of benefits, it’s not what the employer pays for benefits, so shifting costs onto employees, making them pay more for health care, isn’t going to get you out of that tax. You have to reduce the total cost of your health benefits regardless of what portion is paid by the employer versus the employee. That’s something that they’re really now definitely going to have to focus on unless there are some changes before 2018,” he said.
The high court’s upholding of PPACA keeps in place a provision relating to wellness incentives, which is an employer favorite. The provision allows employees who participate in wellness programs to receive financial incentives of up to 30 percent of health insurance premiums beginning in 2014, up from 20 percent presently.
A recent report by the International Foundation of Employee Benefit Plans indicated that the ability to offer increased wellness incentives is the provision of PPACA that employers would most want reinstated if the court had overturned the law (108 PBD, 6/6/12; 39 BPR 1119, 6/12/12).
Young said that wellness programs currently are one means by which employers are attempting to control the cost of health care, but she expressed concern over the wellness provision in PPACA.
“We’re very concerned; part of the Affordable Care Act has a provision that says we’re going to increase the level of rewards you can give from 20 to 30 percent, but there will be conditions attached to that. Some employers are very reluctant to put in new programs that are effective until they know what those other conditions will be,” she said.
Status Quo for Employees.
“Probably the most important issue for a lot of plan participants is that the coverage they have today, under health reform, continues,” Dennett said.
“All of those provisions that have already gone into effect continue, and it removes that uncertainty both for employers and for their plan participants,” Dennett said.
While a lot will stay the same for employees, Wojcik thinks they will be asked to be more involved in their health, in part to help keep the cost of health care down.
“Going, forward, I think they’ll probably be asked to engage more in their health and improving their health so that the cost of the plan can for both them and their employer, can remain low and try to reduce the benefit cost so that they can avoid that [Cadillac] tax in 2018,” Wojcik said.
By Kristen Ricaurte Knebel