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Mercer: Most Employers Haven’t Met PPACA’s 2014 Requirements

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Most employers have yet to develop a strategy to meet requirements that the Patient Protection and Affordable Care Act will impose on employers beginning in 2014, new research reveals.

Mercer LLC, a human resources consultancy and New York-based subsidiary of Marsh & McLennan Companies Inc., published this finding in a survey of 4,000-plus employers nationwide. With 20,000 employees in 40 countries, Mercer designs and helps manage health, retirement and other employee benefits.

The survey reveals that employers had been awaiting a decision of the United States Supreme Court respecting the constitutionality of the 2010 healthcare reform law. The court last week upheld all parts of PPACA.

While 40% of the survey respondents say they will begin taking action now that the court has ruled, another 16% say they will continue to wait until after the November elections.

Although the law still faces a contentious political outlook, employers should stay on track in their efforts to comply with the law as enacted or else they may face penalties, the Mercer study advices. The report adds that employers must act quickly to implement new requirements for 2012 and 2013, such as providing benefit summary disclosures, complying with new dollar limits on health care flexible spending arrangements, and increased Medicare withholding for high earners.

But rules that go into effect in 2014 and aim to expand access will have broader implications for employers. More than a fourth of respondents (28%) say that compliance with the new requirement that employees working an average of 30 or more hours per week must be eligible for coverage will present a “significant challenge” for their organization.

“Employers with large part-time populations, such as retailers and health care organizations, are faced with the difficult choice of either increasing the number of employees eligible for coverage, or changing their workforce strategy so that employees work fewer hours,” says David Rahill, president of Mercer’s Health and Benefits business. “With the average cost of health coverage now exceeding $10,000 per employee, a big jump in enrollment is not economically feasible for many employers.”

The requirement to auto-enroll newly eligible employees in a health plan – which means that employees will automatically be covered unless they opt-out – is also expected to increase the rolls of the insured for many employers. Nearly one-third (29%) of respondents to the Mercer survey say this will be a significant challenge, especially because other provisions of the law will limit the amount of health plan costs employers can pass along to employees through higher premiums or deductibles.

The provision that has the most employers worried—47% of survey respondents—is the excise tax on high-cost plans, expected to go into effect in 2018.

“Employers already struggling with annual health care cost increases of double or triple general inflation are determined to avoid this tax,” said Sharon Cunninghis, US leader of Mercer’s Health and Benefits business. “We’ve been seeing a lot more interest in cost-saving measures, such as consumer-directed health plans and employee health management, since the tax was proposed.”

When asked whether they agreed or disagreed with the statement, “[The reform law] has provided the impetus for our organization to pursue more aggressive health benefit cost-management strategies,” more than half – 52% – agreed. Employer actions were one factor that helped to slow health benefit cost growth in 2011 relative to 2010.

Survey results suggest this trend will continue. Asked whether they planned to be more aggressive about managing plan costs going forward now that health reform has been confirmed, 54% said yes. Four in ten (41%) said “no,” only because they were already taking aggressive action to manage expenses.

Mercer will host a webcast on July 12 at noon EDT to explore how the Supreme Court’s decision will affect employers.


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