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Published November 22, 2013, 05:36 PM

Health Care Reform 101 for business: What you need to know

Misinformation, delays have left many parties confused about how they will be affected
Just months before implementation of the largest health care overhaul in recent U.S. history, health care experts in the region say they were telling business owners that the Affordable Care Act was, in fact, the law.

By: Kris Bevill, Forum News Service, INFORUM

Just months before implementation of the largest health care overhaul in recent U.S. history, health care experts in the region say they were telling business owners that the Affordable Care Act was, in fact, the law.

While penalties for large businesses have been delayed until 2015 and the roll-out of public marketplaces has been bumpy at best, the law will take effect Jan. 1 as planned, requiring all people to carry health insurance.

Welcome to the changing world of health insurance policy, where misinformation, delays and short timelines to react have left many parties confused about how they will be affected and what they need to do to comply with the new regulations.

And while there are some blanket answers for questions on insurance reform, many more issues are business-specific, making the process of disseminating information that much more difficult.

The good news, experts say, is multiple resources are available to help businesses devise a strategy to comply, and time remains to put a plan into action.

Following is a look at common questions and concerns for businesses as they address health care policy over the coming years.

Small businesses

The size of a business makes a difference as to when and how health care reform will impact it. Businesses with fewer than 50 full-time equivalent employees are classified as small businesses and have requirements separate from large businesses. But what qualifies as “full-time equivalent” and where do part-time employees factor into the equation?

Under the ACA, a full-time equivalent employee is defined as one who works 30 hours per week or an average of 130 hours per month over the course of a year. Hours worked by part-time employees throughout the year must be tallied and divided by 120 to determine the number of full-time equivalent workers employed at a business.

If the combined total of full-time and part-time employees is fewer than 50 full-time equivalents, the business qualifies as a small business. Small businesses are not required to provide health coverage for their employees. However, businesses with existing health plans that want to continue providing coverage must either apply to have their plans grandfathered into the new program, choose a new plan from a marketplace, or drop group coverage entirely and direct employees to the marketplace to purchase their own insurance.

Mike Potts, director of employer consulting and wellness services at Blue Cross Blue Shield of North Dakota, says 80 percent of the 5,000 large and small employers currently offering BCBS plans have elected to keep their current policies, although he believes many small businesses are taking a wait-and-see approach to the federal marketplace before deciding whether to drop coverage or maintain a company plan in the coming years.

Large businesses

Large businesses are required to offer affordable health insurance to full-time employees and their dependents beginning in 2015 or be subject to penalties. To be deemed “affordable,” the employee’s insurance premium for single coverage must be no more than 9.5 percent of his or her income, and the insurance policy must meet the 60 percent actuarial value threshold rule, meaning the employer plan must cover at least 60 percent of the cost of the employee’s benefits.

“If (the business) makes it past both of those tests, they’re fine,” Ruth Krystopolski, president of Sanford Health Plan, says. “If they fail on either of those tests, then they need to make a decision as to whether they’re going to do something to pass those tests or if they’re going to be willing to pay the penalty in 2015.”

Penalties for large businesses were originally scheduled to kick in Jan. 1, but now that they have been pushed to 2015, large businesses will likely use the coming year to evaluate their options and determine a course of action.

Labor pool limits options

With historically low unemployment throughout the Northern Plains, most health insurance experts believe companies will continue to provide health plans for their employees to attract and retain workers.

“Maybe that doesn’t matter in some businesses, but in a tight employment market I think you need to factor in the cost and retention of employees if you’re a company that doesn’t offer health insurance,” Krystopolski said.

How much will it cost?

The Affordable Care Act’s full financial implication on businesses will be as varied as the types of businesses and their employees, but a few built-in fees will apply to every policy:

• The Patient Centered Outcomes Research Institute fee will be $2 per person covered under the plan beginning in 2014. So, if an employee insures a family of four under their policy, the fee will total $8.

• The transitional reinsurance fee, which is collected to issue payments to insurers that cover high-risk individuals on the public marketplace, will total $63 per person in 2014.

Fully insured plans will be assessed an additional health insurance industry fee, which can be expected to increase the cost of insurance premiums by about 2 percent, according to Ross Manson, principal at Eide Bailly. He added that while the ACA does contain some set increases, it would be difficult for businesses to fully attribute increased health plan costs to the new law.

“I think that would be inaccurate because a lot of it comes back to their particular utilization,” he said.

Large businesses that choose to pay rather than play in 2015 can expect a $2,000 fine per employee after the first 30 employees for each month they don’t offer health insurance. Large businesses that offer insurance that is not considered affordable or doesn’t meet the minimum coverage threshold will be assessed a $3,000 fine per employee.

While some businesses may believe it is less expensive to take the penalty, Krystopolski points out that businesses receive tax incentives for paying a portion of insurance premiums, but they receive nothing if they send employees to the public exchange.

“You need to add all of those things together before you know where you would land as a business,” she said.

Insurance premium changes under the ACA will vary depending on the age and health of a business’s workers. A business with older, sicker workers may see its premiums go down in 2014, whereas younger companies with employees who rarely use their insurance will likely be subject to an increase. Manson said one of his clients expects a 1 percent premium increase; another client will incur a 30 percent increase.

What happens next?

Businesses that haven’t devised a strategy aren’t out of time, but experts encourage them to begin evaluating their situation now.

“Step back, look at your specific situation and then make an informed decision,” Manson said. “We’ve helped many clients establish a starting point.”

Eide Bailly has developed an analytic tool for this purpose. The tool can be used to evaluate a number of criteria, including identifying the number of full-time equivalent employees and how much that number has changed over the course of a year.

Manson also said businesses may consider adding wellness programs that encourage employees to take part in activities that could reduce their use of health insurance, he said.

Organizations such as BCBS and Sanford Health have experts well-versed on the new regulations who can help.

“If we can’t find the answers, we’ll go to whoever it is who needs to find the answers for them,” Krystopolski said. “We are here to help businesses of all sizes navigate through this change.”

Looking ahead, small businesses and individuals are expected to feel the effects of the ACA early in 2014. Large businesses also may begin to make changes as they prepare for 2015, but the full impacts of the law are not expected to be realized until 2016 and beyond.

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