Coverage
As the Patient Protection and Affordable Care Act continues to roll out, employers this year face a new accounting requirement in preparation for reports documenting their compliance that they will need to file starting in 2016.
Everyone must have healthcare coverage, and responsibility for compliance rests on both the individual and the employer. Key terms are “Minimum Essential Coverage” (MEC), which refers to the individual’s responsibility to have healthcare coverage, and “Essential Health Benefits” (EHBs), which are the elements all employer-sponsored health plans must include. There is some disparity between the two as far as specific benefits. However, Quarles & Brady attorney Sarah L. Fowles explains that, while employers are not required to buy health insurance that is MEC, as a practical matter most employer-sponsored health insurance policies will qualify as such. The issue of EHBs is a little more complicated. “A ‘group health plan’ may or may not cover all essential health benefits, depending on whether it is a self-insured plan … or a fully-insured health plan,” she says, explaining there is no requirement that a self-insured plan cover EHBs, and a fully insured plan is only required to cover EHBs if it is offered in the “small group market.”
What’s important for employers to understand is, penalties revolve around the tax credit. If an employer does not offer any coverage as required, and at least one employee purchases healthcare through the health insurance marketplace and then gets a tax credit on that premium, the employer will be levied a fine. The employee’s eligibility to receive a tax credit hinges on his or her earnings being 100 to 400 percent of poverty level. However, as long as the employer offers an “affordable” plan, the employee cannot get a tax credit.
The amount of the penalty is calculated per a formula that counts the number of employees in the entire company, and levied at $2,000 each. Companies with 51 employees may find it cheaper to pay the penalty, but larger companies can potentially save millions of dollars by offering a benefits plan rather than suffer the penalty — which is not tax deductible, nor can an employee waive it off. Employers may choose to offer more than one level of coverage, as long as all plans are available to every employee.
Filing proof of coverage will be required in 2016 for the 2015 calendar year. The new IRS-required reporting will address the Individual Mandate (Code Section 6055) and Employer Mandate (Code Section 6056).
Under Code Section 6055, individuals (employees) will be required to prove they and their tax-qualified dependents were covered by a plan that included Minimum Essential Coverage (MEC). The new Form 1095-B will be provided by the insurance carrier to each employee and their covered dependents for the time frame of the coverage, for plans that are fully insured. However, employers that offer a self-funded plan can either complete the 1095-B or simplify the process by completing Part III of Form 1095-C — which is already required to be completed to meet components of the Employer Mandate (Code Section 6056) and as described below.
“Under Code Section 6056, employers with 50-plus Full-Time Equivalent Employees (FTEEs) will be required to report and transmit information about their plans and employees to the IRS to ensure conformity with the Employer Mandate requirements of the Affordable Care Act,” says Melanie Thomas, senior VP with Burnham Benefits. Under the Employer Mandate’s reporting requirements (Code Section 6056), there are two forms that every employer should get very familiar with: Form 1094-C and Form 1095-C.
Employers must file Form 1094-C for each FTEE, which details basic information about the Applicable Large Employer Member. This form is very similar to Form W-3 transmittals used to share payroll and tax information to the IRS.
Another form employers will be responsible for is Form 1095-C, which must be prepared for each full-time employee and provided to the employee by January 31 (very similar to the Form W-2 requirement). This must include information detailing the lowest-cost option offered to the employee, even if it is not the plan the employee has chosen. “It includes indicator codes to help the government determine how the employee was classified each month, such as whether the employee was not employed by said employer, was in a waiting period, or was enrolled in or declined to participate in the plan. Additionally, codes are used to determine if an employer offered MEC coverage with minimum value to the employee only, employee and spouse, children or both,” Thomas explains. If the information applies to all 12 months of the coverage year, the employer can simply check a box to indicate that. However, if the information is different for any month, then information must be specified for each of the coverage months.
Applicable Large Employers (ALEs) have until March 31 to file Form 1094-C electronically. And companies who file fewer than 250 of Form 1095-C have the option to file on paper, but with the earlier deadline of the last day of February (in 2016, that will be February 29).
Employers should be preparing to capture all the necessary information now in preparation for 2016. “These ALE’s should confirm the ability to capture required information in their payroll or benefit administration system or build the infrastructure to do so into their system. The ability to include the required indicator codes, and the ability to transmit the information to the IRS is extremely important,” says Melanie Thomas. She suggests employers partner with their employee benefits consultants, and begin communicating now with their payroll vendor, benefit administrator and other appropriate responsible parties sooner rather than later to ensure compliance and avoid costly penalties that may be incurred for inaccurate data or non-compliance with deadlines.
