Restaurateurs Unintended Consequences of the ACA

Transcription

Restaurateurs Unintended
Consequences of the ACA
The Public Exchanges, Private Exchanges, and
Restaurant Employees
December 2013 • Lockton Companies
With the delay of the employer health insurance mandate
MICHAEL KAHLEY
Senior Vice President
Lockton Dunning Benefits
214.720.5762
[email protected]
announced in early July 2013, most in the restaurant industry
celebrated with a sigh of relief or started jumping for joy.
The party lasted for a few days as the industry grappled
ABOUT LOCKTON
with the impact of the delay on the plan’s adjustments,
Lockton Companies ranks as the world’s largest
eligibility changes, employee contribution discussions, and
privately owned, independent insurance brokerage
the compliance and reporting requirements soon to be thrust
and employee benefit solutions to restaurant
firm, providing risk management, insurance,
organizations across the globe. Our foodservice
upon us. Most pushed the pause button on implementation
experts have considerable experience in servicing
clients in quick-service, casual dining, and upscale
and are enjoying the extra time to plan for the January 2015
segments and understand the day-to-day challenges
that restaurant companies encounter. Since our
implementation and are hoping that many of the ongoing
founding, Lockton has remained committed to
the restaurant industry and continues to monitor
questions will be cleared in the next 13 months.
ongoing trends and issues that impact your
business, both financially and operationally. We
With the daily news briefings, the struggling Healthcare.gov website
pride ourselves in providing leading-edge products
and services that enable you to make informed
rollout and the political climate, it was easy for stress to rebuild and
decisions and run your business effectively. It is that
that overwhelmed feeling to creep back into the process. Many have
commitment that allows us to do what we do best:
questions about the next steps and how to best prepare for the 2015
help make our clients’ businesses better.
employer mandate.
We think the following five steps will help you better understand how
to reset your planning process and comprehend the effect of recent
changes on your employer requirements in 2014.
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1
Begin communicating with your employees about their options in the marketplace.
Exchanges
Television, newspapers, and community organizations
eligible for the employer-based coverage. That’s the easy
are all avenues where your employees, both those
part that most of you accomplished.
currently insured and those who may be eligible for your
plan in 2015, are hearing about the possible solutions
The notice template also left room for an “optional”
section called the Employer Coverage Tool that many
available to them on the public health insurance
exchanges. Employees evaluating those options are likely
to find a complicated process as the
employers chose not to complete. The Employer
Coverage Tool needs to be provided for each employee
who requests one. This tool gives employees the
healthcare.gov website combines the availability of
information needed in order to qualify for a subsidy.
plan options, potential subsidies, and the integration
of several federal databases to coordinate enrollment.
While this tool may seem like a new burden simply
During the process, your employees could find
frustration when they are asked to complete information
from the October 1, 2013, exchange notification to help
qualify their eligibility for subsidy.
addressed with providing a copy of the completed
form, employers should seize on this opportunity
to track how many, and who, asks for a copy of the
Employer Coverage Tool. Since this is required to
receive a subsidy, employers can use the requests for the
Determine how many variable hour
form as an indication of just how many variable-hour
employees are seriously considering
employees are seriously considering coverage on the
coverage on the public exchange.
public exchange.
Consider individual private exchange
options . . . employers are exposed
Additionally, employers should consider individual
to no cost in these exchanges.
private exchange options available to help employees get
access to better networks, public subsidies, and more
plan options that are available on the public exchanges.
The October 1, 2013, exchange notification was
Employers are exposed to no cost in these exchanges,
designed to provide ample notice to your employees
about the employer’s intent to promote both qualifying
and affordable coverage and better define who might be
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and employees stand to gain considerably better benefit
plans in the process.
Why Communicate Exchanges To Your Employees?
Your communication strategy should allow you to better understand employee buying habits, and the confusion in
the marketplace gives employers a chance to show the value they have for quality employees by educating their
employees to the options available in the marketplace.
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2
Establish the measurement period for your variable-hour employees and begin
monitoring labor trends immediately.
Understanding the difference between full-time employees and their
variable-hour compatriots is the key to managing the health reform
Why Measure Employees Hours?
liability each organization faces in 2015.
Employers should consider how to measure employees
now since the employees on the payroll today are
For those employees hired with the expectation that they
the ones who may ultimately be eligible beginning in
will work in excess of 30 hours per week (or 130 hours
2015. Delays to establishing the measurement process
per month), qualifying and affordable benefits must be
increases the risk that more employees will meet
extended within 90 calendar days of their date of hire
the requirements and therefore, increase the cost of
compliance for employers.
or change in class where the hours expectation is met.
As full-time employees, this isn’t necessarily news since
most employers provide coverage to administrators,
If an employer utilizes the measurement period
managers, and shift leaders where this expectation is most
for 12 months, then the employee can stay on the
commonly applied.
plan for 12 months, even if his or her hours dip
Variable-Hour Employees
below the 30-hour average in the following year.
The real concern is for employees for whom there is no
Armed with this tool and looking out to January
immediate expectation of working in excess of 30 hours
2015, employers should consider how best to
per week (or 130 hours per month). These are termed
measure their employees’ hours in 2014. The
variable-hour employees, and regulatory guidance provides
averaging takes a look at the hours worked
that employers may evaluate the hours worked within this
over the entire 12-month process, so proper
class over a period of no more than 12 months, while
management of the hours should be able to
allowing for the completion of a calendar month for
control the labor pool to give the most productive
administrative purposes. So, employers can watch variable-
employees the hours and prevent anyone from
hour employees over a 12-month timeframe to see if their
just squeaking by at an average of 31 hours.
average hours worked falls above or below the statutory
30-hour-per-week requirement for extending coverage.
When an employee is determined to work the requisite
Control the labor pool to give
hours throughout the measurement period, they qualify
the most productive employees
to continue their coverage, subject to paying their portion
the hours and prevent anyone
of the premium and remaining an active employee, for a
from just squeaking by.
timeframe equal to the measurement period. This is called
the “stability period.”
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3
Model the increased costs of providing the coverage along with the increased
expenses of managing the new responsibilities under ACA.
Costs of Compliance and Health Insurance
Once you have evaluated the measurement period and its impact on the potential eligible population, modeling the
costs of compliance and the provision of qualifying and affordable health insurance becomes possible.

