North Bay brokers outline trends in 2015 health insurance

The Business Journal asked local insurance experts about what's coming with health insurance coverage in 2015.

Offering insights in the following discussion are David Hodges, vice president, Vantreo Insurance Brokerage; Bud Martin, national practice leader for individual health and Medicare insurance and Jennifer Lunski, director of compliance, both of Wells Fargo Insurance Services USA, Inc. in Petaluma; Victor McKnight, principal of EPIC Insurance Brokers; Michael D. Parr, a Santa Rosa-based employee benefits consultant for Northwest Insurance Agency Inc., a division of George Petersen Insurance Agency; Jim Settles, senior vice president and employee benefits practice leader for Woodruff-Sawyer & Co. in Novato; and Jordan Shields, president of Arrow Benefits Group in Petaluma.What is changing for 2015 and how should employers be preparing?

David Hodges: My large groups are fairing better then small groups under 100 employees.Rates have been softened by the grandmother act for small groups. However, this will simply hold off the sharp rate increases coming next year unless California or federal lawmakers change the law. Groups with less then 50 employees should be prepared for higher out of pockets on their plans and higher costs for those plans.

Bud Martin and Jennifer Lunski: There are several big changes taking effect in 2015, depending on the employer's size.

For large employers with 100 or more employees, and some employers with 50-plus employees, the 2015 Affordable Care Act requirements will increase an employer's responsibilities and costs, such as 1) "play or pay" penalties, along with complex rules for tracking the hours of variable hour employees, 2) the collection of employee and health plan data as required under the new information reporting requirements, with returns due in early 2016 to the IRS, 3) obtaining a HPID number for self-insured plans and 4) collecting data and submitting the ACA Transitional Reinsurance Program Annual Enrollment and Contributions submission form.

All employers, regardless of size, should be closely re-evaluating: 1) benefit plan designs offered to employees, 2) employer contribution towards the cost of coverage for employees and 3) plan eligibility rules. For those employers with lower-wage employees, it will become of vital importance to understand the impact your decisions on these items, especially for these employees and their dependents who may otherwise be eligible for health insurance subsidies through Covered California or other government operated exchanges.

Victor McKnight: Small groups will see drastic changes to their plans and rates in 2015. They may need to reconsider which plans to offer and what amount they contribute. Due to increasing costs, health savings accounts, or HSAs, may not be a viable solution as the new ACA plans are rolled out.

Large employers will need to increase their focus on compliance. They will have new reporting requirements to adhere to and will need to work with their payroll company to make sure they have the ability to gather and report the information. Employers with seasonal or part time employees will need to establish rules to determine eligibility for health plans that comply with the ACA. With the complexity of the ACA implementation, it will be more important than ever for employers to seek advise from their broker or consultant.

Michael Parr: For one, in California the new-hire waiting period can be changed from the mandated maximum 60-day wait to 90 days or fewer at renewal in 2015.

Also, the first phase of the employer mandate will go into effect on Jan. 1, 2015. If you have 100 or more full-time equivalent employees, you must provide affordable coverage to 95 percent of your full-time employees and the dependents of those employees. The coverage must also provide minimum value in that it covers at least 60 percent of the total allowed cost of benefits that are expected to be incurred under the plan. The contributions for the employees cannot be less than 9.5 percent of the employee's salary.

Penalties for those large employers who do not offer coverage to at least 95 percent of their employees and their dependents is $2,000 per employee per year minus the first 30 employees. For those large employers who do offer coverage but it is not affordable (if the employee contribution for the year exceeds 9.5 percent of the federal poverty line for a single individual for the applicable calendar year) then the large employer could be subject to a penalty of $3000 per employee per year minus their first 30 employees. These penalties are triggered if any one of the affected employees goes to the marketplace/exchange and receives a subsidy.

Jim Settles: Small employers need to prepare for significant premium increase and benefit plan changes as the "grandmothered" legislation expires. These employers should be scheduling discussions with their broker/consultant at least six months in advance of their renewal to understand plan design, carrier and contribution options to mitigate premium increases while maximizing employee benefit levels. A full review of market options should occur and be compared against industry and regional benefit benchmarks.

Small employers should be reaching out to their state elected officials and business associations to express their concern regarding potential premium spikes associated with ACA compliance.

Large employers have been gearing up over the last several years to comply with the pay-or-play provisions. Most are already in compliance. For those that are not compliant, their focus should be using the pay-or-play guidelines to define the employee population that will require healthcare coverage and then developing plan designs and contribution strategies to comply while minimizing the financial impact too the employer.

