The impact health care reform will have on the cost of providing employee benefits will, in part, be determined by your company`s size, the nature of its workforce, the industry you are in, and how large portions of the legislation are enforced. Perhaps the most significant barrier to knowing what it will cost is there has been very little “ if any “ interpretation of the law.
In 2011, the maximum age for eligible dependents will rise to 26 and plans will no longer be allowed to set annual or lifetime limits on coverage. It is likely these will add to the costs of employer-sponsored plans.
There are some options available that could offset these. One is the grandfather clause exempting s from additional regulation companies who keep the plan they had at the time reform laws were enacted in March 2010. So, this fall, you need to decide the merits between your old plan or a new one, which some predict reform will make more expensive.
In a recent Mercer study companies were predicting compliance with first round reform mandates will add at least 3% to projected 2011 plan costs with other saying costs would increase by 5% or more.
What will happen in 2014 when groups of 50 employees or more are required to offer health care coverage? Opting out is allowed but comes at a price. Employers who opt out will pay fines of $2,000 per year for every employee who works 30 or more hours a week (the first 30 employees are excluded.)
However, employers offering insurance will not be fined but costs could increase as workers who opted out in the past decided to enroll because of the mandate.
The legislation also creates state-run insurance exchanges offering affordable coverage, and it provides tax credits to help low-income individuals pay premiums. What will happen if some employees get coverage through an exchange because their employers` plans are too expensive? Well, the law says companies will pay a $3,000 fine for employees who choose exchange coverage if their income falls below 40% of the federal poverty level (projected to be $48,000 in 2014).
It seems likely that companies with large, lower-income hourly workforces who would benefit from using exchanges and the expanded Medicaid coverage that`s also called for in reform legislation, will pay significantly more under health reform have.
Complying with reform will mean corporate accountants will have their hands full. As of 2012, W-2 reporting of 2011 costs for health, dental, vision, and employer HSA and HRA contributions will be mandatory. Other federal reporting requirements and employee notifications take effect later.
In 2013, a $2,500 annual maximum contribution to tax-deferred flexible spending accounts takes effect, which means employers, will have fewer options for passing health care costs to employees.
As of 2018, a 40 percent excise tax for high-cost œCadillac plans (plans with premiums greater than $10,200 for individual coverage and $27,500 for family coverage, indexed for inflation in 2019 and beyond) will be levied. It is quite possible your current plan may be seen as a œCadillac by 2018.
Finally, CFOs can look forward to tax increases beginning in 2011 as the government seeks to pay for health reform.
On way to avoid or reduce the impact of health care reform on your costs, is to take control health care costs now. Wellness programs can lower claims, which reduces renewal costs. In this regard, the new law is on your side as it allows more incentives “ including lower premiums “ employers can offer employees for participating in wellness programs. And, if your company is self-funding its benefit program, the impact on your costs can be immediate and significant.
In the end, there are no easy answers. We believe your best strategy is to work closely with your HR and legal departments and call on the help of outside experts to evaluate the impact on your business. The sooner you get started the more time you will have to evaluate the impact, choose your best alternatives and protect your company`s success.
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