Policies and Programs
Choosing a policy means settling on a network of providers that will be available. Jeff Stelnik, senior vice president of strategy, sales and marketing with Blue Cross Blue Shield of Arizona, suggests employers consider the following questions when choosing what coverage to purchase: Does the carrier have a national presence (an aspect especially important for employers with multiple locations)? What is the reputation of the carrier, and how is it rated on such elements as customer service and satisfaction? Will the plans meet the needs of a diverse work force? What is the ease of implementing the plan? And John Shufeldt, M.D., who serves on the board of managers of Arizona Care Network, suggests checking out the plan’s website to see what providers are on the policy’s panel. “You can have the greatest plan in the world, but if no doctors take that plan, you’re out of luck,” Dr. Shufeldt says.
Accountable Care Organizations is a relatively new option for employers. The payer, healthcare provider and patient are all accountable and incentivized. Not only is it a lower premium if patients stay within the system, but ACOs offer a richer array of benefits — more hands-on patient care and connectivity with the provider because the provider has a financial incentive attached to the outcome. Touted as a breakthrough idea only a few years ago, networks are becoming more the standard than the exception since the passage of PPACA — a significant aspect being shared information and coordinated care.
Dr. Shufeldt believes collaboration and shared information will help reduce the cost of care, and illustrates this from his own experience. “I work in ER at St. Joseph’s and I had a patient who had had an MRI at another MRI center — who said they could fax the report to me but couldn’t send the MRI. No doctor will perform surgery on someone’s head based on a report, so I had to redo the MRI.”
This is where the technology of electronic health records is making a difference, granting access to critical information when a patient is receiving care. This may be an emergency room physician having access to complete health records when needing to prescribe medication and being able to know about a previous bad reaction or interaction with other medications, a primary care physician having access to specialists’ reports, or a specialist having information on the reason for a patient’s visit. “I believe communication among providers will aid in the process of delivering high quality and improving the value of the healthcare that’s being delivered,” says Mark S. Hillard, CEO of Arizona Care Network, noting, “The genesis of all ACOs forming is [an effort] to reduce cost, improve efficiency and make the patient experience better.”
And then there’s the concept of “narrow network,” developed by insurance carriers to more closely control cost by limiting the choice of providers, providing consumers a cost trade-off. While narrow networks come in a variety of iterations, all must meet rules regarding network adequacy: They need to have broad enough coverage across various aspects to be able to create a network, and that includes primary care, specialists and hospital.
But healthcare coverage is changing, and Bob Campbell, senior vice president of business development and chief strategy office of Phoenix Children’s Hospital, emphasizes the need to educate employers on the importance of thinking about those changes. “You no longer have everything in these policies, so you really do need to look at them in more detail.” For instance, if a policy seems attractive from a price standpoint, consider “how does that match up with the needs of your employee population? What are the potential gaps, and what is the cost of filling the gaps by having a more comprehensive network?” He believes part of the employer’s role is truly understanding the healthcare needs of the employees, and “thinking through with an advisor regarding the kind of policy they want and need, and what kind of policy the employer is willing to purchase or provide.”
Employees now want to be more empowered about their health insurance coverage, observes Stelnik. This has been fueling a trend to a defined contribution by the employer. “The employer gives a fixed amount, and the employee can choose where to sign up — which is similar to the federal exchange,” he explains. Choices include an HMO product with a tighter network, a health savings account (HSA) program that affords full empowerment, and a lower-deductible PPO that allows an employee to buy up to richer program. “This allows the opportunity to make decisions more individualized at the employee level while giving the employer a better line of sight into the company’s financial obligation. The contribution is the same across the board, and is therefore more stable and consistent.”
Another trend is the proliferation of private healthcare exchanges being offered by a variety of types of companies. One recently launched by Arizona-based Lovitt & Touché, founded in 1911 and now one of the nation’s largest insurance brokerages, offers employers more control over their health insurance options while providing employees with more levels of coverage to suit individual needs. “The employer sits with us and we build them a ‘store’ of products,” says Senior Vice President Doug Adelberg, explaining the review involves comparing advantages and disadvantages of offerings from various carriers rather than choosing simply based on rate. The wide choice overall essentially neutralizes the rate differences, he says. “It’s more a long-term discussion about the employer building a relationship with the carrier based on wellness programs, customer service, provider network and funding flexibility — fully insured, self, level or captive.”
It is built on the defined contribution model to give the employer cost predictability, and Adelberg says its key components are decision-support software and employee communication and education. “It’s not just a website,” he says. “We interview the employees about family, utilization of healthcare and risk tolerance. They receive a customized recommendation that meets their specific, unique needs.” Comparing the shopping process to Amazon, Adelberg says the employee can take the “virtual gift card” with the employer’s contribution and fill his cart with his coverage choices. “It teaches employees consumerism.”
