When recyclers are asked what they are doing to respond to the recent Supreme Court decision on the Patient Protection and Affordable Care Act (PPACA), answers range from “I don’t know” to “We’ll let our insurance agent figure it out.” However, deadlines are approaching—some of them as soon as this month—that employers will need to meet.
“The picture right now is so unclear that I don’t know what to tell you,” says Sam Sinel, who, along with his brother Charles, owns Berger & Co. Recycling, Pawtucket, R.I. Celebrating its 100th year in business in 2012, Berger used to pay 100 percent of its workers’ individual health insurance once they were with the company for 90 days. The company also paid for a portion of insurance coverage for its employees’ families.
Like any other small business, Berger now needs to provide documentation of its benefits. Employers must begin preparing to report on their workers’ 2012 W-2 forms (the ones issued in January 2013) the aggregate cost of their employer-sponsored health insurance coverage. Some employers might have chosen to report those figures starting with their 2011 W-2 forms issued this past January. However, reporting this information is no longer optional.
Skyrocketing insurance costs have destroyed Berger & Co. Recycling’s approach to employee health care, Sinel says. “If we could get rid of the sick, the elderly and the poor, we’d have a good, affordable program,” he says. Sinel calls that his Ebenezer Scrooge plan.
Sinel says he is in favor of a health care program that covers everyone at a lower premium—even at a steady premium.
Today, Berger & Co. covers half of the cost of the insurance plan it offers to employees, with employees picking up the other half, though many of the company’s employees decline the insurance coverage, Sinel says. They tell him they can hardly make rent let alone afford health care, he explains.
“If I am forced to provide insurance, the money is going to come out of someone’s pocket,” Sinel says. “It is not up to me to tell an employee that I’m going to take so many dollars out of his pocket each pay.”
The net effect of the PPACA will be the same, Sinel says. “Either way, the worker will have less money at the end of the week, and so will I.”
Sinel points out a flaw of the current insurance system. “My premiums are based on too small a census—the number of employees I have,” he says.
Berger & Co. loses in several ways. For one, the company has a number of solid employees with 25 to 30 years of tenure. As the workers age, premiums increase. That makes it difficult for a young worker with a family to get onto the company policy at a reasonable rate. Older workers simply pay more.
In addition, an employee or an employee’s spouse with a history of cancer sends the premium base through the roof for all of the workers.
“Any of those things make my small group unattractive,” Sinel says. “If the pool were the whole state of Rhode Island, then the picture would be different,” he adds.
A Larger Pool
He may get some relief there. The PPACA requires states to set up health insurance exchanges by 2014. This, in effect, sets up a new marketplace from which individuals and small businesses can buy health coverage. The U.S. government will operate a federal exchange to serve workers in states that opt not to create their own exchanges by January 2014.
The PPACA also will limit the time before a new employee’s insurance becomes effective through employer-sponsored plans.
Duane DeVos, controller for Millennium Recycling, Sioux Falls, S.D., says Millennium, which employs nearly 90 people, makes a health care plan available to all its employees after they have worked a minimum of 90 days with the company. That waiting period is essential, DeVos says. “We have such a high turnover rate; 40 to 50 percent of the people leave after 10 to 20 days,” he says.
However, under the PPACA, a 90-day waiting period will be the maximum allowed. The law requires amending existing coverage to reduce waiting periods that are longer than 90 days.
Health Facts and Figures
According to the U.S. Chamber of Commerce, the United States currently spends some $2.6 trillion per year on health care, and more than 168 million Americans receive their health insurance through voluntary, employer-sponsored plans. Unless rising health care costs are addressed, the chamber says, simple calculations will lead companies and families to drop their coverage, increasing the number of Americans without health care insurance.
Further, only one in five small businesses expects to add employees in 2013, and, according to the U.S. Chamber of Commerce’s fifth quarterly small business survey, 82 percent of those polled say they think the national economy is on the wrong track.
By the U.S. Chamber of Commerce’s estimate, nearly 220,000 small businesses employing more than 26 million workers could be subject to the new employer mandate under the Affordable Care Act. As premiums rise, some businesses will decide that it makes sense to drop their coverage and pay the fine. The Joint Committee on Taxation estimates that employers will pay $52 billion over 10 years in penalties for noncompliance. The Congressional Budget Office (CBO) projects that 3 million fewer Americans will be covered through employer plans in 2019.
Even businesses with more than 50 employees that do offer health benefits will face a $3,000 fine for each full-time employee who opts out and receives a subsidy to purchase coverage through an exchange. Part-time employees defined as working 30 hours per week are taken into account as full-time equivalents under the law. The total employer penalty is capped at the maximum penalty amount the company would face if it did not offer any coverage at all. An employer plan must cover a specific set of services—to be determined by the government—and meet actuarial standards laid out in the law.
The U.S. Chamber of Commerce says it is working to reduce the burden of the new health care law. “We are promoting strategies and solutions to help businesses get health care costs under control, improve the quality of health care coverage and services, and expand meaningful coverage to the uninsured.”
Asked how Millennium will find its way through the thicket of new requirements put in place by the PPACA, DeVos says the company relies on its insurance agent to determine compliance requirements. His feeling that requirements will not vary that much from state to state also squares with that of other recyclers.
The PPACA requires that companies provide insurance coverage for full-time workers, effective 2014. The number of full-time employees will determine the cost of the employer mandate. The law defines full-time employees as those who work an average of 30 hours or more per week. However, it is unclear how this definition is measured and over what time period it is measured. In determining the number of full-time employees relative to the employer’s insurance, employers likely will be allowed to exclude full-time seasonal employees who work less than 120 days during the year.
