Employers face health reform uncertainties

October 25, 2013|By Lorraine Mirabella, The Baltimore Sun

Even though employers won't be required to offer health insurance under Obamacare for more than a year, many already are fretting about the uncertainties raised by the law.

Confusion over how the law will work and an evolving set of rules make it difficult to plan ahead, some employers say. Much of their misgiving centers on health care costs that might not be known for months.

"Some concerns stem from the general confusion and unknowns surrounding certain aspects of the law," said Francis X. Kelly III, CEO of Kelly & Associates Insurance Group Inc., a group insurance administrator, broker and consultant. "A lot of businesses are concerned about the bottom line net impact on their business."

Parts of the Affordable Care Act are already in place. Public and private exchanges, marketplaces where those without insurance can buy health plans, launched in October, though not without significant technical difficulties. Coverage will start Jan. 1, and all individuals will be required to have health insurance by March.

But the mandate requiring all employers with more than 50 full-time equivalent workers to offer affordable minimum coverage — or pay a penalty — won't take effect until Jan. 1, 2015. The Obama administration announced the one-year delay this summer.

Though the law aims to stabilize rates by spreading risks among a larger pool of people who have coverage, many in the business world worry that premiums will not cover claims and costs will rise, Kelly said.

Businesses are trying to assess "what it will cost if they don't provide coverage versus if they do," he said. "Those evaluations are taking place. There's a lot of questions about what will happen to group rates over time."

Some large employers, such as Walgreens, Home Depot and Trader Joe's, already have announced shifts in coverage, some choosing to move workers to exchanges.

Small employers, especially those with just a few workers, will be weighing costs of putting individuals into an individual market versus a group exchange. In some cases, Kelly said, "three individuals through an exchange might be cheaper than three individuals on a group plan."

For Calvert Mechanical Solutions, a commercial plumbing, heating and electrical contractor that always has offered health coverage, it's too soon to know what reform might mean for future benefits, said John C. Smyth, president of the 85-person company.

"The decisions that we face are all driven by what the potential costs could be, and none of us know that now," Smyth said. "There are no decisions that can be made or can even be contemplated until we know what the costs are."

Faced with greater-than-expected increases, companies might shift more costs to workers, eliminate coverage for dependents or pay employees a set amount to purchase a plan on an exchange.

Smyth worries that the generous plans Calvert Mechanical offers might be deemed "Cadillac" plans, triggering an excise tax starting in 2018.

"We might get taxed and have to do away with it, which is rather unfair," he said. "You have the ability to give that coverage in lieu of pay increases to an employee you want to keep around. We're in an industry that relies heavily on skilled tradesmen. You have to make sure you have a decent benefit package to attract and keep them. We're always competing for good labor."

Since she founded Owings Mills-based Restore Rehabilitation seven years ago, Pam Anthony has paid 60 percent to 70 percent of premiums for her 130 employees, mostly nurses who work as case managers for injured workers. The law essentially requires companies to cover 60 percent of workers' premiums or pay a penalty.

"I've chosen to do it, but I hate the fact that our government is telling me I have to do it," said Anthony, the company president. "I feel bad for businesses if they're only paying 20 or 30 percent, and now health care will double and eat up their bottom line."

Whether Restore Rehabilitation can maintain the same level of premium contribution or hire more workers will hinge on how sharply premiums increase, she said.

"It's concerning as a business owner," she said.

Walgreens plans to give all of its 160,000 employees a fixed amount to buy health insurance through a private exchange.

The drugstore chain said it will give workers as much next year to buy insurance as it paid this year for the cost of benefits. Employees will choose from options such as high-deductible health plans, a PPO and an HMO-style plan. The retailer expects the lower-premium plans, typically those with higher deductibles, to be an attractive option for the more than a third of its workforce that is under 30 and single.

Home improvement giant Home Depot plans to shift about 20,000 part-time employees who work less than 30 hours per week from company-sponsored medical plans to government-sponsored exchanges.

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