Waiting for answers on reforms

TOUGH TO SWALLOW: Valerie Ann Leduc, vice president of operations at Angelo’s, saw a 13.2 percent increase in health-insurance premiums this year. / PBN PHOTO/FRANK MULLIN
TOUGH TO SWALLOW: Valerie Ann Leduc, vice president of operations at Angelo’s, saw a 13.2 percent increase in health-insurance premiums this year. / PBN PHOTO/FRANK MULLIN

With just nine months before many of the Affordable Care Act’s new regulations, taxes, tax credits and penalties go into effect – as well as the startup of the R.I. Health Benefits Exchange on Jan. 1, 2014, businesses across Rhode Island are trying to calculate future costs when it comes to offering health insurance to employees.
Getting answers on what to expect can be difficult, however, because of the still-evolving health-reform landscape.
For instance, exactly what products and plans will be offered by insurers for small businesses and individuals to purchase on the exchange is still unknown, according to Christine Ferguson, the exchange director, who spoke at a Feb. 28 meeting of the Health Insurance Small Employer Taskforce at Temple Emanuel in Providence.
Her expectation is that four health insurers – Blue Cross & Blue Shield of Rhode Island, UnitedHealthcare of New England, Tufts Health Plan and Neighborhood Health Plan – will all offer products on the exchange for small businesses, their employees and individuals.
But those plans won’t be filed with his office until sometime after April 1, according to R.I. Health Insurance Commissioner Christopher F. Koller, who also addressed the crowd of more than 125 people at the event.
Koller said that he was working “hand in glove” with Ferguson to negotiate high-quality, affordable health-insurance options for small business and individuals. In turn, Ferguson said that the exchange would offer Rhode Islanders a “robust resource” to compare health-insurance options. The only assurance that Koller and Ferguson could guarantee about such plans is that whatever product is offered on the exchange would also be offered as a product for the rest of the market.
Such uncertainty makes planning for her business’ health-insurance renewal difficult, said Valerie Ann Leduc, vice president of operations at Angelo’s Civita Farnese restaurant on Federal Hill. Leduc expects that the rates of premiums for her health-insurance employee plans will go up in 2014, despite health care reform and the efforts by Koller to control increases. “It can’t just be the commissioner” looking to control costs, she said. In 2012, her health-insurance premium rates jumped 22.8 percent; in 2013, there was a 13.2 percent increase. “We are a small business with under 50 employees, and health insurance is a benefit we’ve provided for many, many years,” she said. As a result of the rate increases, Leduc said the restaurant has had to pass much of those cost increases onto the employees. “We added a deductible, then doubled the deductible, then added and increased copays for hospital and office visits,” she said.
Eliminating health insurance for employees is not an option, according to Leduc. “It’s a benefit we choose to give.” Not to do so, she continued, “It’s just not good business. It would put us at a competitive disadvantage.”
Leduc has taken a wait-and-see approach to whether the restaurant will become involved with the exchange. “Our renewal is in December [of 2013],” she explained. “It gives us some time to see what our renewal rates are going to be.”
Leduc expressed frustration about the challenges of finding an overall affordable solution to rising health care costs. “There are a lot of paths to a solution, there are some great models, but there doesn’t seem to be any distinct leadership,” she said. “No one’s willing to make a decision, and until those decisions are made, it’s hard to predict the future.”
Under the new health care reform law, after Jan. 1, 2014, an employer with more than 50 full-time employees is required to pay a penalty, $2,000 per employee, for every employee who is not offered a health-insurance plan.
In 2014, the total amount of such a penalty will include an offset enabling employers to subtract 30 employees. So a firm with, say, 60 full-time employees that didn’t offer affordable health insurance would be fined for half that number of employees, according to James Raiola, a certified financial planner and insurance broker from Warwick who is also a member of the exchange’s advisory council. One of the questions being raised repeatedly by Rhode Island employers concerns the definition of 50 full-time employees for businesses with both full-time and part-time workers – such as landscapers, hotels and home-care nursing firms.
“It’s a federal decision,” Koller told Providence Business News after the task force meeting, saying the state was not involved.
An IRS ruling issued Aug. 31, 2012, enables employers to use a look-back period, called a “safe harbor,” to determine whether or not an employee is a full-time employee. The business owner can choose either a three-month period or a 12-month period.
“If you’re a landscaper, or you’re running a hotel operation in Newport, very busy with staffing between Memorial Day and Labor Day, you may not want to include those summer months,” Raiola said. “You’d probably want to use the last three months – say October, November and December – to calculate the average of employees working more than 30 hours.”
And, for owners of multiple franchises, Raiola warned that attempts to say that each is a separate business to evade the employer health-insurance mandate would not fly.
“The [IRS] will look at common ownership and deem it one entity so you won’t be able to bypass the employer mandate that way,” he said.
There are also a number of new taxes and fees that will take effect in 2014 under the Affordable Care Act, including a health-insurance tax on fully insured health plans, which will tend to hit small companies harder, because many larger companies are self-insured. Such taxes and fees will be included as part of the annual fees going forward, according to Stacy Paterno, spokeswoman for Blue Cross. “This is not a new dynamic,” Paterno said. “It exists today with premium taxes and assessments for child immunizations at the state level.”
Blue Cross is very concerned, she said, about the added pressure on the fully insured market. “It is time for the state and federal government to allow alternative assessments that would spread taxes and fees across a broader base,” Paterno said.
As a result of the new taxes, fees and implementation costs, Paterno said business can anticipate a rise in premiums. “We anticipate that rates could increase an additional 4 percent for small and large group premiums purely to pay federal taxes, and possibly 2.5-3 percent for state taxes,” Paterno said. “We are also assessing the cost associated with implementation, and while the full amount is unknown, it will also be reflected in the premiums going forward.”
An additional tax, which went into effect in January, may not cost employers more money, but it will certainly have an impact on their high-wage earners. Individuals making more than $200,000 or couples filing jointly making more than $250,000 will pay an increase of 0.9 percent to the 1.45 percent tax for wages above that amount.
“The calculation for Rhode Island employers will probably not be around whether to drop coverage,” said Jennifer Wood, chief of staff for Lt. Gov. Elizabeth H. Roberts. “Rather, the choice will be for those employers who don’t already offer coverage: Will they be willing to pay the penalty or start offering coverage? Both will cost the employer.”
Woods cited the data from Massachusetts regarding employer practices in the face of a penalty, where employer participation rose from 71 percent pre-Massachusetts health care reform law to 76 percent by March 2011. •

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