Obamacare Aftermath Part II: Four (More) Recommendations for Reform

Oct 1, 2013

Despite the backdrop of a potential government shutdown, the new health care exchanges under President Barack Obama's health care reform are set to launch on October 1.

But it’s clear from news reports that employers need the administration to take an approach that recognizes the challenges associated with compliance of this immense and complex law. A Kaiser/NBC News poll found Americans remain deeply divided on the Affordable Care Act, with half confused about how it works or worried about how much it will cost them.

In a September 24 press release, U.S. Chamber executive vice president for Government Affairs Bruce Josten warned: “The administration and regulatory agencies must take every opportunity to reduce administrative burdens, offer guidance, preserve flexibility, and reduce premium increases, so that employers can continue to offer quality health care coverage to their employees.”

In our previous post, we looked at four ways to lessen Obamacare’s most onerous burdens on businesses and consumers.

Today, we look at four more.

Permit anyone to purchase catastrophic plan coverage: The health care law stipulates that health plans covering the essential health benefits may offer plans in the Bronze, Silver, Gold, and Platinum levels of coverage. In addition to these four levels of coverage, the law indicates that a catastrophic health plan can be offered to adults under age 30 and people over 30 who cannot find a plan with a premium that is 8% or less of their income. These catastrophic health plans cover essential health benefits and three primary care visits a year. These plans are likely to have lower premiums but higher cost-sharing expenses than other plans in the exchanges.

To better advance the goals of better health and access to affordable coverage, the Solutions Council proposes several recommendations to permit greater flexibility and facilitate greater innovation in plan design, benefit variation, and health and wellness programs.

One way to make the system more flexible would be to expand the availability of lower-cost catastrophic health plan coverage in a health insurance exchange to any individual, regardless of age, whose employer-sponsored coverage is not affordable.

Repeal FTEs from large employer determination. To determine whether a business is “an applicable large employer” which is subject to the employer mandate, employers must aggregate: (1) the number of full-time employees working 30 hours or more per week averaged over a month and (2) the total number of hours worked by part time employees to arrive at a monthly number of full-time-equivalent (FTE) employees. 

Employers must determine all employees’ hours of service each calendar month, calculate the number of FTEs per month, and finally average each month over a full calendar year to determine the employer’s status for the following year.

Businesses say this annual determination is administratively burdensome and costly, especially for those employers just above or below the 50 FTE employee threshold, who must closely monitor their status – most likely smaller businesses. Repealing the reference to FTE employees and simply requiring employers with 50 or more full-time employees to be defined as “applicable large employers” would simplify the administrative headaches for businesses.

Eliminate auto enrollment: Applicable large employers who employ 200 or more full-time employees (and offer a company health benefits plan) are required to automatically enroll new full-time employees in their lowest cost plan if the employee has not opted out of the coverage within his first 90 days.  

According to a recent IRS Report, the Department of Labor (DOL) has determined that implementation of automatic enrollment will not be ready to take effect by January 2014, and DOL estimates that automatic enrollment will not be enforced until at least 2015.

Businesses say auto-enrollment has the potential to lead to lower-quality healthcare for all their employees. According to a survey from the Society for Human Resource Management (SHRM), 65% of respondents (business owners that would be required to auto-enroll their employees) said that they would use their lowest-cost plan as the default plan. More troubling, however, is that 10% of respondents said they will add a new lower-cost plan to use as a default plan, and 3% said they will change to a new lower-cost plan to use for all employees.

Reps. Richard Hudson (R-NC) and Robert Pittenger (R-NC) introduced legislation in March to repeal auto-enrollment in Obamacare. The Auto Enroll Repeal Act has been referred to a House subcommittee, but no hearings have been held.

Increase the small business tax credit: A much-touted part of the health care law centers around tax credits designed to help small businesses offer health insurance to their employees. Small businesses with no more than 25 employees and with average annual wages of less than $50,000 may receive a credit for up to 35% of what they contribute towards employee premiums. (This small business health insurance tax credit has been available since shortly after the health reform law was signed 2010.)

Beginning in 2014, the tax credit increases to a maximum of 50% of the amount small businesses contribute towards employees’ monthly premiums—if they participate in the small business exchanges being set up by the states.

By all accounts, the small business tax credits have been woefully underutilized. Initially, it was expected that the credits would cost $2 billion in 2010, but in May 2012 the U.S. Government Accountability Office reported that only $468 million in tax credits were claimed by 170,300 small businesses covering 770,000 workers. That’s just over 10% of the 1.4 million businesses believed to be the minimum number eligible. By some estimates, as many as 4 million businesses might qualify for the credit, according to the GAO report.

Part of the problem is that small business owners must complete a series of complicated tests to determine the actual amount of the credit that they may be eligible to receive. Very few small firms receive the full credit (only firms with 10 employees or less). For firms with 11-25 employees, the credit is reduced per employee.

Only firms who pay their workers an average of $25,000 or less are eligible for the full credit. The credit is reduced as the average wage goes up, stopping when it reaches $50,000. Only firms covering 50% or more of insurance costs will be eligible.

And the credit is only available until 2016, but health care costs will continue to increase well beyond that. There is no transition after the cutoff, so for some firms costs could double the next year, or they may be forced to drop a benefit that employees had relied upon or grown accustomed to.

The U.S. Chamber’s Health Care Solutions Council recently released a report outlining additional recommendations for advancing real health care reform. The report suggests ways to leverage the successes in the employer-sponsored health care system, and proposes changes.

Find out if your business is Obamacare compliant at this new U.S. Chamber resource page

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