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Friday, 06 July 2012 14:45

Verdict is in: Experts advise proper planning to deal with health care reform

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WEST MICHIGAN — Business owners who haven't already been planning ahead for federal health reform better get going, experts on the law say.

The U.S. Supreme Court ruling largely upholding the federal Affordable Care Act heightens the need for employers that have not already done so to begin planning for how they'll comply with provisions in the law.

April Goff, an employee benefits attorney at Warner Norcross & Judd LLP in Grand Rapids, roughly estimates that up to 40 percent of employers may not have been preparing for the Affordable Care Act, partly because they were awaiting the Supreme Court ruling.

"Now they're going to have to jump on that horse and take care of it very fast," Goff said. "Some people put off stuff this year and now they have to have it done by the end of the year."

Goff advises employers who haven't already started preparing to not wait until after the November election, either, and hope for the possibility for a new Congress and president in 2013 that would repeal the law. If that doesn't happen, "they'll find themselves in a bind," she said.

In the near term, employee health benefits will need to begin covering women's preventative health as of Aug. 1. In 2013 employers will have to provide employees a simple summary of benefits and report on their W-2 forms the cost of providing health coverage.

In the long term, employers will have to decide whether to even continue providing employee health benefits or pay a penalty and have employees buy their own individual coverage from a state-run health exchange beginning in 2014.

Kirk Roy, who leads health care reform for Blue Cross Blue Shield of Michigan, says employers need to be strategic about their health benefits and work with their benefit provider to do a cost analysis.

"They need to think about what they want to do," Roy said.

Yet even with the Supreme Court upholding the law, it's too early for employers to decide now whether to drop coverage and send employees to the health exchange in 2014, said attorney Nancy Farnam, who runs the health care practice at Varnum LLP.

Federal regulators are still finalizing regulations for implementing changes that start in 2014, Farnam said.

"It's very difficult to do any thorough analysis because we don't have all the pieces that we need right now," she said.

But that doesn't mean employers shouldn't educate themselves and do as much planning as they can about future benefit decisions in preparation for 2014. Farnam's advice is to avoid making benefit changes at least through this year, except what's needed to comply with the law.

Ultimately, she said, employers need to think strategically on where health benefits fit with their overall business strategy.

"Don't make a radical change now. Just continue what you're doing. If you provide coverage, continue providing coverage. If you're not providing coverage, don't make a decision to provide coverage based on the law," she said. "Make the decision based on any other business decision. It's just so uncertain right now."

Under the law, which is intended to extend health coverage to millions of people who do not have it now, employers can continue with their existing group coverage. Companies with 50 or fewer employees that do continue with their existing group coverage would become ineligible for a federal tax credit for small businesses to help offset the costs of their premiums. To qualify for a credit, a small business must pay at least 50 percent of the premium, have less than 25 FTEs, and pay an average salary of less than $50,000.

Employers could opt to buy their employee health insurance through the exchange, rather than their insurance agent, and get the tax credit if they are a small business. Or they could choose to drop group coverage, pay a resulting $2,000 per-employee penalty annually starting in 2014, and send their employees to the exchange to buy individual coverage, perhaps even with a stipend to help pay for it or a bump up in pay.

Individuals who decline to buy minimum coverage would pay a penalty, or tax, based on whatever is greater: The percentage of their taxable income — 1 percent in 2014, 2 percent in 2015 and 2.5 percent in 2016 — or a flat-dollar penalty that starts at $95 in the first year, grows to $325 in 2015 and to $695 in 2016. The fee is then indexed to inflation in the subsequent years.

Just like the Affordable Care Act, how many employers may opt to drop coverage for the exchange is a subject for debate.

In the 2011 employer health benefit cost survey by Alliance for Health and The Employer's Association in Grand Rapids, 22 percent of the 163 companies responded "yes" when asked if they would consider dropping coverage in 2014.

The 2012 McGraw Wentworth benefits survey of mid-sized employers in Southeast Michigan found that 85 percent of respondents would likely maintain coverage for full-time employees in 2014. Thirty-five percent of respondents, however, told McGraw Wentworth they were unsure if they could pass the benefits and affordability tests in the law.

Health care reform is clearly a burden for employers, with its coverage and affordability mandates, reporting requirements and taxes, said benefits attorney Mary Bauman of Miller Johnson's Grand Rapids office.

But employers need to balance any consideration of dropping benefits with a potential recruitment and retention problem that may result, especially for high-skilled workers, Bauman said.

"There's no doubt employers are in a tough spot," she said. "Employers should strategically say, 'Why am I providing health insurance? Is this the best thing for my employees?'

"My advice for employers is don't be the first to drop coverage. Watch and see what other employers do and learn."

Charles Owens, director of the Michigan office of the National Federation of Independent Businesses, speculates that as many as half of Michigan employers could drop health benefits because of the coverage mandates in the federal law and the resulting costs.

"It's already been difficult for smaller employers to try and hang on to this benefit for their employees. I think at some point they just throw their hands up and say, 'We're done. We're tired of being in the health insurance business,'" Owens said. "The cost drivers inherent in the law are going to cause a lot of them to do that and say, 'We're not going to provide this benefit anymore. Go to the health exchange and get it.'"

Small Business Association of Michigan CEO Rob Fowler sees the issue in a different light.

Small businesses still need to compete for talent, Fowler said. With the individual mandate, employees looking for work are going to place a greater importance on whether a prospective employer provides health benefits, he said.

"If I have a choice between two companies — one that provides health care and one that doesn't — that's a no-brainer," he said. "You'd be a less attractive place for employees to come and you'd pay the $2,000 penalty per employee."

Read 1348 times Last modified on Sunday, 29 July 2012 22:06

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