Employee Engagement Key to Health Care Reform Compliance and Slower Cost Inflation
 

Employee Engagement Key to Health Care Reform Compliance and Slower Cost Inflation

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By now, most U.S. employers are well aware of the
Affordable Care Act (ACA) and its employer mandate,
which requires companies with at least 50 full-time
employees or full-time equivalents to offer affordable,
minimum value health insurance to their full-time
employees and their children up to age 26 or potentially
face a financial penalty. Most companies are also
aware that the penalty under the employer mandate
has been delayed until 2015.

What many employers may not realize is that the
associated penalty is unlikely to be delayed beyond
January 1, 2015. Even more important, the one-year
deferral of the penalty provisions of the employer
mandate does not change the core concept of
employer shared responsibility. In order to prepare
themselves for compliance with the employer mandate
and other ACA-related requirements, employers
need to act now. There is a wide range of employee
metrics that employers will need to track to support
compliance, which will necessitate the development of
a sophisticated reporting system that can track weekly
staff hours, benefits costs as a percentage of salary
and a variety of other labor metrics.

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    Employee Engagement Key to Health Care Reform Compliance and Slower Cost Inflation Employee Engagement Key to Health Care Reform Compliance and Slower Cost Inflation Document Transcript

    • Affordable Care Act Employee Engagement Key to Health Care Reform Compliance and Slower Cost Inflation By David Marini, ADP Strategic Advisory Services By now, most U.S. employers are well aware of the Affordable Care Act (ACA) and its employer mandate, which requires companies with at least 50 full-time employees or full-time equivalents to offer affordable, minimum value health insurance to their full-time employees and their children up to age 26 or potentially face a financial penalty. Most companies are also aware that the penalty under the employer mandate has been delayed until 2015. What many employers may not realize is that the associated penalty is unlikely to be delayed beyond January 1, 2015. Even more important, the one-year deferral of the penalty provisions of the employer mandate does not change the core concept of employer shared responsibility. In order to prepare themselves for compliance with the employer mandate and other ACA-related requirements, employers need to act now. There is a wide range of employee metrics that employers will need to track to support compliance, which will necessitate the development of a sophisticated reporting system that can track weekly staff hours, benefits costs as a percentage of salary and a variety of other labor metrics. Companies that wait until late 2014 may well find that it is too late to implement these systems and processes and could easily find themselves facing ACA-related penalties in 2015. When an employee’s healthcare premium exceeds 9.5% of the employee’s household income (the affordability threshold), companies with 50 or more full-time employees and full-time equivalents may face an annual penalty of $3,000 per full-time employee that enrolls for coverage through the Health Insurance Marketplace (aka Exchange) and receives a premium tax credit. (Several safe harbors are available to employers for purposes of assessing affordability.) In addition, employers with 50 or more full-time employees and full-time equivalents that do not offer coverage may face an annual penalty of $2,000 per full-time employee if one or more full-time employees receives a premium tax credit. Who would have thought that one of the most important components of managing ACA is employee engagement? Who would have thought that one of the most important components of managing the ACA is employee engagement? In preparation, most employers should take actions now to prepare for a more consumer-centric focus with a strong emphasis on employee engagement. Communications and education are critical components of engagement and the employers that start the process now should find themselves better prepared as the ACA requirements continue to be implemented. Engagement Is Key to Success Employers of all sizes need to carefully manage their healthcare benefits decisions over the next year. One of
    • the most overlooked strategies that can help support ACA compliance and reduce healthcare cost inflation over time is employee engagement. As the burden for healthcare decisions continues to shift to employees, employers have an opportunity to engage employees in the management of their own health, healthcare benefits and provider decisions. Not only does this help employers reduce their costs and protect the bottom line from unnecessary ACA penalties, it can also have numerous added benefits for the employee. For one, it allows an employee to take control of the employee’s health. Employees must be empowered to make personal healthcare choices through actionable information and tools, communication and education, and health and wellness programs. Health & Wellness Health and wellness programs are a popular strategy many companies are implementing to help offset the expense of health care without passing additional costs on to employees. In addition to improving employee health by encouraging healthier lifestyles, another reason to consider wellness programs is that the ACA increases the permitted wellness incentive to 30% of the cost of coverage for plan years beginning on or after January 1, 2014 (and to 50% for programs designed to prevent or reduce tobacco use). Beyond costs savings alone, studies repeatedly have shown that improving the health of the workforce leads to higher productivity. Healthcare Consumerism Putting your employees in charge of what they spend also helps keep costs down while empowering employees with greater ownership of their health. Many of your employees may not be aware that the cost of care can vary dramatically depending on geographic location and the specific healthcare provider. For example, a magnetic resonance imaging (MRI) scan can cost $1,200 at an out-patient facility, as compared to $2,000 at a local hospital. In fact, there can also be significant cost variation between the same kinds of providers in the same region. There are a variety of tools and resources available to help consumers compare providers based on cost and quality. Access to these tools can empower employees to make smarter decisions about preventive and elective care, which can translate into lower healthcare costs for employers. Another healthcare benefits strategy that more and more employers have been offering to slow long-term costs and drive employees to make smarter healthcare choices is