Controlled chaos and business-as-usual appear to be the prevailing sentiments among industry experts when discussing the much-anticipated opening day of the public health care exchanges.
"When you implement large technology, things aren't perfect on day one," says John Kelly, principal business adviser with Edifecs, an exchange technology provider. "The fact that the requirements that the feds are spitting out were coming in almost in real-time as people were designing and building [the exchanges]... there's a lot that is going to be bare bones about the initial go-live."
Many also believe the public exchange launch will, for now, have little effect on employer-sponsored health care coverage. "I don't think [employers] are losing sleep over it right now," says Don Garlitz, executive director of exchange solutions for bSwift, the technology vendor behind Vermont's SHOP exchange. "My sense is that they're in a little bit of ... wait-and-see mode."
Karen McLeese, vice president of regulatory affairs at CBIZ Benefits & Insurance Services concurs. "Initially, there won't likely be significant impact on employer-provided coverage," she says. "Employers that have offered coverage will continue to offer coverage, at least for the near term, and maybe for the longer term."
Nevertheless, the public exchanges have brought several issues to the forefront for employers and brokers alike and they are bracing for challenges over the coming months. As the public exchange launch commences, here's what we know for sure:
By Oct. 1, employers are to have provided employees with written notice about the public exchanges and employees' potential eligibility for federal subsidies. While the U.S. Department of Labor says employers won't be fined for not providing these, McLeese advises caution. "There still could be some arguments that employees weren't given - not even from an Affordable Care Act point of view, but maybe from an ERISA point of view - all the accurate information that they needed," she says.
She maintains employers should make certain that all information contained in the marketplace notice is accurate and that they "don't bind themselves to something that they may change in the future."
Conversely, she says, once an employer does know with certainty what the plan design is going to look like next year — whether it will meet minimum value and affordability standards — that information should be communicated.
Steve Wojcik, vice president of public policy with the National Business Group on Health, says large employers are concerned about the communication aspect of the public exchanges, "especially since they know that they're offering coverage that disqualifies their employees from any kind of federal assistance or coverage on the exchange."
The launch of the public exchanges presents an opportunity for employers to reinforce the value of the benefits they're offering employees, says Mike Thompson, principal and NY-metro health care practice leader for PricewaterhouseCoopers' human resource services practice. Still, the DOL's model exchange notice is simply "the minimum requirement, not probably what [employers] needed to do ... more importantly, [employers] need to customize the communications around how their specific employees are impacted," he says.
While the majority of people at companies with more than 50 employees will continue to get their health coverage through their employers, it's still uncertain how the SHOP exchanges — created for small employers with fewer than 50 full-time equivalent employees — will play out, especially given the recent federal delay to Nov. 1.
"The jury is still out on whether what they can buy through the marketplace is going to be more attractive than what they can buy in the private sector," McLeese says. "If it works out to be that what's offered through the SHOP is more safety-net in nature, and if the employer is interested in continuing to offer coverage, I think the private sector market will likely be attractive. Conversely, if what's offered through the public marketplace works out to be something attractive, then the fact that the employees might have more choice might make that an attractive option."
Options on the SHOP exchanges vary by state and while most states will only have one option available this year, it's expected multiple plans will be available in 2015. "There are definitely some plans that we're dealing with that have not looked at this as onerous government intervention," Kelly says. "They've looked at it as a real opportunity to move into retail health care."
The challenge with the SHOP exchanges, says Garlitz, is that a lot remains unknown about how plans will be rated.
"When a small employer that's eligible for the SHOP exchange goes out and looks at what it will cost to put his people on a particular plan or set of plans, how will that price compare with the price that it would cost those employees to buy individual coverage on their own?" he says. "That's the open question in all 50 states right now. Although, a lot of the preliminary data I've seen in several states show that it's likely that individual products are going to come back less expensive than group products."
Employer mandate delay
The employer mandate delay was widely touted as providing employers with much-needed breathing room to prepare for the following reporting requirements:
* Whether the plan offers minimum essential coverage, which individuals must maintain in order to avoid a financial penalty; and
* For large employers, whether the health plan meets minimum value and affordability standards.
The proposed Internal Revenue Service regulations regarding the reporting requirements provide for a testing period employers can use to determine whether the employee will qualify as full-time and thus require coverage.
McLeese cautions employers not to take a too laissez-faire approach to the delay because they will need to start their measurement periods within months.
"Let's assume they have a calendar-year plan and they want to use a measurement period of 12 months, but they want some time between the calendar year and the end of the measurement period to kind of figure things out, they probably would want to pick a measurement period of [approximately] November through October. And then have November and December of 2014 to figure it out, so to speak, and allow people to enroll," she says.
Chris Ryan, vice president, strategic advisory services with ADP, also cautions employers about not being lulled into complacency by the delay. "The IRS had provided a six-month safe harbor for companies that were using a 2013 look-back period, where they said that you could establish a one-year look-back period. But for the purposes of the first year, you could actually run a six-month look-back period," he says. "We don't think that safe harbor is going to be provided next year."
Several large employers — including Time Warner, GE, IBM — have recently announced plans to move retirees to private health care exchanges. Retiree coverage is expensive and represents a huge, unfunded liability for many employers. "They've got to find a way to affordably allow their retirees to get health care," says David Embry, president of SelectQuote Benefit Solutions, an exchange provider.
Interest in private exchanges for retirees "has already been very clear," says Christi Wise, senior vice president, health solutions product management with Fidelity Investments, which announced in February it was partnering with private exchange provider Extend Health to give its employer-clients this option for retirees.
The launch of the public exchanges has fuelled interest in private options, says Alan Cohen, chief strategy officer with Liazon, which runs the Bright Choices private exchange. "We certainly think that a proliferation of the public exchanges will lead to much higher levels of adoption of not just public but also private options," he says.
Still, bSwift's Garlitz expects the adoption rate of private exchanges to be somewhat modest this year, aside from retirees.
Other ACA notices
And while all eyes are on the launch of the public exchanges, there remain several important compliance deadlines in 2014.
* Summary of Benefits Coverage. While employers had to issue this summary to employees for the first time last year, McLeese says the SBC for 2014 has to indicate whether the plan meets minimum value standards.
* PCORI fees. The first round of Patient-Centered Outcome Research Institute fees were due in July, for plans that ended in October, November or December 2012. The amount is $1 for each individual covered under the group health plan. The next round will be due July 2014, for all plan years ending in 2013 and the fee increases to $2 per covered individual.
* Transitional reinsurance fee. This fee, designed to help stabilize the individual health insurance market, will be $63 per covered life in the plan in 2014.
Regardless of whether the public exchanges get off to a rocky start on Oct. 1, "I would suggest that people start preparing for success because, if it's successful, that's when their world is going to get turned upside down," says Kelly. "The whole point of ACA, I see, was not to build exchanges. In fact, the legislation doesn't explicitly say, 'Let's build exchanges.' It says, 'Let's create a retail market for health care.'"
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