A typical quick-service restaurant can expect between two and four additional eligible employees to participate per
store at an average tax-adjusted employer cost of approximately $2,500 per employee per year.

Given the $2,500 employer premium obligation estimate and the usual turnover in the restaurant industry,
providing access to insurance tends to be the least expensive option for most employers.
Consideration should also be given to “who” actually qualifies for access to the insurance.
If a variable-hour employee has to work at least 12 consecutive months at an average of 30 hours per week or more
to get access to employer-provided coverage, then the employer should consider what plans and contributions should
provide the best benefits for long-term, valuable team members.
Restaurant employers consistently struggle to find quality, long-term
employees and the consistent employment experience that comes with
them. Training efforts, customer familiarity, and a consistent service
delivery tend to multiply the value of the hours these employees work.
In a sense, providing qualifying and affordable coverage to these
employees is a significant effort in employee retention and managing
other soft costs tied to turnover. For that reason, employers should
consider what benefits and premiums employees are exposed to in
the public exchange (where most will find access to coverage while in
their measurement period) to avoid any unintended consequences of
benefit eligibility.
Let’s take a hypothetical employee, Kayla, as an example of
the potential transitional impact of an employer’s plan provision
to highlight the problems and opportunities involved in your
plan offerings.
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Meet Kayla
24 years old, married, mom
Husband, contractor/student
If we carefully evaluate Kayla’s circumstances while she is in the
measurement period, we can see that she and her family are eligible for great
coverage at a reasonable premium in the public exchange. For $176, her
family gets a low out-of-pocket plan.
Server
Problems arrive when Kayla gets promoted to shift leader, which is a
Earns $16,560 ($11.50,
full‑time position.
120 hours/month)
Spends $176 per month in
exchange ($1.47 per hour)
Covers entire
household—$400 deductible,
80% coinsurance, $20 office
co-pay, $2,500 out-of-pocket
$400 deductible, 80%
With her promotion,
KAYLA PROMOTED TO SHIFT LEADER
she must be provided
Earns $23,490 ($14.50, 135 hours/month)
access to the employer’s
Spends $740 per month in employer plan
qualifying 60 percent
Covers entire household, $2,000 deductible,
actuarial-valued plan,
60% coinsurance, $25 office co-pay, $5,500 out-of-pocket
where the employer asks
coinsurance, $20 office co-
her to pay $90.00 per
pay, $2,500 out-of-pocket
month to participate for
Net pay: $10.03 per hour
Net pay: $8.26 per hour
employee-only coverage. Because Kayla also needs to provide coverage for
her spouse and children, she is required to pay $740 per month to add her
dependents. This plan and contribution philosophy meets the guidelines
provided within the ACA for employers, but it also disqualifies Kayla from
receiving the federal subsidies on the public exchange, where she had
coverage before her promotion.
So, in order for her to maintain the less expensive, better coverage from the
public exchange, Kayla has to quit her job.
This doesn’t serve Kayla through job security or stability, and it doesn’t serve
the employer either.
For this reason, employers should consider the plans and costs employees are
exposed to on the public exchange to better manage the expectations of their
valuable, long-term employees.
Employers should consider plans and costs employees are
exposed to the public exchange to manage expectations of
their valuable, long-term employees.
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Why Model Plans and Contributions?
Modeling different plans and contributions based on Kayla’s reality is an important step in managing the unintended
consequences of an employer’s ACA compliance strategy. Additionally, until an employer comes to understand how
the ACA will serve the employer and it’s valuable, long-term employees the employer will probably not be able to
communicate its intentions well and deliver a positive message to internal and external constituents.
4
Consider communication, managing eligibility, maximizing the enrollment process,
and collecting necessary data for government reporting to be part of the same
process.
Upcoming Regulations
The report must also include the identity and, for each
In early September 2013, the IRS issued proposed
calendar month, the number of full-time employees, as
regulations regarding the significant reporting
well as the months during which they had coverage.
obligations insurers and employers must meet under the
ACA, for 2015 and later years. The reporting will enable
Open Enrollment
the IRS to identify which individuals and employers
Your open enrollment process is an important place to begin
are complying with the law’s individual and employer
capturing the data that employers will need to comply with these
mandates, respectively, and to verify the legitimacy
reporting requirements. Employers need demographic data
of the premium subsidies supplied to individuals
not only for the employees and dependents on the plan,
purchasing coverage in the public health insurance
but also those employees and dependents that waive
exchanges, or “marketplaces.”
their coverage.
With regard to the employer mandate, employers subject
to the mandate must make calendar year-end filings with
Employers need demographic data not
the IRS indicating:
only for the employees and dependents