consumer-directed health plans (CDHP), which are high-deductible health plans combined with a health savings account (HSA). Some employees today may be hesitant to participate in these plans because they are concerned about the potential burden of significant out-of-pocket costs. However, for many employees, these plans can help reduce costs in the form of lower monthly premiums. Cost calculators can also enable employees to determine what their likely healthcare costs will be for the coming year. They can then set aside funds in an HSA to cover those costs on a pre-tax basis. Compared to flexible spending accounts, which do not allow a permanent rollover, HSAs are a particularly valuable option because they allow employees to create a savings account that can accrue interest and grow over time (and into retirement) to cover healthcare costs. Beyond costs savings alone, studies repeatedly have shown that improving the health of the workforce leads to higher productivity. Communications and Engagement Outside of the specific healthcare benefits strategies employers choose to pursue to comply with Health Care Reform and help slow healthcare cost inflation, communication is a major key to success. Healthcare benefits are a confusing choice for many employees and, as consumers become more responsible for their healthcare choices, employee education and communication are becoming increasingly important. Employers who take responsibility to help employees understand how the various provisions of Health Care Reform can affect their own healthcare benefits should enable their employees to become more proactive healthcare consumers through educating their employees on various healthcare benefits options and by making available decision support tools. In order to successfully communicate with employees and drive engagement, employers need to consider the implications of today’s evolving workforce dynamics. More so than ever before, the current workforce is truly multi-generational. The health benefit messages that will resonate well with a middle-aged data analyst who keeps traditional hours in the office may not be appropriate for a part-time
    • sales associate who works from home. Employers must find a way to clearly articulate the benefits of participating in employee health insurance to people of all generations and backgrounds. The constant evolution of communications technology is driving the need for a multifaceted communications strategy. There are more communications channels available today than ever before. Health benefits communications need to match the right channel and messages with the right group of employees. This includes the utilization of all media channels— from traditional paper brochures to mobile media, video content and social media platforms. It can, for example, be easier to engage a millennial in the management of their health and health benefits decisions by utilizing new forms of media versus traditional communications channels. Some employers are doing this successfully, but there is clearly room for improvement. For example, the February 2013 study, Quantifying Great HCM* conducted , by the ADP Research Institute® among large and midsized companies found that fewer than one-third of companies surveyed currently provide employees with the ability to enroll in or make changes to employee benefits via mobile applications or devices such as smartphones, tablets and other portable devices. Employee Retention The flipside of evolving communications technology is that more and more employees are finding it difficult to disconnect from work. With an abundance of mobile technology at their fingertips, employees today are less anchored to their office, and some struggle with the increasingly blurred lines between work and home that prevent them from ever being truly “off the clock.” The recent economic downturn and fears over job security have further strained the relationship between employer and employee. Given these complexities, organizations must also implement policies that help prevent employee burnout and resignation resulting from communications overload. *Quantifying Great HCM, ADP Research Institute, February 2013 It is also worth noting that, when it comes to attracting and retaining talent, health benefits are an increasingly critical factor in the overall value proposition to a prospective or current employee. With an economic recovery underway, the war for talent continues, and health benefits remain one of the most valued components of a total compensation package. This will only become more pronounced as the ACA begins to draw a distinction between employers who offer competitive health benefits and those who do not. Measurement Research and analytics are another critical factor in driving employee engagement, enabling employers to refine their benefits strategies and tailor them to various segments of their employee population. Trend analyses, strategic insights and decision support tools are essential for short- and long-term benefits planning. Not only can these tools help employers lower overall costs by reducing the amount of time HR and benefits departments spend on administrative tasks, they can also enable employers to offer the benefits options and decision resource tools that are valued, and most used, by their employees. As employers have begun to learn, this is a very complex, multifaceted and constantly evolving regulatory landscape to navigate. To that end, it is important that employers continue to move forward with healthcare benefits planning and ACA compliance. With time on their side, employers can take the necessary steps to complete and test their human resources information, payroll and benefits administration systems so that they can be fully prepared come January 2015. There are many complexities and questions when it comes to Health Care Reform, and there is no silver bullet to containing healthcare costs and improving health outcomes. But as we look to the future, one thing is clear: employers who successfully engage their employees and encourage those employees to become better, more informed healthcare consumers will reap the benefits of long-term cost savings and a healthier, more satisfied and productive workforce. About the Author David Marini is a Division Vice President and managing director of ADP Strategic Advisory Services. ADP administers health care benefits to more than 10 million employees, and five million dependents. The company offers comprehensive solutions designed to help small, midsized and large businesses in the United States manage all the various compliance requirements under ACA. ADP is not a law firm and does not provide legal advice. ADP, Inc. 1 ADP Boulevard, Roseland, NJ 07068 adp.com The ADP logo, ADP, ADP Research Institute and In the Business of Your Success are registered trademarks of ADP, Inc. Copyright ©2013 ADP, Inc. Printed in the USA