There’s no doubt that businesses are facing hurdles as they navigate the Affordable Care Act and modify employee health plans to comply with the law.
Many of the broad-reaching provisions of the federal health law take effect Jan. 1, and their impact on businesses will vary.
Many of Wichita’s largest employers with traditional full-time staffs and health insurance plans don’t expect major changes to benefits, although they expect costs to rise. Some other businesses will find the challenges of compliance more numerous.
“It could be pretty rough on the retail, hospitality and restaurant sectors,” said Jason Lacey, an attorney with Foulston Siefkin.
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“Those industries rely on more part-time labor. There probably won’t be as big of an impact on, for lack of a better term, the whiter-collar industries, because they rely on a lot of full-time employees and have a history of offering benefits to most of those employees.”
Before making drastic changes to their workforces or health plans, Lacey encourages employers to analyze the needs of their businesses.
“Employers need to do a lot of thinking about what makes sense for their business first before letting the health-care-reform tail wag the whole dog,” Lacey said.
Intrust Bank is among those employers that don’t expect major changes in their health plans, said Jill Beckman, Intrust’s division director of people services.
“We’re analyzing our population to understand our health issues, our risk and helping align our benefits with that. We’re analyzing to make sure we’re compliant with the law, and we have a third party that helps us with that, and we’re communicating at all levels within the organization,” Beckman said.
Intrust started making changes to its health plans soon after the 2010 passage of the Affordable Care Act, Beckman said, by including preventive coverage and coverage for dependents up to age 26.
Intrust has about 880 employees, about 863 of whom are eligible for health benefits. Beckman said 650 employees subscribe to the company’s insurance, which covers about 1,300 people.
Eligibility for benefits at Intrust starts at 20 hours. The federal law requires benefits to be offered to employees who work more than 30 hours a week if the employer has more than 50 full-time-equivalent employees. Beckman said Intrust is analyzing its eligibility standards for benefits.
A poll at a recent event held by the Wichita Business Coalition on Health Care, whose members are mostly medium and large businesses, showed that 79 percent of attendees said their organizations “won’t drop coverage but will raise premiums or change plan design to offset the cost impact” of the Affordable Care Act.
Eleven percent said they would leave their programs as they are, 7 percent said they are considering dropping their plans, and 2 percent said they will definitely drop health coverage.
Spirit AeroSystems spokesman Ken Evans said the company would decline to give an interview about health coverage, but Spirit did release a statement: “Spirit already offers and will continue to offer benefit programs that exceed the requirements set forth under Healthcare reform. While some guidance may still be required regarding certain elements of the law, Spirit is in the process of making minor adjustments as needed. Due to the strength of our benefit programs, we do not expect our employees or their benefits to be significantly impacted by the law.”
‘Play or pay’
Under the law’s “play or pay” rule, employers with more than 50 full-time-equivalent employees must offer affordable health insurance or pay a fine of up to $2,000 per full-time employee, excluding the first 30 employees.
The first question for many employers is: “Do I have more than 50 full-time equivalents?” said Linda Sheppard, special counsel and health care policy and analysis director for the Kansas Insurance Department.
To determine the number of full-time equivalents, employers should take the total hours that part-time employees work in a given month and divide by 120. If that number, when added to the number of full-time employees, equals or exceeds 50, that employer will be subject to the “play or pay” provision, according to Lacey.
Companies that meet the 50 full-time-equivalent threshold will be required to provide affordable coverage plans to employees.
For at least the next few years, large employers will not be eligible to purchase plans through the new online health insurance markets mandated by the law, Sheppard said.
If a company fails to offer affordable plans that meet “minimum essential value” and the company has an employee who goes online to the insurance marketplace to get a tax credit or subsidy, the penalty is $3,000 per employee who gets subsidized coverage on the marketplace, Sheppard said.
To ensure plans are affordable, the government requires that employers can’t charge an employee for single coverage more than 9.5 percent of what that worker earns in a year.
“If you set that amount low enough for the lowest-paid employee, it should be good for everybody else,” Sheppard said.