on the plan, but also those employees and
Whether they offered at least bare-bones coverage
dependents that waive their coverage.
(minimum essential coverage) to full-time
employees and children.

With the additional concern that many of these newly
The months during the calendar year for which
eligible employees have not had coverage before, how
coverage was available.

the plan options, costs, and enrollment process are
Each full-time employee’s share (by calendar month)
communicated will likely have to be very different from
of the lowest cost coverage option (employee-only
the historical paper and enrollment meeting process.
tier).
6
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Why Prepare in 2014?
Employees will need tools to help them determine what coverage is best for them and not just how the plans pay for certain
ailments or accidents. Potential enrollees will need to see the taxable effect of their elections on take-home pay in order to
better understand the impact of their choices. And, employers will need a consistent way to deliver the enrollment message
and communicate the employee selections to the appropriate insurance carrier partners.
How an employer is viewed by its employees for the solutions it offers for the ACA will be measured in how effectively it
communicates its intentions and the delivery of the promises made in the process.
5
Consider the changing marketplace for your ACA strategy.
When exchange options have been discussed, ACA
It is imperative that employers dictate
costs modeled, plan designs and contributions
what they are looking for specifically from
determined, and systems identified, employers are then
the insurance marketplace.
well equipped to evaluate the best carrier partners to
implement their strategy.
Historically, employers have asked insurance carriers
to bid on a replica of the benefits provided in the
previous plan year. The complexities of a newly
eligible population and the necessary interaction of the
insurance marketplace with technology have created a
change in the most effective way to source the insurance
for ACA solutions employers want to roll out to
their employees.
Considering participation requirements, lack of
credible claims experience on a currently uninsured
Take Time Now
The five considerations above will not produce a good
strategy on their own. Time and frank discussion about
employer objectives and impact on restaurant operations
will be important to making all of this work in harmony.
It takes time, it takes a willingness to tackle some tough
questions, and it takes a commitment to not doing
things the way they have always been done. At Lockton,
our hope is that employers will take advantage of the
gift provided in the delay of the employer mandate to
begin the process now.
population and the addition of benefit plan designs to
the conversation, it is imperative that employers dictate
specifically what they are looking for from the insurance
marketplace. Most of these partners have not been at
Why Consider Other Insurance Carriers and
Outsourcing Partners?
the table during the formation of your strategy, so direct
Being armed with what you need from the marketplace
requests to insurance carriers and potential outsourcing
and working with consultants who understand the
vendors who can meet program requirements and work
changing landscape of restaurant employee benefits can
through the unique challenges facing the restaurant
help employers find the marriage of a well-thought-out
strategy and a marketable insurance program.
industry are imperative.
7
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Our Mission
To be the worldwide value and service leader in
insurance brokerage, employee benefits, and risk management
Our Goal
To be the best place to do business and to work
www.lockton.com
© 2013 Lockton, Inc. All rights reserved.
Images © 2013 Thinkstock. All rights reserved.
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