Thursday, August 19, 2010

Preparing for the Impact of the Government’s Health Care Reform

No matter what you think about health care reform, one expectation is clear: health insurance costs are going up soon. Based on a recent Mercer study, employers expect health insurance costs to jump as early as the 2011 plan year. [1]

The Mercer study also revealed health care reform provisions that concern employers the most. Here are a couple of the areas of concern:
  • Dependent care coverage. Beginning September 23, 2010, all organizations must extend dependent coverage to all dependent children—even married ones—up to, and including, age 26. Most employers will need to change their dependent eligibility rules to comply with the reform law.

  • Providing coverage to more part-time workers. The reform law will require employers to offer “affordable” health care coverage to all employees who average 30 hours per week or more in a month—starting in 2014. This provision will especially impact organizations that heavily rely on part-time labor at the 30 or more hours a week level.
Making appropriate plans to meet the health care reform laws are very important (adherence to laws is required by ECFA’s Standard 4) but it will not be easy. The temptation will be to simply offset increased health insurance by decreasing benefits to staff. But should staff shoulder the burden of increased health care cost? The issue is more complex.

Most surveys of workers show that benefits are second in importance only to job security. The importance of compensation usually ranks last or nearly so.

So, if benefits are so important, why do employers considering cutting benefits as one of the first cost-saving options? As long as employer-provided health insurance is tax-free, why not maximize the tax-free benefit and make other adjustments to balance the budget!

Consider offsetting the coming increases in health care costs with employee engagement, motivation and efficiency. Even after making recession-related adjustments, most organizations have many ways to increase efficiencies and reduce costs by focusing on issues that are really important.