Posts Tagged ‘PPACA’

It’s Easier (and Cheaper) to Stay Well than to Get Well


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The Patient Protection and Affordable Care Act (PPACA) is intended to make health insurance more affordable for Americans. Inherent in this Act is the requirement that preventive care be covered as it is well understood that prevention is key to better treatment options and outcomes and, basically, healthier people. Healthier people mean lower costs, right? Right!

The Act specifically requires that insurance companies and employers offer free preventive services to help people improve their health before they need costly interventions. Most agree that covering preventive health care services now that will eventually lead to lower health care costs over time is a good thing. However, we don’t think the writers of this Act are in on the dirty little secret known by HR professionals and benefits actuaries: providing preventive health care services without any penalty or incentive does not lead to sick or at risk people getting the early diagnosis or treatment they need. In fact, in our experience, when employees are provided with free health screenings, weight loss programs and fitness classes, the people who take advantage of them are those who are already in good health! Not surprisingly, the Act does not require that employees take advantage of preventive screenings, nor does it penalize employees for not taking advantage of them. Furthermore, by removing pre-existing condition limitations, the Act sends the message that it’s ok to not deal with your health until the symptoms are such that you have to.

The idea, though, is that these preventive screenings could lead to lowering health care costs and improving employee productivity. But just as people don’t eat brussels sprouts despite the numerous health benefits, many shy away from utilizing preventive care. And no amount of cajoling will change that. What could change this behavior? How about a “pocket book approach” where incentives and penalties that may reach 50%. That’s a significant cost or benefit, making an otherwise “voluntary” program something that “giveth or taketh away” a significant amount of money based on utilization.

As Michael Booth says in his article for the Denver Post, “Colorado has some pricey choices to make soon on how steep Obamacare penalties should be for smokers, and how sweet the rewards for the healthy and fit.” Andit’s not just in Colorado. Insurance commissions in all fifty states will be looking at how much insurers can increase or reduce rates based on the perceived health (or lifestyle) of the policy holder.

Do “lifestyle-based” incentives and penalties make sense? Perhaps they do. Over the past decade, preventive programs have become “all the rage”.  As Robert Cirkiel said: “Ten years ago companies were concerned that there was no discernible return on investment for preventive programs, today it is clear that there is a measurable and valuable ROI both from an employee productivity perspective and lowered health care costs.” And with the continuing concerns about escalating health care costs in the US, reducing cots or at least slowing the speed of ascent is important.

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To pay or not to pay: is that the question?


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In recent months there have been a number of lawsuits brought against companies by unpaid interns saying that the interns should have been paid for the work they performed. As Jane M. Von Bergen wrote in her February 24, 2013 article for the Philadelphia Inquirer: “In December, TV host Charlie Rose and his production company agreed to pay up to $250,000 to settle a 2007 wage-and-hour lawsuit brought by an unpaid intern.”

But there are voices to be heard on both sides of the paid vs. unpaid interns issue. Whether paid or not, an internship provides a unique opportunity for a student (or recent grad) to experience the real world of work, with all the “grown up” responsibilities that a job brings.
Continue reading “To pay or not to pay: is that the question?” »

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Affordable Care Act: “Shared Responsibility” is Just Around the Corner


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When the Affordable Care Act was passed in 2010, the rules requiring employers and individuals to have health insurance or pay a penalty commencing in 2014 may have seemed a long way off. Well 2014 is just around the corner and the laws are about to kick in. Rather than wait a few paragraphs before confusing everyone, why don’t I get right to it?

Large employers are required to offer their employees’ health insurance coverage or risk paying a penalty.

What is a large employer?

It is one that employs at least 50 “employee equivalents”. One way to be an “employee equivalent” is to work at least 30 hours per week. Another way would be to work less than 30 hours per week and be aggregated with others in the same situation. For example, two part timers working 15 hours per week each aggregate into one “employee equivalent”. Add up the number of employee equivalents in your organization. If the number is less than 50 there is no penalty for not offering health insurance and you can stop reading now.

If you are still reading this, your organization needs to offer health insurance or be subject to penalties. These penalties are not called penalties anymore; they have been immortalized by the regulators as “shared responsibility”. Just to make sure that you are still confused, the Supreme Court had already decided that they were not penalties but rather taxes that you pay for not buying something (an un-sales tax) but the regulators liked “shared responsibility” better.

You will need to offer the coverage to full time employees (30 hours per week or more) only. Once you’ve aggregated part timers into “employee equivalents” for determining the abovementioned “over 50 test” you no longer need to consider them and there is no penalty for not covering them.

What kind of coverage must you offer?

In order to avoid penalties, the organization must offer a comprehensive level of benefits to at least 95% of the full time workforce and pay for at least 60% of the actuarially derived cost (with the employee paying no more than 9.5% of the family’s combined W-2 pay). The comprehensive level of benefits is known as “Essential Health Benefits” (“EHB”), the definition of which can vary a bit by State but needless to say covers most everything you’d expect including hospitals, doctors, tests, drugs, etc. for all kinds of care.

If your plan does not meet the 95% test, the EHB test, the 60%/9.5% test, and at least one of your low paid full time employees receives subsidized coverage from an Exchange, your organization will be subject to a penalty based on Calculation Number One.

If your plan meets the 95% test, the EHB test, the 60%/9.5% test, and at least one of your low paid full time employees receives subsidized coverage from an Exchange, your organization will be subject to a penalty based on the lesser of Calculation Number One and Calculation Number Two below.

Calculation Number One: Multiply $2,000 by the total number of employees in excess of 30.

Calculation Number Two: Multiply $3,000 by the number of low paid employees who receive subsidized coverage from the Exchange.

If your plan meets the 95% test, the EHB test, the 60%/9.5% test, and no low paid full time employee receives subsidized coverage from an Exchange, your organization will not be subject to any penalties.

By the way, “low paid” is not so low – in 2014 it is about $88,000 for a family. This will encompass a lot of people. And, an employee that is offered coverage from an employer-based plan that passes all the tests and turns it down is subject to individual penalties but the employer is spared.

Employers are deciding who to cover, what to contribute, or whether to have a plan at all. These deliberations are known as “Pay or Play.” Some employers are considering meeting the requirements of the Act by giving stipends to employees and letting them buy coverage on their own from one of the Exchanges. Others will not offer coverage at all, and pay the penalties. For now, most seem to be content to offer an employer-based plan that complies with the Act and covers all full time employees. There is no right answer. Grahall can help you choose the right path for your organization.

This sidebar is just a brief summary. There is plenty of “fine print” not covered. Contact us to learn more.

Or access the IRS’ Q&A on Employer Shared Responsibility Provisions.


Filed under: Expert Perspective