Other changes for 2015 that will impact employers' costs apply to employers of all sizes, both those who purchase insured health coverage for their employees as well as those who are self-funded. Employers must prepare to pay additional ACA fees for transitional reinsurance and to fund the Patient Center Outcomes Research Institute (PCORI). These additional cost, including health insurer tax (HIT), will be reflected in premium and plan costs.What new products are you seeing in the marketplace?

Bud Martin and Jennifer Lunski: Purchasing health insurance through exchanges -- both government and privately operated -- is one of the most popular new products, and one that will have a long-range impact on employee benefits.

There are a number of new solutions that are of high interest to employers who are looking for ways of simplifying ACA administration requirements and minimizing "play or pay" penalties in 2015 and beyond. These products are often technology or outsourcing solutions, and sometimes insurance products. Because all the software and insurance products are new, employers should work with advisors who are familiar with them and be cautious of vendors who promise they can offer a health plan that absolves your company of all ACA penalties.

Victor McKnight: There are a number of new products being released by carriers. These products include partially self-funded plans down to 25 employees. Self-funding allows employers to avoid many of the taxes that are included in the ACA and provides much more freedom on plan design. Employer groups that have lower than average claims, may see additional savings. Specific products designed and marketed exclusively to the Ag Industry are also popular. Skinny plans designed to avoid the employer mandate have come under scrutiny as of late by the IRS. These strategies are being utilized by employers trying to contain costs by not fully covering all their employees. Staffing, agriculture, retail and restaurants have been the industries that have embraced these products.

Private exchanges focused on the mid to large group market have also been the buzz this year and should continue to grow in 2015. They offer a choice of plans provided by one or more carrier and will include medical plans as well as dental, vision, life and disability. The enrollment is online and allows employees to utilize decision making tools to choose the plans that fit their family best. So far, it has not driven rates down as each employer is rated based on the demographics and experience.

Michael Parr: MEC, or minimum essential coverage, plans that are not nearly as rich as a traditional, fully-insured plan, but allow a large company (100-plus employees) that has not offered coverage in the past to provide minimum coverage and avoid the associated fines with the Affordable Care Act employer mandate that begins on Jan. 1, 2015. Usually these plans are fully self-funded and have an aggregate stop-loss which provides a maximum cost exposure for the employer.

There are also GAP plans that can be employer-paid or employee-paid to provide funds to help offset the higher deductibles in many of the group health insurance plans employers are having to move to due to increasing group health insurance costs. However, these plans are not supported by the California Group Health Insurance carriers at this time.

And not new, but there are also the traditional higher-deductible health savings accounts, or HSA, plans and health reimbursement arrangement, or HRA, plans that have been an attractive alternative to numerous employers due to their potential cost-savings as well. However, the premiums on these types of Group Health Insurance plans are not as low as they have been in the past and therefore, many employers may offer these plans with little or no funding towards the higher deductibles for their employees.

Jim Settles: The Woodruff Sawyer Exchange is one of our most exciting developments for 2015. The changing benefits landscape has created an environment that challenges employers to find the right benefits solution and employees to choose the benefits that will best meet their needs. Health care reform gave birth to public exchanges as one-stop benefits shops for consumers and small businesses. The appeal of simplified benefits shopping and enrollment experience gave rise to private exchanges, like the Woodruff Sawyer Exchange solution.

A private exchange is a technology platform that enables employees to provide choice to their employees with the ability to host multiple benefits options in an online shopping experience, employer's administrative work is reduced and more employee choice is provided. Our technology platform offers enhanced features to mid-sized employers who would not otherwise be able to have them available. The online website is populated with medical and ancillary carriers/plans and includes decision making support and wellness components.

Sutter Health will be entering the Sonoma County marketplace with an HMO solution that promises to be competitive. They currently offer this plan in the Sacramento region and employers have found success in offering plans from Sutter Health, Kaiser Permanente and Western Health Advantage to meet the needs of their local employee population.

With more and more employers offering high deductible medical plans, voluntary benefits to reduce employee health expense have become very popular. These newer solutions include Supplemental Health and Gap plans designed to offset out of pocket expense employees and their families are faced with when dealing with unforeseen accident or illness. When pairing these plans with high deductible medical plans, employers can offer cost effective solutions that provide employees with the coverage they have been accustomed to.

Woodruff Sawyer Employee Benefits Captive allows mid-size employers to reap the benefits of a self-funded health insurance program as part of a pooled arrangement with like-minded employers. Each participating employer establishes its individual claims risk level, but collectively shares the financial/claims risk. Captives can also yield dividends for a participating employer. By bringing companies together, the captive also enables companies to gain greater insights on health plan issues, share what works and what doesn't and becomes an incubator for best practices. The power of this type of collaboration helps mid-size employers plug into the type of health risk management programs typically only available for large employers.

