With Obamacare now a reality, employers choose strategies
BY KARA SPAK Staff Reporterfirstname.lastname@example.org November 11, 2012 5:04PM
President Barack Obama reaches for a pen to sign the health-care bill in March 2010 at the White House. His re-election has guaranteed the survival of Obamacare. | Charles Dharapak~AP file photo
Updated: December 13, 2012 10:19AM
Love it or hate it, President Barack Obama’s re-election Tuesday cleared the last major hurdle toward implementing the Patient Protection and Affordable Care Act.
Businesses are being forced to take a fast and hard look at how to handle the shift in health-care benefits and potential costs that are part of the law that goes fully into effect in 14 months.
“This is here to stay,” said J.D. Piro, a senior vice president at Aon Hewitt who leads the company’s health law consulting group. “I’ve been saying for a couple of years this is by and large an entitlement program, and entitlement programs are very rarely repealed. They can be amended or changed around the edges. But it hasn’t been overturned in court or at the ballot box.”
By 2014, employers with the equivalent of at least 50 or more full-time workers will be required to provide health care for those who work 30 or more hours a week. If they don’t, they’ll have to pay a $2,000 penalty per employee after the first 30 workers.
Those studying the law thought that few employers would take the penalty — which is substantially less than the cost of providing health benefits — or shift toward filling full-time positions with part-time workers who don’t meet the mandate.
“Employers have been looking for ways to control the cost of health coverage since World War II when health benefits were first introduced,” said Paul Fronstin, director of the health research program at the nonprofit, nonpartisan Employee Benefit Research Institute. “They aren’t happy about the costs, yet they haven’t abandoned the coverage. They’re going to continue to do that with the Affordable Care Act.”
Companies routinely offer health insurance even though there currently is no penalty for not doing so, Fronstin said.
“Why would they cut back on it because of the mandate?” he said. “You can’t just conclude it will happen or happen across the board.”
The Affordable Care Act — known better as Obamacare — includes a significant role for employer-provided health insurance, Piro said.
“This system is designed to keep the employer-provided health-care system going, and at the same time you create an individual insurance market” through state-run insurance exchanges, he said. “That system is not going to work if 160 million Americans covered by their employers leave and go into state exchanges.”
Businesses are taking a hard look at what the new law will mean to their bottom line and their employment. A survey by Mercer, a human resources and finance consulting group, showed that 18 percent of employers with any part-time employees are planning to adjust some hours so fewer employees work 30 or more hours a week, said Beth Umland, Mercer’s director of research for health and benefits.
But making this move can come with risks.
Matt Stevenson, a principal working in the work-force planning and analytics group at Mercer, said companies are consistently asking if they should shift positions from full time to part time.
“We point out that if you move from full time to part time, you generally get a different type of employee,” he said. “You have an issue with engagement, they’re not staying as long and especially for people who are client-facing or customer-facing, you might get a different type of responsiveness.”
The bottom line? It might not be worth your bottom line.
“You may be saving money on the health-care side but might actually be losing money on the productivity side,” Stevenson said.
Still, some businesses are choosing to move more employees to part time, see if it works and then readjust as needed.
Darden Restaurants, the parent company of Red Lobster and other chain restaurants, with 21 locations in the Chicago area, is experimenting with filling vacant full-time spots with part-time workers. The company has 185,000 employees, and about 75 percent are part time, working 30 hours or less in a week. All Darden employees, regardless of how many hours they work, are eligible for health care, said Rich Jeffers, Darden Restaurants spokesman.
“We’re looking at as people in full-time roles leave, could we replace that person with somebody in a part-time role?” he said. “We’re doing that in a handful of restaurants and seeing what the impact is on the service model and the guest experience.”
Jeffers said the company is looking at a variety of ways to work within the upcoming framework but “there are a whole lot of unknowns. What does it look like exactly? Nobody knows.”
Companies also are waiting for clearer indications of how Obamacare will be rolled out, said Cara Woodson Welch, vice president for policy and public affairs at WorldatWork. The nonprofit organization for human resources employees focuses on benefits and compensation in medium to large companies.
States have until Friday to let the federal government know whether they plan to set up an exchange. Only 10 states have passed some kind of law or had an executive order from the governor that they intend to set up an exchange. In several Republican-controlled states, leaders have said they don’t plan to set up a state exchange.
The federal government will run an exchange if a state does not. Illinois plans to offer a combination federal-and-state exchange known as a partnership exchange.
While states are rushing to get some sort of exchange up and running, the nitty-gritty details of the government providing insurance for 30 million Americans are still somewhat vague for employers.
“One of the things employers and benefits professionals are waiting for are regulations defining full- and part-time employees and what the minimal essential coverage will be,” Welch said. “The proposed regulations have come out. We’re waiting for the finals.”
Welch said employers she works with are looking to continue providing benefit packages as a way to lure top talent. Costs remain a factor, and she thinks more companies are heading towards offering wellness plans to keep expenses in line.
“The drivers are the costs, and the drivers of the costs are the unhealthy population,” she said. “Our membership is looking at ways to manage their costs by making sure folks are healthier.”