Sudden Impact

Sudden Impact

Coping with health care reform's provisions and ever-changing rules

On March 24, 2010, the day after President Obama signed sweeping health care reform legislation into law, Robert T. Kakuk's phone didn't stop ringing.

Employees were eager to add their adult children under the age of 26 back on to their health insurance policy, one provision of the Affordable Care Act, explains Kakuk, director of total compensation and human resources information systems at Western Michigan University, which supports approximately 2,800 benefits-eligible employees.

For years, WMU allowed employees to keep their adult children on their health plan until they reached their 26th birthday as long as they were enrolled in school full time. Last year, officials had lowered the age to 25, changing it back after the bill passed. Under the new health care law, adult children can stay on their parent's health plan until the age of 26, whether or not they're full-time students.

"In my view, that actually has been an equalizer," Kakuk says of the law, explaining that since adult dependent children may be enrolled in one semester but not the next, it was often difficult to verify their student status. "On one hand, we really want to make our coverage available to those who are full-time students. [But] a dependent's age is easier to administer."

Nothing on college campuses will spark a fierce debate more than health care reform. Many believe the law's intent is good--more Americans will now have health insurance. On the flip side, some say the law is off balance because it requires institutions to deliver more health care to more people without providing financial relief. Regardless of their opinions, officials at many colleges and universities are sitting on the sidelines, not making any major changes to their health plans because they expect many aspects of the law to be reviewed, revised, or repealed.

The new law may require colleges and universities to adopt a more progressive, innovative approach.

At WMU, Kakuk says 99 adult children were added back on to employees' health plans. Since the plan never contained clauses for pre-existing conditions, which has since been outlawed, no changes were needed. The same applies to the bill's exclusion of lifetime dollar limits. The plan's limits were already high - up to $5 million per member--which no one had ever reached.

So far, he says only two minor changes need to be addressed: waiving deductibles for preventive services like colonoscopies and, unless a doctor writes a prescription, eliminating over-the-counter drugs, such as aspirin, as reimbursable expenses under health care flexible spending accounts and health savings accounts.

"I really haven't seen adverse outcomes with health care reform," he says, adding that HR built in a 2.2 percent increase for health care costs in its 2011 budget. "I don't have anything keeping me up at night."

Neither does Janis Townsend, HR director at the University of Dallas, which supports about 500 benefits-eligible employees.

The university is part of CARES, a health care consortium that includes Texas Christian University and Austin College. She says the consortium hasn't made changes solely based on the new law. For example, it recently selected a new insurance carrier "based on what we know today," she says.

Last year, the consortium added a prevention plan as a cost control strategy. Each year, a third-party vendor administers free, onsite biometric screenings, which include a full blood panel test. All results are kept confidential between employees and the vendor. Staff can also store their health records on the vendor's website and are contacted by a nurse if they skip important, routine exams.

The consortium's focus, she says, is not on what may happen with health care reform over the next several years, but on minimizing claims by helping employees develop a healthy lifestyle.

"I'm still at the 'Let's wait and see how this comes out [stage]'," she says. "Organizations spend a great deal of money analyzing how it impacts them. Then Congress comes in and dismantles it, rescinds it, does all kinds of things, and you don't end up with what initially came out. My tendency is to listen, learn as much as I can. ... Things may change."

Moving Target

The health care reform law is a massive, confusing piece of legislation. Its provisions will be introduced throughout 2018, explains David Ratcliffe, a principal in Mercer's health and benefits business in Washington, DC.

For example, some provisions for this and coming years include:

2011

  • Part D premium increase for high-income individuals
  • No health FSA/HRA/HAS reimbursements for non-prescribed medications (limits reimbursements to prescribed drugs and insulin)

2012

  • Group health plan fees begin. Pay approximately $1 per covered life in first year; $2 for the second year; then a formula thereafter
  • Distribute standardized benefit summaries to plan participants
  • Offer 60-day advance notice of plan design changes

2013

  • Higher Medicare payroll tax on wages exceeding $200,000 per individual; $250,000 per couple
  • New tax on net investment income for taxpayers with incomes exceeding $200,000 per individual; $250,000 per couple
  • Form W-2 reporting for 2012 health coverage

2014

  • Health insurance exchanges that facilitate purchase of insurance by individuals and small groups
  • No waiting period over 90 days
  • Shared responsibility penalties

2018

  • Excise tax on high cost, or Cadillac, plans

One issue institutional leaders have been grappling with is grandfather status. If they didn't make any changes to their school's heath plan--beyond a $5 increase in copay - after the health reform bill was enacted (March 23, 2010), they maintained their grandfather status. Some schools opted to keep their status even though it meant paying more for health care costs. The advantages, says Ratcliffe, is that they don't have to conform to certain aspects of health care reform, such as offering preventive care.

Another factor is even more difficult to predict or manage: details keep changing as federal regulations are issued.

"We're constantly getting clarifications on how things will work," he says, adding that the penalties for noncompliance are very high, possibly $100 a day per employee. "I don't think any employer has done a whole lot yet. They're in the discovery phase, [asking] what is the financial projected impact to us."

Still, he believes the new law will require colleges and universities to adopt a more progressive, innovative approach. As an example, he points to employers in the private sector who are partnering with nearby hospitals to better manage severe, chronic health conditions.

Age 26 Conundrum

While many parents applaud the "Age 26" provision, especially those with teenagers soon heading off to college, some may be in for a big surprise.

"Ninety-seven percent of schools don't accept private health insurance," points out Bryan A. Liang, executive director at the Institute of Health Law Studies in San Diego. "They only accept their own crappy insurance."