Jordan Shields: Other than they highly cynical "minimum value" or "MEC" plans, which are about to be investigated by the government, we are seeing more interest in full or partial self funding but it is difficult to pull this off in a Kaiser dominated market. There was a splash made by SeeChange a couple of years ago where they would reward healthy lifestyles, etc. but they just announced they are pulling out of the California market at the end of the year. We didn't have any clients with them -- we won't work with a carrier with less than a three full year track record -- but a lot of brokers in the city and South Bay got wamboozled.Is there anything you would like to add?

Bud Martin and Jennifer Lunski: When clients learn of all of the compliance requirements, they frequently ask, "Is it worth it to keep sponsoring an employee health benefit plan?" It is a good question to ponder.

In the past, offering a group benefit plan almost always helped a business attract and retain good employees. However, the ACA has created a new paradigm and businesses should re-evaluate past decisions regarding the economic reality of offering employee benefits, as well as whether it will help or hinder attracting and retaining talented employees in the future.

Victor McKnight: Employers will need to work with their broker/consultant to confirm that they are compliant with all aspects of the ACA. Their broker should have a compliance department behind him or her including an attorney with a specialty in the ACA. The time to prepare is coming to an end and you should now be implementing the plans you created over the last few years.

Michael Parr: One of the many pieces of good advice that my father gave me was, "Change is a constant. It is how you deal with it and persevere that will determine your character and success." In regard to the "moving target" Affordable Care Act, this could not be more true for brokers/consultants, their account managers, employers, HR managers and employees.

When Covered California and the federal exchange were announced to go live in the fall of 2013, there was significant concern about a potential reduced role for Employee Benefits Consultants. However, I strongly believe that the role -- and need -- of the employee benefits consultant or broker is stronger than ever. Much like most employers need an accountant to assist with financial matters of their company, these same employers -- of any size -- need the expertise and advice of an employee benefits consultant to ensure they are in compliance and not subject to potential penalties associated with the Affordable Care Act.

If you haven't already, I highly recommend you meet with your employee benefits consultant soon who can help guide you through these current and future turbulent times in the employee benefits marketplace.

Jim Settles: Look to 2018 for the next big hurdle, long-range planning is now being recommended to address the "Cadillac" tax that will begin in 2018. This will be a nondeductible excise tax in the amount of 40 percent to the extent that the health benefits and coverage provided by an employer exceeds statutory levels.

Jordan Shields: Employers are coming to the realization that the ACA is not a cost panacea -- most knew that already -- and that rates will continue to rise as we experience regular inflation, an aging population and the miraculous discovery/invention/development of new drugs, techniques, procedures and machines that can do things we never dreamt of only a decade ago. That all costs money, and the carriers, despite their claims to finding ways to "control costs" are essentially powerless in the face of progress.

With this realization comes the need to develop a benefits game plan with a totally new perspective. We always counsel the consideration of "total compensation" and mix those broad fiscal figures in with a view toward employee community, organizational goals, work environment and a full understanding of the basic "story" any compensation program should tell -- who will benefit, what will change or is required of employees, why are we doing it, where are the changes going to be most telling and how will all this work. We call our process, "A Blueprint for Change"

The press of legislation continues to bear down quite hard on employers and the need for a full compliance audit and basic systems for monitoring and adapting to change is greater than ever. We already had both ERISA and general benefits counsel available, along with a network of professionals who continually converse about legislative matters. Recently we added a full service HR division to complement and integrate with what we do, and give us greater ability to help our clients navigate the continually confusing maze of rules, regulations and policies.

There is also a greater need for administrative efficiency in onboarding and offloading employees, working them within a discrete system that allows connectivity to multiple vendors and the need to properly, effectively and consistently communicate what is offered, why it is important and its general meaning to employees. Compliance has to work within systems, and there are a number of companies now competing in the space to manage and coordinate payroll, benefits management, HRIS and HR intervention. We have a number of partners who do these as a "one off" and also do them in a coordinated, comprehensive fashion. Now that the technology has caught up with the burgeoning need, we are rolling out these system solutions to our clients as quickly as we can. Our HR Division helps us to better implement and coordinate these systems as well.

Finally, there is and will be a greater need for community cooperation both within the company (consider wellness and financial targets for benefit performance) and without (cooperation with similar industry participants or just county employers in general) to effect change in the cost and efficiency of the medical delivery system and its utilization by employees. We are well on the road to helping employers develop and achieve goals in these areas, or at the very least realign their thinking.

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