Female employees get special notice under the PPACA. The law requires full coverage of women’s preventive services when performed by an in-network physician. Plans have to offer, without member cost-share, prenatal visits; additional gestational diabetes screening tests; lactation support, devices and counseling; and Federal Drug Administration-approved contraceptive methods, including prescribed drugs, implantable devices, sterilization procedures and patient education and counseling for women of reproductive age.
The U.S. Department of Health and Human Services (HHS) is charged with publishing annual reporting requirements for group health plans and insurers offering group and individual coverage. This goes beyond dollars and cents. The reports must provide information on health outcomes through the plan’s quality of care provisions; activities to prevent hospital readmissions; activities to improve patient safety and reduce medical errors; and wellness and health promotion activities.
At deadline, HHS has not yet issued the forms or details of what must be reported. Insurance companies should be able to handle this reporting responsibility for companies that are contracted with them, however.
Insurers also must provide a summary of benefits and coverage (SBC) document to all enrollees and potential enrollees at specific times, including during enrollment and re-enrollment. The new rules also require 60-days prior notice to enrollees when a health plan or issuer modifies the terms of the plan or coverage and the change affects a previously issued SBC. Per the final rule released by the U.S. Departments of Labor, HHS and Treasury Feb. 14, 2012, this requirement is effective for open enrollments that begin Sept. 23, 2012.
Debating the Mandate
The Institute of Scrap Recycling Industries (ISRI), Washington, D.C., has taken no position on the Supreme Court decision to uphold the PPACA. Scott Horne, director of federal policy for ISRI, says the trade association focuses on issues specific to the recycling industry rather than on broad issues such as the PPACA.
Billy Johnson, director of political and public affairs for ISRI, adds that it is important to note that the new insurance requirements vary from state to state, so a blanket response is not possible.
According to Eric Pritchard, a partner in the law firm of Kleinbard Bell & Brecker LLP, based in Philadelphia, “Opponents of the law, including 26 states and the National Federation of Independent Businesses, argued that the individual mandate was an unconstitutional attempt by Congress to compel citizens to purchase insurance.”
The Supreme Court agreed by a slim majority, as Pritchard points out, that the individual mandate is, in fact, unconstitutional under the Constitution’s Commerce Clause. However, the penalty assessed against those who failed to obtain the required insurance may reasonably be characterized as a tax, the levying of which does fall within Congress’ constitutional taxing powers, according to the Supreme Court.
“In this case, however,” Chief Justice John Roberts writes in delivering the majority opinion, “it is reasonable to construe what Congress has done as increasing taxes on those who have a certain amount of income but choose to go without health insurance. Such legislation is within Congress’ power to tax.
“The federal government does not have the power to order people to buy health insurance.…The federal government does have the power to impose a tax on those without health insurance," he later explains.
Roberts’ joining with the more liberal members of the Supreme Court (Justices Breyer, Ginsburg, Kagan and Sotomayor) regarding the legality of the mandate was unexpected, and unless this fall’s election brings a change in the political balance and a legislative repeal of the law, it will become effective in 2014.
In his blog, Pritchard also points out that employers “will have to wait and see whether the potentially significant increases in health care premiums forecasted by some economists will actually occur” and whether there will be options for employees to share some of the costs, perhaps through co-pays and their own contributions.
Beginning in 2014, employers with more than 50 employees will be required to offer coverage or they must pay a $2,000 fine per employee, even if just one employee receives a subsidy to purchase insurance through newly created state health insurance exchanges. A firm’s first 30 employees will be subtracted from this penalty payment calculation.
The United States Chamber of Commerce says the PPACA “forces small businesses to provide health insurance whether or not they can afford it.”
The health care law, the Chamber says, “expands health care coverage but fails to address skyrocketing health care costs” adding that in 2009, the federal government was already “on the hook” for $36.8 trillion in unfunded liabilities for Medicare and now a new trillion dollar entitlement has been created.
The U.S. Chamber of Commerce recommends business owners who opposed the PPACA consider taking several actions, including:
- Supporting the repeal of the most onerous provisions of the PPACA, including the new mandates and taxes on businesses and individuals;
- Pushing back through written comments on regulations implementing the act;
- Supporting the enactment of meaningful medical liability reform, supporting health courts, caps on punitive damages and the elimination of frivolous lawsuits;
- Expanding access to care, strengthening employer-sponsored health insurance by expanding its availability (and affordability) for every worker;
- Supporting consumer-focused health care, making account-based plans more attractive to small businesses by increasing flexibility and improving the transparency of cost and quality information; and
- Realigning reimbursement mechanisms to reward quality of care instead of quantity.
Not everyone—including some professionals in the health insurance industry—agree with all that the U.S. Chamber of Commerce suggests, however.
“We have always said the (PP)ACA did not go far enough to address the serious challenges facing our health care system,” says Mark Bertolini, president of Aetna Health Care, in a public statement, “and therefore we continue to push for broader reform.”
One of his proposals is for an entirely new health care payment system that pays doctors for keeping their patients healthy and not for ording more tests and treatments.
“We believe there is still time—if people can come together in a bi-partisan way—to improve quality and affordability,” Bertolini says. “That security is what Americans want and need.”
The authors are freelance writers based in Cleveland and Minneapolis, respectively. Harler can be reached at email@example.com.