New Jersey employers may be better prepared than their counterparts in other states to offer health insurance that meets new federal requirements. If they are, their pole position comes courtesy of tighter state regulations and widespread adoption of more comprehensive plans in the state.
While most Garden State employers that offer health coverage will only have to “tweak” their plans, they may still see significant increases in healthcare premiums, according to John Sarno, president of the Employers Association of New Jersey.
Sarno, whose organization advises companies on employment law, has been preparing companies for the January 1 rollout of many of the key provisions of the 2010 Affordable Care Act.
Employers want to know what changes they have to make to their health plans to comply with the requirements of the federal law, which penalizes some businesses that don’t offer plans that meet a set of federally defined essential health benefits.
And they tend to be apprehensive about the new requirements, Sarno said.
“I for one do not want a train wreck,” said Sarno, an attorney, to a crowd of 45 business owners and managers at a workshop in Lakewood last week.
Employers with 50 or more full-time employees will have to offer a plan that covers most primary, specialist, and emergency-care services, as well as prescription drugs, or they may face a penalty.
The plans will also have to be affordable, with premiums costing no more than 9.5 percent of employee salaries. In addition, businesses will have to notify workers about the existence of the health benefit exchange, an online marketplace where residents will be able to purchase insurance and learn if they are eligible for subsidies.
Sarno noted that the details of the requirements will require employers to make some complex calculations, such as whether they have 50 full-time employees. The difficulty is that part-time help and paid consultants who do work similar to employees count toward that calculation.
While Sarno said that nearly all of the EANJ’s 1,250 members offer insurance, this practice isn’t universal in the state. He noted that 85 percent of the roughly 600,000 state residents eligible to purchase subsidized individual coverage through the health benefit exchange have full- or part-time jobs.
Subsidies to purchase insurance will be available for residents who do not have affordable or adequate coverage from their employees and who have incomes between 100 percent and 400 percent of the federal poverty line, currently $11,490 to $45,960 for a single person and $23,550 to $94,200 for a family of four.
Sarno’s association sells insurance through a program in which 12 percent of its members share healthcare costs. He cautioned employers against paying for the lowest-cost plans available.
“Most employers don’t buy plans on value, most employers buy plans on cost, but you get what you pay for,” Sarno said. “The cheaper the plan, the less value that you’re buying.”
The penalties for not offering adequate or affordable insurance have been a major concern for employers. If a company doesn’t offer insurance and has at least one worker who receives a federal subsidy, it will have to pay a penalty of $2,000 for each of its total number of employees, minus an allowance of 30 employees.
For example, if an employer with 75 full-time workers doesn’t offer health insurance and has at least one employee receiving a subsidy, then it will have to pay the $2,000 penalty for 45 workers, for a total penalty of $90,000.
If the employer does offer insurance but it is either unaffordable or inadequate according to the ACA, then the penalty will be $3,000 for each full-time employee receiving a subsidy. For example, if an employer offers unaffordable or inadequate insurance and has 100 employees, including 25 who receive a subsidy, then it will have to pay a penalty of $75,000.
While some financial managers may consider the penalties to be relatively low, Sarno added that company executives should consider the value that offering insurance provides to a company, such as increasing its ability to recruit and retain employees.
“There might be temptation to discontinue insurance. I understand that, that’s why your finance guys should be the last one to look at this,” Sarno said. “That’s somebody else’s role, to communicate the value of healthcare within your organizations.”
Sarno said there was “fear mongering” in 2011 that many employers would drop coverage. He said that that idea has subsided as employers have weighed the costs and benefits.
Sarno also warned businesses against engaging in “shenanigans” to try to avoid the law’s provisions, such as failing to notify workers about the exchange, attempting to dissuade an eligible worker from pursuing a subsidy, or firing workers to stay below the 50-employee threshold.
“Employees will be able to file charges with the U.S. Department of Labor for the alleged shenanigans of their employers,” Sarno said.
Sarno’s message appeared to resonate with business officials.
Sandy Shea, human resources benefits manager with waste carrier Freehold Cartage Inc. said it’s been a challenge to keep up with the steady flow of new federal regulations related to the ACA. She said she relies on the EANJ to highlight essential facts about how the law will affect companies like hers.
Shea said that while her company, which self-insures, may not face penalties in the short term, its relatively generous benefits package could lead to the business being subject to a new federal excise tax on high-value plans in 2018. She said offering high-level benefits has been important to attracting good employees.
“We’re not in the clear because our health insurance is considered a ‘Cadillac’ plan, so we’re very worried about 2018 and the tax that’s going to be imposed,” Shea said. “I believe that we will look at our plan and see what we might be able to shave off that’s not used a lot.”