David Berg, D.C., chairman of Redirect Health, believes employers can also control costs by placing greater emphasis on providing healthcare to those individuals who use it most. Explaining this rather counter-intuitive approach, he says, “It is generally accepted that 10 to 15 percent of a company’s health plan members will spend 65 to 85 percent of all the healthcare dollars. Identify these people before they get sicker, give them a personalized plan of action and then the support that they need so that they believe they can actually execute their plan, and keep them out of the hospital, and huge savings result every time.” He developed Redirect Health to provide low-cost data analytics and software monitoring and tracking to enable businesses to implement this approach, which he had used successfully for several years with his Arrowhead Health Centers.
Dr. Berg notes also that having actionable data — which includes quality and pricing information at the time care is needed — can enable an employer to lower healthcare costs in the future as well as the current year. “It’s important to have the data in real time, and understand your plan so everyone knows their own responsibility.” He suggests every employer ask their broker or insurance company about premiums and pricing — who owns it and can they get their own data. HIPAA regulations is the defense commonly given for not providing the data, but Dr. Berg says that is a misreading of the law. “The law says you can’t have retribution because of the data.”
Benefits
The correlation between an employee’s physical and mental well-being and productivity at work is not a new concept. What is new is the widespread attention to this area of healthcare since passage of PPACA. In fact, Humana’s Victoria Coley, vice president of the Employer Group for Arizona and Nevada, says, “We’ve gone from being a claims payer to being a wellness company.” Citing a report in the Journal of Occupational and Environment Medicine that the business impact of health insurance claims on productivity was a staggering $164 billion per year, she says that, in addition to impacting the claims cost to the employer, “As we identified where the issues were as a carrier, we wanted to make and impact of people’s lives and give them tools and resources.” Part of that effort is a recently launched first-of-its-kind program with Weight Watchers International to address the rapidly growing issue of obesity and its health-related impact.
For all Humana members in qualified employer-sponsored health plans, Humana will pick up the cost of the Weight Watchers program for six months, and then offer the next six months at a discount — and repeat the offer each year when the employer’s plan renews. Noting that individuals are increasingly trying to take accountability for their health but may not have the means to follow through, Coley says, “We have to do something to jump start people being able to have accountability for this.”
Another route for business is to offer employer-sponsored, voluntary non-insurance benefits. “This is a way to add value to employees’ benefit program with little to no cost on the employer’s side,” says Lenny Sanicola, senior practice leader of Professional Development for nonprofit human resources association WorldatWork. “The employee picks up the cost, with the benefits offered through a payroll deduction.” What the employer brings to the arrangement is leveraging volume of individuals to provide them access to programs or rates that are not available in the individual marketplace. Most, at first, were supplemental to core benefits, but with the recession, there was a tightening of the belt that led to an uptick in voluntary benefits offerings, Sanicola relates. This is cost effective for the employer, as the only cost is administrative. Sanicola notes that another opportunity is coming up for employers concerned about the “Cadillac Tax” that will take effect under PPACA in 2018 — they can choose to not offer as rich a benefit, but supplement in voluntary benefits.
And these are generally portable — the individual can take the benefits with him when he leaves the employer, oftentimes at the same discounted rate.
As vendors and providers in the exchange marketplace have enhanced their programs, they have been adding to their voluntary benefits portfolio, and, Sanicola says, “We can expect to see more as private exchanges become more popular.” While these voluntary benefits can be anything — from pet insurance to prepaid legal — there is still more opportunity for health-related care. In fact, A 2014 study released by Corporate Wellness 365™, a division of Spafinder Wellness, Inc., shows that if businesses concerned about healthcare costs want employees to live healthier lifestyles, they need to offer access to a wider range of activities that go far beyond traditional gym memberships.
This is the realm that John Richards, CEO of chiropractic clinic The Joint, says he is already eyeing. Chiropractic is increasingly considered part of the healthcare continuum, especially for back pain — chiropractic currently represents about 25 percent of the more than $50 billion spent annually on back pain, according to Richards, who says the general consensus among the medical community is that back pain is best treated by the chiropractor’s repeat, non-invasive approach. But, “restrictive codes on insurance lead to co-pays that are more expensive, and insurance allows only so many visits,” Richards says, explaining the advantage of non-insurance package plans as a supplement benefit to healthcare insurance. “We’re beginning to reach out to businesses to make them aware of this.”
Dr. Shufeldt notes that benefit design is an important factor for both the employer and the employee. “A lot can be done to help guide patients to the best source of care,” he says. For instance, the program can be designed to make it easier to get routine maintenance care, but have a higher cost for going to the ER or out of network. He also suggests rewarding individuals who are trying to change — not necessarily the ones who are healthy but the ones who are working on their health. Employers can use biometric screening to identify patients who are at risk, and give incentives to lead healthier lives, such as covering more of the health insurance cost or having a differential co-pay.
The bottom line on coverage and benefits is, employee benefits are valuable as both an attraction and retention tool, and employees continue to view healthcare benefits as first and foremost in importance. And even the most cynical, numbers-crunching employer acknowledges the productivity impact of a healthy work force.
