Welcome to the third edition of TPG’s Healthcare Review, a forum to keep our current clients, prospective clients, and candidates apprised of the ever-changing landscape of healthcare in a post-reform world. Tracking the iterations, implementations, extensions and exemptions of the Patient Protection and Affordable Care Act of 2010 (PPACA) can be a full time job. Each new day seems to bring a wave of information which needs to be fully digested before the next news cycle starts. Again, it is our intent to update this newsletter monthly through the end of 2014 to keep you well-informed of the latest developments and their implications. We thank you in advance for your interest, and welcome your comments and questions throughout the year.
This month’s focus will be on Disclosure and Delay. First we’ll tackle “Disclosure” and the Congressional Budget Office (CBO) Report released on February 4th. It is important to remember that the report released in early February was not an exhaustive study of the Affordable Care Act, rather only 30 of the 175 pages in “The Budget and Economic Outlook: 2014 to 2024” deal with PPACA. The non-partisan CBO’s report focused mostly on the forecast of how government spending and the economy are likely to perform over the next decade. As PPACA is expected to have a significant impact on both issues, a good portion of the reports analysis focused on expected outcomes.
It did not take long for the report to gain headlines at every major media outlet in America and beyond. Specifically, the CBO’s analysis concerning its revision to forecasts concerning PPACA’s impact on the labor market in one sentence. The report states: ”The reduction in CBO’s projections of hours worked represents a decline in the number of full-time- equivalent workers of about 2.0 million in 2017, rising to about 2.5 million in 2024.” In an economy which has struggled to create jobs since the end of “The Great Recession,” the implication that PPACA would be responsible for a loss of 2.5 million jobs over the next decade caused a great stir.
In light of this Disclosure, the defense of PPACA which occurred shortly thereafter may have been of more concern than the actual information within the CBO report. The initial defense focused on the reduction of hours rather than the loss of actual jobs. This revelation focused on PPACA as a “disincentive” to work. As a large portion of the enrollees at the HealthCare Exchanges will receive subsidies for the purchase of their insurance policies, the public conversation shifted to the loss of subsidies which would occur upon reaching certain income thresholds. An employee may be placed in a position that if they work additional hours, or receive an increase in compensation, they would lose some, or even all, of their subsidy. This structural issue within PPACA is contrary to the American work ethic and will need to be addressed legislatively.
The second defense of PPACA came from the administration and the concept of “job lock.” The idea was floated that there is a measurable portion of the workforce which is “stuck” in an employment situation because these people need their health benefits, and that is the sole reason they keep their jobs. With the availability of insurance policies through the PPACA exchanges and the corresponding subsidies, these people will no longer be subject to “job lock,” but would be free to leave their jobs and search for something else without being concerned about their health insurance. This storyline was dropped by the administration in short order as the reaction from a public weary of high unemployment did not enthusiastically embrace the idea of people walking from their jobs with the government’s help.
The CBO report also brought into focus the enrollment numbers and how they have been calculated. The most recent number released by the U.S. Department of Health and Human Services (HHS) exceeded 3.0 million. This is a strong number after a weak start in October and November of 2013. With the large change in enrollments, the question has been raised as to what qualifies as an enrollment. Are there 3.0 million policies which have been bought and paid for through subsidies and/or private funds? Does the HHS include those who have chosen a health plan and put it in the website’s shopping cart, but not paid for it as an enrollment? Despite these questions being asked repeatedly, no clear answers have been forthcoming. With these disclosures having a negative impact on the public’s opinion of the law, the following week’s news included another “Delay.”
For the second time in a year, the administration is giving certain employers extra time before they must offer health insurance to almost all of their full-time workers. On Monday, February 10th, less than a week after the release of the CBO report, Treasury officials announced that employers with 50 to 99 full-time workers will be given until 2016 before they risk a federal penalty. That is two years longer than originally envisioned for compliance under PPACA. As an accommodation for large employers, those employing 100 or more full-time workers, a graduated schedule of implementation was adopted. Large employers must offer qualifying health insurance to 70% of their eligible full-time workers in 2015. Thereafter, they must offer qualifying health insurance to 95% of their full-time workers, the original requirement of the law.
The new delay in the implementation of the employer mandate won over part, but not all, of the business community. The delay announcement was as much a surprise on February 10th as it was last July when the first postponement of the employer mandate to 2015 was announced. With the creation of a new “medium-sized” employer category within the PPACA conversation, concerns have arisen that employers have an incentive to lay off employees in order to get under 100 and qualify for the full postponement of the employer mandate until 2016. In order to combat this possibility, the administration added a condition to the legislation. Employers will need to certify to the IRS, under penalty of perjury, that the waiver of the employer mandate was not a motivating factor in the company’s hiring and firing decisions. As stated by Fox News’s Chris Stirewalt, “To avoid ObamaCare costs you must swear that you are not trying to avoid ObamaCare costs.”
So that’s where we find ourselves in the middle of February, 2014. Disclosure and Delay amidst a heap of snow. We’ll keep you updated with TPG’s common sense solutions for PPACA employer costs as the regulations continue to flow from Washington, DC. More to come. . .
Thomas E. Readdy
President
The Performance Group