He explains that schools make money selling health care plans to students. But the plans are skimpy, he says, pointing specifically to medical loss ratios - the amount of revenues from health insurance premiums dedicated to medical services. The standard rule under the new federal legislation is that 80 to 85 percent must be spent on patient services. Since student plans are exempt, the amount drops to as low as 10 percent, creating massive profits for schools.

To make matters worse, he says if students aren't covered by their school's plan, many campus clinics will insist upon cash payments and can charge up to 500 percent more for onsite services.

The "Age 26" [provision] is pretty meaningless," says Liang. "They're excluding private insurance that would cover these [students] for a lot of things they need."

However, things may be looking up in the area of student health coverage. The Department of Health and Human Services is proposing regulations that would ensure college- and university-offered student health plans include consumer protections created by the Affordable Care Act. The new rules are, in part, a response to a request from the American Council on Education, the American College Health Association, and other organizations for guidance to help colleges navigate the changes in health care and health insurance.

These regulations would go into effect Jan. 1, 2012, and define college plans as individual health insurance coverage--meaning they would have the same protections the new law gives to other individual plans, including no lifetime limits on coverage, no arbitrary rescissions on coverage, and no exclusions for pre-existing conditions.

Steven Bloom, director of government relations for ACE, said in a statement, "We're pleased that HHS listened to the unique concerns of higher education and the needs of students, and that they responded to our request for guidance so campuses can continue to offer affordable, high-quality student health plans." He did, however, express concern that the proposed regulations don't address how institutions that self-insure their student health plans should handle those plans under ACA.

While Liang believes the proposed regulations are a step in the right direction, he says more details are needed, such as how they will compare to other plans or be regulated in the future and also if students will be subject to implementation delays.

Coaches and Reimbursements

Considering the opposition to health care reform by many members of Congress, it may well be likely to change. So many schools are applying a common sense approach to rising health care costs--growing a healthy workforce.

Although American University (D.C.) offers a robust wellness program, the school plans on linking the program to its medical plan by providing incentives for employees who participate in onsite health assessments, such as lower copays or deductibles, says Ann Joiner, senior director of employee benefits at the school, which supports an estimated 2,000 benefits-eligible employees.

American recently piloted a coaching program where a coach met face-to-face with roughly 50 employees over a six-month period to help them establish and accomplish fitness health goals. However, Joiner believes more employees may have taken advantage of the benefit if they didn't have to walk across campus to attend coaching sessions. So HR may soon offer health coaching telephonic services.

Meanwhile, the university implemented the "Age 26" rule, which may increase its overall health care costs by one percent since its two health plans already covered dependent children up to age 23 and 25. Officials are also exploring a partnership with an external vendor for online benefits enrollment and employee communication to comply with the law's auto enrollment provision. If employees, or their spouses or family members, who formerly opted out of the school's health plan now want to participate, she says it could cost the school up to an additional $3 million.

However, not all provisions of the health care reform law are costly. One program actually gives money back.

The Early Retiree Reinsurance Program targets employees who retire before they are eligible for Medicare, no longer have employer-sponsored coverage, and have high medical bills and even higher premiums. Joiner says the program set up a $5 billion fund--which sunsets in 2014 or whenever the money runs out--to reimburse employers 100 percent for claims that fall between $15,000 and $90,000, says Joiner. Funds can also be used to provide financial relief to retirees and their families.

"We're one of the few employers that actually applied for this and have been approved," she says, adding that the university will probably submit one or two claims.

Roller Coaster Ride

Losing grandfather status for higher ed institutions is a little like walking home in the dark. While officials know the path they must follow, they could still trip and fall when portions of the law change.

At Maricopa County Community College District in Phoenix, Ariz., two of the law's provisions--the "Age 26" rule and offering preventive care--will add almost four percent to the school's annual premium, says Diane Johns, director of compensation. At this point, she's unsure how much, if any, of the additional costs will be passed on to its 4,300 benefits-eligible employees.

In July, the district will also lose its grandfather status. Since its premiums will increase by 26 percent, or $10 million, she says the district was forced to change some aspects of its health plan, including increasing copays for emergency room visits from $50 to $150.

Then there's the individual mandate, perhaps the most controversial of all provisions. Everyone must be covered by a health plan by 2014 or institutions will face a penalty. The community college currently pays between $8,000 to $9,000 per employee for health care. But by 2014, Johns believes inflation will push that amount well past $9,000. Yet, the federal penalty averages out to approximately $3,000 per employee.

It doesn't take a crystal ball to determine what could happen next. Johns says offering employees lump sums of cash to find and manage their own health care is a strong possibility.

Unfortunately, adding incentive wellness programs is not. "I would like to be able to pay more of an employee's premium if they could show they kept their cholesterol, blood pressure, and weight within standard or national norms or are making efforts to move in that direction," she says. "We talked about giving employees $100 a year for doing wellness types of activities, but found the cost would be $600,000."

Instead, each campus' wellness coordinator educates employees on ways to better manage illness or a medical condition based on medical claims data provided by HR's benefits team. Right now, Johns says the most expensive claims involve heart problems, diabetes, and cancer, which may soon be trumped by a few transplants sitting in the wings.

Since health issues tend to increase as people age, colleges and universities are more vulnerable to rising premiums. They tend to have a more mature employee population, she says, adding that the average employee age at MCCCD is 48. "We're all going to watch what happens with this legislation because it's going to be very fluid for the next couple of years," says Johns. "It's going to bring job security to a lot of us."

Carol Patton is a Las Vegas-based writer and the Human Resources columnist for University Business.


Advertisement