Even though employers won't be required to offer health insurance under Obamacare for more than a year, many already are fretting about the uncertainties raised by the law.
Confusion over how the law will work and an evolving set of rules make it difficult to plan ahead, some employers say. Much of their misgiving centers on health care costs that might not be known for months.
"Some concerns stem from the general confusion and unknowns surrounding certain aspects of the law," said Francis X. Kelly III, CEO of Kelly & Associates Insurance Group Inc., a group insurance administrator, broker and consultant. "A lot of businesses are concerned about the bottom line net impact on their business."
Parts of the Affordable Care Act are already in place. Public and private exchanges, marketplaces where those without insurance can buy health plans, launched in October, though not without significant technical difficulties. Coverage will start Jan. 1, and all individuals will be required to have health insurance by March.
But the mandate requiring all employers with more than 50 full-time equivalent workers to offer affordable minimum coverage — or pay a penalty — won't take effect until Jan. 1, 2015. The Obama administration announced the one-year delay this summer.
Though the law aims to stabilize rates by spreading risks among a larger pool of people who have coverage, many in the business world worry that premiums will not cover claims and costs will rise, Kelly said.
Businesses are trying to assess "what it will cost if they don't provide coverage versus if they do," he said. "Those evaluations are taking place. There's a lot of questions about what will happen to group rates over time."
Some large employers, such as Walgreens, Home Depot and Trader Joe's, already have announced shifts in coverage, some choosing to move workers to exchanges.
Small employers, especially those with just a few workers, will be weighing costs of putting individuals into an individual market versus a group exchange. In some cases, Kelly said, "three individuals through an exchange might be cheaper than three individuals on a group plan."
For Calvert Mechanical Solutions, a commercial plumbing, heating and electrical contractor that always has offered health coverage, it's too soon to know what reform might mean for future benefits, said John C. Smyth, president of the 85-person company.
"The decisions that we face are all driven by what the potential costs could be, and none of us know that now," Smyth said. "There are no decisions that can be made or can even be contemplated until we know what the costs are."
Faced with greater-than-expected increases, companies might shift more costs to workers, eliminate coverage for dependents or pay employees a set amount to purchase a plan on an exchange.
Smyth worries that the generous plans Calvert Mechanical offers might be deemed "Cadillac" plans, triggering an excise tax starting in 2018.
"We might get taxed and have to do away with it, which is rather unfair," he said. "You have the ability to give that coverage in lieu of pay increases to an employee you want to keep around. We're in an industry that relies heavily on skilled tradesmen. You have to make sure you have a decent benefit package to attract and keep them. We're always competing for good labor."
Since she founded Owings Mills-based Restore Rehabilitation seven years ago, Pam Anthony has paid 60 percent to 70 percent of premiums for her 130 employees, mostly nurses who work as case managers for injured workers. The law essentially requires companies to cover 60 percent of workers' premiums or pay a penalty.
"I've chosen to do it, but I hate the fact that our government is telling me I have to do it," said Anthony, the company president. "I feel bad for businesses if they're only paying 20 or 30 percent, and now health care will double and eat up their bottom line."
Whether Restore Rehabilitation can maintain the same level of premium contribution or hire more workers will hinge on how sharply premiums increase, she said.
"It's concerning as a business owner," she said.
Walgreens plans to give all of its 160,000 employees a fixed amount to buy health insurance through a private exchange.
The drugstore chain said it will give workers as much next year to buy insurance as it paid this year for the cost of benefits. Employees will choose from options such as high-deductible health plans, a PPO and an HMO-style plan. The retailer expects the lower-premium plans, typically those with higher deductibles, to be an attractive option for the more than a third of its workforce that is under 30 and single.
Home improvement giant Home Depot plans to shift about 20,000 part-time employees who work less than 30 hours per week from company-sponsored medical plans to government-sponsored exchanges.
Grocer Trader Joe's also is ending health benefits for part-timers, who will each get $500 a year to purchase health care on a public exchange. The grocer estimates that nearly three-quarters of employees who work an average of 17.3 hours to 29.9 hours per week will pay less for comparable insurance by switching to a exchange-based plan.
One employee found her costs would decrease to $69 per month on an exchange, with a tax credit, the company said in a prepared statement.
"This crew member, a single mom with one child, making $18 an hour and working an average of 25 hours per week, is currently paying $166.50 per month for health coverage provided by Trader Joe's," the company said.
But since tax credits are based on household income, not an employee's income, the grocer said, "there could be crew members who may experience an increase in costs due to this change."
Despite concerns over both the looming excise tax and next year's predicted 5.2 percent increase in health care costs, many companies likely will hold off on making benefits changes for the next couple of years, according to an August survey by Towers Watson. Of 420 midsize and large companies surveyed, 82 percent said subsidized health care benefits are an important part of their benefits package for the coming year. Nearly all said they plan to keep their current medical plans for 2014 and 2015.
"Because companies view subsidized health benefits as core to the total rewards mix … we don't see employers wavering on that commitment," said Eileen Quenell, health and group benefits practice leader in Towers Watson's Washington office. "That said, employers are rethinking their dependent subsidy strategy, particularly for spouses that could obtain coverage elsewhere. More employers are looking to reduce the subsidy for spouses that have benefits with their own employers."
More than 60 percent of the survey respondents said the expected impact of the excise tax will shape their health care strategy over the next two years. Besides dropping coverage for spouses or charging a surcharge if they have access to another plan, employers might offer only "account-based" plans, those with high deductibles that are paired with health savings accounts. Some 85 percent of employers surveyed said account-based health plans will be part of the coverage offered by 2016.
Nearly three-quarters of companies surveyed said they are evaluating private exchanges as an option that would let them sponsor plans but outsource some management to an exchange operator.
Such "corporate exchange models" are gaining favor with employers, according to the Society for Human Resource Management. Under that model, a privately run exchange contracts rates for specific groups with insurers. Employers give their workers money to buy coverage, leaving the employee to pick a plan based on his or her needs and employer contribution.
When health reform legislation was first enacted, Samantha Kolbe sat down and read the entire law. And she's still reviewing the rules.
"There have been so many changes that keeping up with it is like jumping on a moving train, but you really have to," said Kolbe, human resources manager for Girl Scouts of Central Maryland.
With 60 employees, the organization is subject to the new regulations. Girl Scouts already pays a portion of the premiums and deductibles on insurance through a comprehensive benefit package, Kolbe said.
"We're already offering greater insurance than what is required and will continue to do so," she said.
At commercial real estate firm MacKenzie Co., the current health benefits package is expected to meet all requirements, said Lisa Weber, corporate controller for the 150-person firm.
"Right now, as long as the rates don't go sky high, we don't plan on doing anything [differently,]" Weber said. "We're more focused on keeping our staff, and, if it's still affordable, that we don't upset their lives any more than we have to. We don't want to lose any of our employees.
"We've been very fortunate that our costs haven't increased that much over the past years," she said. "But we really don't know what to expect."Copyright © 2015, The Baltimore Sun