MISSOULA — With the largest components of the recent health care law kicking in at the start of 2014, businesses have a lot of decisions to make this year about how they will react to new rules and regulations.
“The law is like a 2,000-piece jigsaw puzzle. Right now, only a few of those pieces are put together. Some pieces may not fit, some pieces don’t exist right now,” said John Doran, the director of strategic marketing services with Blue Cross and Blue Shield of Montana.
Doran, along with other representatives from Blue Cross Blue Shield, traveled around the state in 2012, conducting seminars to inform companies and individuals about the changes that are coming as a part of the recent federal health care law, the Affordable Care Act. He said Blue Cross Blue Shield is planning to hold more seminars across Montana over the course of the year.
While employers might not fully understand how the law will affect them, Doran said there is a foundation they can work off of to start planning for 2014, when many of the provisions of the law take effect.
These requirements include a mandate that large employers offer health coverage to their workers or risk paying a penalty. That coverage also must be deemed affordable or the employer will be required to pay a different penalty.
“The misconception is that this law will be detrimental to small businesses across Montana. This isn’t the case. It could actually provide more options for small businesses,” Doran said.
Requirements to kick in
Next year, all large employers — those with more than 50 full-time employees — will be required to offer affordable health insurance to full-time employees or face penalties. Health insurance is deemed affordable if the cost to the employee is not more than 9.5 percent of their annual household income.
Individuals will be required to have insurance for themselves and their dependents that provides a minimum level of coverage or face penalty fees. This insurance can be through government systems such as Medicare and Medicaid, employer-provided health insurance, or insurance purchased from a private insurance company or through an insurance exchange.
The ACA provides subsidies on a sliding scale for individuals and families who make up to 400 percent of the federal poverty level (currently around $92,000 a year for a household of four) and who buy insurance on a health insurance exchanges.
If a company required to provide insurance does not, it can face a penalty of $2,000 a year for every employee after the first 30 if even one employee gets care at a federally subsidized rate through a health insurance exchange. If the coverage is unaffordable, a penalty of $3,000 is applied for every employee who buys from an exchange and receives a federal subsidy.
Employers also will be able to sign up employees for affordable plans through a specific small-business exchange that will become available later this year.
Full-time employees are those who work on average 30 hours per week or more. Part-time workers whose hours add up to be 30 hours a week are used to determine the number of “full-time equivalents” a business has, but are not required to be offered health insurance.
Employers with fewer than 50 full-time employee equivalents will not be mandated to offer health insurance. In addition, smaller companies — those with 25 or fewer employees — are eligible to receive tax credits if they decide to offer insurance to their workers anyway. In 2014, this credit will apply only if small businesses use plans from the heath insurance exchanges.
97 percent exempt
According to a report by the the University of Montana Bureau of Business and Economic Research, 97 percent of Montana businesses have fewer than 50 full-time employees and therefore are exempt from having to offer health insurance to workers. Eighty percent of employers in the state have fewer than 10 employees.
Also beginning in 2014, insurance plans are prohibited from restricting coverage from or charging higher rates for people with pre-existing health conditions or because of gender.
All insurance plans also will have to offer “essential coverage benefits,” meaning the plan must cover at least 60 percent of the costs of at least these 10 services: ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental health and substance use disorder services, including behavioral health treatment; prescription drugs; rehabilitative and habilitative services and devices; laboratory services; preventive and wellness services, and chronic disease management; and pediatric services, including oral and vision care.
This is equivalent to what the lowest tier of the exchange plans, “Bronze level,” will offer. Better exchange plans will offer a higher percentage of cost coverage. Costs for the exchange plans have not yet been set, but in 2010 the Congressional Budget Office estimated the cost of a Bronze individual plan at less than $5,000 and a family plan at less than $12,500.
The health insurance exchanges will have limited open enrollment windows every year. This would be the only time that, excluding very specific circumstances, individuals would be able to sign up for a plan or change plans. These open enrollment periods are meant as a way limit adverse selection, in which people simply wait and pay the penalty until they get sick, then buy insurance to cover treatment. This year, the exchange will have an extended enrollment starting in October.
The ACA also includes a reinsurance fee on all private insurance plans to offset the cost of the public exchanges. The $25 billion in fees will be collected for three years starting in 2014. The U.S. Department of Health and Human Services estimates that the fee will be $63 per person covered by a private insurance plan in 2014, and decrease slightly over the next two years.
Patrick Barkey, director of the Bureau of Business and Economic Research at UM, said employers will find a way to be ready when the changes do arrive.
“There’s a cottage industry of consultants for this. There are a lot of workshops trying to help businesses prepare. Regulatory compliance is just a part of doing business,” he said.
Both Barkey and Blue Cross Blue Shield’s Doran said that when an employer looks at the cost of offering care versus paying the fee, they might choose the latter.
“It might end up being cheaper for employers to release their employees onto the open exchanges and just pay the penalty. It’s something that is going to be governed by markets, and employers will make decisions and workers will adapt,” Barkey said.
Companies might opt to take the known cost of the penalties, rather than the unknown and shifting cost of coverage, he said.
Barkey said that due to the amount of new rules brought in by the ACA, costs likely are going to rise.
“Regardless of whether you like or dislike it, it is a large increase in regulation. So the cost of regulatory compliance is going up. Even something as benign as electronic medical records can be an enormous investment for a small health provider,” he said.
Every year, the BBER hosts a seminar that looks at the state of economic issues in Montana. The seminar has a major theme every year, with this year’s being health care. The seminar will include a keynote by Larry White of the Western Montana Health Education Center and a special industry outlook by Gregg Davis, the director of BBER’s health care research. More details about the seminar, which will be held in multiple cities around Montana through the end of March, is available on BBER’s website, bber.umt.edu.
Monica Lindeen, Montana’s commissioner of securities and insurance, recently commissioned a report from the BBER about the impact of health care changes on businesses in the state.
Barkey couldn’t discuss the details of BBER’s findings, as the report was currently being reviewed by Lindeen’s office.
Lucas Hamilton, the communications director for Lindeen’s office, said the findings of the report will be made available Jan. 12.
“We’re reviewing it to make sure that what we had asked to be included is there, and that it is written in a way that is accessible to the public,” he said.
On the day it is released, a representative from the BBER will be at an event in Helena to discuss the findings, and the full report will be available online.
Barkey and Doran agreed that the ACA doesn’t do enough to address the cost of health care, focusing instead on the cost of insurance. To really bring down premiums, they each said, the cost of care is what will need to be addressed.
Doran hopes that last year’s U.S. Supreme Court ruling means the main components of the law will go forward, and businesses will develop their plans for it.
“My caution is, this is a very political piece of legislation. People need to get beyond the politics of it and see how this bill is going to impact them. It’s possible, and maybe even likely, that it will impact them positively, at least financially,” Doran said.