Before deciding how to comply with the Affordable Care Act’s (ACA) coverage requirements, employers should seriously consider what they want to achieve through their pay and benefits package, advised benefits expert Gary Kushner, SPHR.
"Health care reform is a once-in-a-lifetime opportunity to rethink health care benefits delivery," said Kushner, president and CEO of Kushner & Co. in Portage, Mich. "Compliance is important, but it's more important to begin thinking about benefits as part of a larger HR strategy linked to organizational goals and objectives."
He recommends focusing on the role that benefits in general, and health coverage in particular, play in attracting, retaining and engaging employees within the organization.
The ACA sets a floor for essential health benefits for all employer-provided health plans and requires organizations with 50 or more full-time employees or equivalents to offer coverage that is both affordable and provides minimum value. "Employers must decide if they want their health benefits to lag, match or lead the market," Kushner said. Strategic questions employers should come up with answers to include:
- What is the overarching organization strategy to be competitive?
- How is HR’s workforce recruitment strategy aligned with the company’s business strategy?
- What is the role played by total rewards strategy?
- How do health care benefits fit into the above strategic considerations?
A company with a low-skilled workforce and high turnover may want to provide the minimum required health benefits and compete for employees based on hourly wages, Kushner noted, whereas a business with mostly high-skilled professionals will likely find that candidates expect a highly competitive health package.
"If the organization’s strategy requires recruiting and retaining high performers and those with in-demand skills, then benefits will play a different role," he pointed out. "What happens if you lose key talent? Unemployment is still high overall, but unemployment for high performers is low."
Whatever the strategy, effective communications highlight how much employer-provided benefits are worth. "This could be a golden opportunity to reinforce the value of your rewards package," said Kushner. For example, "Help employees to understand the value of your health plan versus plans available through the ACA's public marketplace—exchange plans cost a lot more than $20 per week."
Preparing for 2018
While there has been much focus on ACA's minimum-coverage requirements, less attention has been paid to the other side of the vise: the so-called Cadillac tax on high-value health plans, which will take effect beginning in 2018. "An excise tax is not deductible by business; it's the worst kind of tax for your bottom line," Kushner warned.
The 40 percent excise tax will hit health plans with overall premiums (whether paid by the employer or by workers) that exceed $10,200 for employee-only coverage or $27,500 for family coverage.
"To attract high-value employees without high-value health care that triggers the Cadillac tax, one solution is to phase health care benefits down and enrich the other parts of your total rewards package," he advised.
Here again, effective communications are vital. "Develop a communications plan that explains why health benefits are being cut back and what you might be adding in terms of higher compensation or the enrichment of other benefits."
Kushner spoke at the SHRM Employment Law & Legislative Conference on March 17, 2014, in Washington, D.C.
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