The mandate that large employers provide health care coverage to their employees has been put off until 2015, but some businesses have already started changing health care benefits.
Still, many employers say they have little choice but to “wait and see” how the Affordable Care Act and the public health marketplace that opens Oct. 1 will affect how they cover their workers.
“We came to the conclusion, let’s take a step back,” said Wes Kuehnle, chief operating officer and co-owner of Spalding Automotive. “Let’s see what happens. Let’s not mess anybody up.”
Spalding, which makes parts for the automotive industry, employs more than 70 people at its manufacturing facility in Bensalem, Pennsylvania. The company offers a fully paid, high-deductible health plan to its employees and their families. It also gives $2,500 to each employee for a Health Savings Account with which they can pay medical costs, including treatment co-pays and prescriptions, Kuehnle said.
That’ll change next year, when employees start contributing 10 percent to their health plans. And any new hires going forward will pay a larger portion to cover their families. Kuehnle said the new arrangements were made after meeting with the union representing its employees.
“We’re basically forming a ‘wait and see’ attitude,” he said. “It has not affected our hiring at this point. We had already believed in covering our employees. I can’t imagine not giving them health insurance.”
The Affordable Care Act seeks to increase employer-sponsored health coverage in two ways: by requiring businesses with more than 50 employees to cover those who work at least 30 hours a week or face penalties for not doing so; and by giving tax credits to small businesses with fewer than 25 employees who decide to provide health insurance.
Employees can shop around on the public exchanges starting Oct. 1, but they may not qualify for subsidies if their employer already provides an affordable health insurance plan that complies with Affordable Care Act rules. There’s a separate exchange offering plans for small employers, but experts say many are choosing to avoid those exchanges because they can get more options elsewhere. Shopping on the small business exchange is only required if a small employer plans to claim the tax credits.
Across the country, employers are reacting.
A survey released in March by professional services firm Towers Watson and the National Business Group on Health found that more than 80 percent of respondents plan to continue raising the share of the premiums paid by employees. But 82 percent said they wouldn’t direct active employees to an exchange without a subsidy over the next five years. And 60 percent said they wouldn’t do so even if the employees were eligible for subsidies based on their income.
Some companies, like Wegmans, are changing who they cover. The grocery store chain announced earlier this summer that it would increase its eligibility requirements from 20 hours a week to 30 hours starting in 2015.
“Even though the new health care law is requiring some changes, we are not going to do anything that will hurt our employees,” the company said in a statement. “Wegmans will continue to offer health care benefits for part-time employees, but eligibility requirements will change.”
Other employers are cutting worker hours.
Retailer Forever 21 announced last month it would cut line workers to 29.5 hours a week. The company denied the decision was made based on the Affordable Care Act, but rather a result of an internal audit. And still others, like UPS, said they’d no longer cover spouses of non-union employees if the spouse could get coverage through his or her own employer.
In the past few years, the Advertising Specialty Institute, a Bensalem trade group for the promotional products industry, also stopped covering spouses who could get coverage through their own employer, said CEO Tim Andrews.
“We started looking at (health insurance) several years ago,” Andrews said. “The costs were going up so dramatically every year.”
With 450 employees, ASI has more than 600 people enrolled in its benefits plan, including employee spouses and children.
“We’ve been preparing for a long time, putting programs in place,” Andrews said. “Now we’re really ramping up as time gets a little closer.”
Among those programs are incentives for employees who quit smoking — up to $1,500 in cash — and wellness programs like fitness classes and healthy lunch options in the company cafeteria. The Affordable Care Act encourages workplace wellness programs.
“At the end of the day, people don’t know what’s going to happen,” Andrews said. “People can have any theory they want. The theory can be that the healthy people flee to another plan, and the people left behind are the people who are most expensive to cover. We don’t know. All we know is that we want to provide the best benefits that we can for our employees, and do it at a cost that makes sense for them and for us.”
Scott Post, vice president of corporate and association affairs for Independence Blue Cross, said employers will begin to see a new suite of plan offerings starting in 2014. Those plans have been reconfigured to comply with the ACA.
“We’re withdrawing all our current products over the next year and introducing a whole new product suite,” Post said. “It’s a big effort to get everything ready. We’ve been at it for well over a year. They’ll all carry the same essential health benefits. But come your renewal date, you’ll, at that point, have to come into a compliant health plan to offer your employees, if you choose to offer them.”
Post said the insurer hasn’t seen a large-scale exodus of companies dumping health insurance. But it is seeing a larger number of employers adopt defined contribution as a benefit strategy, in which the employer contributes a set amount and allows the employee to pick from a private exchange with several plans.
“A carrier can go to an employer and say, ‘I’ll set up a whole suite of products for you — as many as 5 or 10 product designs — and you can decide to give your employee a set amount of money to go into this exchange and be able to find a product that they like and they purchase, and in that way your expenses are capped. They’re known. And next year you can decide to increase that amount or not,” Post explained.
Kristen Dougherty, employee benefits sales manager for Univest Insurance, said she’s seen a similar trend toward defined contribution benefits.
“This was something in place in the past, and we’ve gotten away from this,” she said. “(The employer is) setting a dollar amount, and you pick what makes sense for you. The insurers are on board with this; they’re allowing us to offer multiple plan options. In the past, it was only two or three plans. Now it can be five ... up to 20 plans being offered.”
Univest Insurance is a division of the Souderton-based Univest Corp., which provides insurance to 605 full-time and part-time employees working at least 20 hours a week, said Theresa Schwartzer, senior vice president and director of human resources.
Univest has been self-insured for the past seven years, and its plan is already compliant with the Affordable Care Act requirements, Schwartzer said.
“We look at that as a very important part of our overall compensation package,” she said. “We pride ourselves in offering an affordable plan.”
US BioDesigns, a medical textile manufacturer headquartered in Quakertown, Pennsylvania, has 15 full- and part-time employees, and provides medical coverage with a Health Savings Account plan to its full-time workers, said CEO Tom Molz.
The cost of providing that care went up nearly 20 percent this year, and the company is bracing for an even greater impact next year.
“It’s a huge concern,” Molz said. “It makes us hesitate significantly to hire full-time employees. That’s a sad thing to say. Everyone wants to become employed and have benefits and take care of their families, but from a company perspective, it’s a huge deal.”
His company is looking into taking advantage of next year’s tax credits, which would require it to purchase health insurance through a small-business exchange similar to the public exchanges. But it’s also considering other options, including make direct contributions to help employees obtain their own coverage.
“We have a health insurance broker that we deal with, and it’s very confusing to everyone,” said Molz, who added that he “fundamentally disagrees” with government-enforced health care.
Ed MacConnell, president of Total Benefits Solutions said he, too, is seeing confusion among his clients.
“The big concern for my clients is, ‘what are we supposed to do?’ ” he said. “Business people are smart. They try to prepare. So many clients are just not sure. They want to do the right thing. But sometimes, they’re afraid to act because it may be wrong, or the rules may change.
“The impact isn’t necessarily on the rates, as it is on their own planning and staffing. If you have 24 people and you qualify for a tax credit in the exchange, then you think about hiring two more people, you eliminated yourself from that tax credit,” MacConnell added. “You have to be aware as a business owner what that means. The same also applies if you’re on the borderline of 50. Do you lay people off? Do you add people?”