The “minimum essential value” requirement involves the amount and cost of coverage that is provided. Lacey said some plans that meet the requirement could still have $4,000 to $5,000 deductibles and some co-pays.
The law doesn’t require employers with fewer than 50 full-time-equivalent workers to offer any coverage, but employees will still be responsible for getting some sort of coverage as part of the individual mandate, Sheppard said.
‘Safe harbor rule’
Via Christi Health, which has more than 10,000 employees, 88 percent of whom are eligible for benefits, is “trying to retain some consistency in its benefit offerings,” according to Valerie Fokol, manager of benefits for Via Christi Health.
The health system is working with IMA Financial Group and is looking over records from the past year for employees who have variable work schedules to help determine whether they meet the benefits threshold.
For its employees who meet benefit eligibility, which is working 24 hours a week, Via Christi will use the “safe harbor rule,” which provides a dollar amount for the maximum monthly charge for a single employee: $90.96.
The figure is the cost that can be charged an employee for the cheapest single coverage plan. It’s set by the government for employers who don’t want to calculate the maximum 9.5 percent of employees’ earnings.
Under the law, employers would need to cover any premium cost above the $90.96.
One fee that Via Christi has already calculated is called the Transitional Reinsurance Fee, which will charge $63 per covered life next year, Fokol said. The fee will be in place for three years.
With more than 16,000 covered lives, the fee totals about $1.1 million per year for Via Christi, Fokol said.
The fees, to be paid by most businesses with health plans, will generate revenue that the government said it will use to subsidize the cost of insurance for those who have health risks. The aim is to spread or shift the risk within the market as insurance companies take on more risk now that people cannot be turned away for pre-existing conditions, Lacey said.
To control costs associated with complying with the law, some employers are limiting the number of employees eligible for company-provided insurance by keeping the workers’ hours to fewer than 30 a week.
Spangles is using this strategy, said Dave Dooman, CFO for the company. Through attrition, the company has reduced the number of its full-time equivalents, Dooman said.
“Our initial plan was to just send (President) Obama the keys to the business and let him have it and write it all off to get a tax refund, but that doesn’t seem practical. So we spent a long time to research and work on this program and working with our attorneys to try and interpret that law,” Dooman said.
Spangles has about 600 employees, Dooman said. Last year, about 250 of those were full time. Now that number is at about 200 full-time equivalents, he said.
“Last year we started scaling back when we knew what the full-time-equivalent requirement would be, which is 30 hours,” Dooman said.
“Once we knew that and knew limitations, through normal attrition – we didn’t terminate or reduce hours – we didn’t replace full-timers with a full-time person. We maybe replaced them with two part-timers.”
He said the company still hasn’t made all decisions on the health plan and will probably wait until later this year to finalize the details.The implementation has resulted in more than $15,000 in legal fees so far, Dooman said, and the company is having software developed to help Spangles keep better track of employees’ hours, start dates and eligibility for benefits.
Jim Korroch, CEO and president of A.G. Holdings LLC, which owns and/or manages four Marriott properties in Wichita and employs about 110 people, said it wouldn’t work for his company to attempt to make sweeping cuts to workers’ hours to get them under 30.
“We initially started going down that road but found we want the best people in system and make sure they are the ones that are with us cleaning rooms and working front desks. I’m not totally subscribing to the whole thought process of putting everybody under 30 hours – just where it makes sense.”
However, he said the law has forced the company to look at its labor force and efficiency, and there has been some reduction of hours in some cases.
Benefits for A.G. Holdings employees start at 30 hours. He didn’t have a breakdown of the number of full-time and part-time employees.
Korroch said that if all businesses started cutting the hours of all employees, the government would find a way to tighten the loophole to discourage the changes in the workforce.
“The biggest thing is to wait and see, and I’m not optimistic about how it will overall affect small businesses. ... It’s not something that as an employer I feel is beneficial to me wanting to grow business. A negative to the bottom line ultimately means less capital for new development.”