The Picture of Health: Weaving Your Way Through the Affordable Care Act Maze

BY KATIE KUEHNER-HEBERT

The Patient Protection and Affordable Care Act (ACA) has had sweeping impacts across all industries, and the construction industry is no exception. AGC of America members say the health care reform law has caused them to tweak not only their health insurance offerings, but also other employee benefits, including bolstering their wellness programs to keep their employees healthier and hopefully reduce health care costs.

The ACA has also resulted in more fees and reporting requirements, members and benefits experts say, and firms should be mindful of important deadlines coming up. Members should also consider the new AGC Alternative, a private exchange provided by Willis North America that offers a wide range of plan options for health insurance as well as a host of voluntary benefits.

WA Klinger LLC in Sioux City, Iowa, a Master Builders of Iowa member, offers the same basic health care plan that it had before the ACA, but the company made some modifications due to the law’s new compliance requirements and the resulting impact on costs, says Robert J. DeSmidt, chief financial officer.

Prior to the ACA, employees had to be working for seven months to qualify to participate in the health care plan, as many of its workers in two of its units travel to different jobs around the country and are temporary local workers, DeSmidt says. But with the ACA rules, Klinger had to change the eligibility to the first of the month after 60 days, which resulted in 35 percent more employees qualifying for health care.

To mitigate for the "substantial" additional cost, Klinger added a second plan which has a lower premium and a slightly higher deductible and increased out-of- pocket maximums, he says. The company still pays about 75 percent of the cost, but as more employees opt for the second plan, costs should be lower. Moreover, Klinger added a $200 a year higher out-of-pocket $200 maximum for smokers.

Overall, Klinger’s costs due to the implementation of the ACA rose roughly 25 percent, which includes paying several new fees under the new law – the temporary transitional reinsurance fee and the Patient- Centered Outcomes Research Institute Fee, DeSmidt says.

"Our costs also rose due to having to add so many adult children of employees to our plan at no additional premium," he says. Adding an adult child to a family plan incurs no increase in premium dollars, but medical treatment could impact company costs. He adds, "We have been told that some of those adult children are making more money than their parents, as well as higher plan costs due to now insuring people with pre-existing conditions. Claim costs were also increased due to the 2.5 percent medical device tax."

Klinger also lengthened the qualification date for dental insurance, short-term disability and life insurance, from the date employees were eligible for health insurance to after working one year. The company pays 50 percent of dental and 100 percent of disability and life.

The ACA has also added to Klinger’s "administrative burden" of managing the health insurance benefit, DeSmidt says. One example is having to produce an annual 11-page statement "which participants find confusing and not helpful." "When I talk to supervisors on jobsites they tell me that when they hand out the required summary of coverage data, employees don’t read it and many toss it immediately," he says. "The notice is a waste of time in our opinion. Each of these changes in themselves are not horribly burdensome, but when you put them all together, along with the new reporting requirements, it is."

Metro Waterproofing Inc. in Scottdale, Georgia, an AGC Georgia member, added a third health care plan to its menu that lower income employees could more easily afford, in order to comply with the ACA’s poverty threshold provision, says Grady Bland, human resources director. The company is also looking into offering health savings accounts to offset high deductibles, but hasn’t decided how much the firm would contribute to such accounts.

"We don’t currently have a wellness program, but we have to come up with ways to help employees improve their health, such as smoking cessation and lowering their blood pressure," Bland says. "We are looking at what other industries are doing because we have found that the construction industry is lagging in these kinds of programs." For voluntary benefits, Metro Waterproofing’s employees pay 100 percent of the premiums for short and long-term disability, while the company pays 100 percent of the premiums for basic term life insurance, up to $15,000, he says.

Patrick Casinelli, vice president and principal of Cavignac & Associates in San Diego, an AGC San Diego Chapter member, says his firm’s contractor clients have shifted more costs to employees because of the new law, particularly since ACA fees have added between 5 percent to 7 percent in additional costs.

"For a $1 million premium, that’s $50,000 to $70,000 in additional fees," Casinelli says. "Our clients have asked us to explain these fees to their employees during open enrollment so they understand the affects and costs of the law."

To mitigate some of the additional ACA costs, many contractors are changing their percentage of contribution, such as from 100 percent to 90 percent or less, he says. Many are also offering a wider menu of plans, including those with higher deductibles and greater out-of-pocket costs. Some are choosing to contribute 100 percent to less costly higher-deductible plans, allowing employees to pay the difference for a richer plan if they choose.

Contractors are also considering whether to offer their employees critical illness, cancer, accident and hospital indemnity plans from companies such as Aflac or Colonial Life that pay cash to cover deductibles in those situations.

"The addition of gap plans is definitely a discussion we are having with all of our clients, as prices continue to go up," Casinelli says.

More employers are also now thinking of self-insuring, but Davis Bacon/government works contractors should understand how self-funding affects fringe benefits. 

"It’s tricky, but doable," he says. "Before considering alternate means of funding the insurance, they have to consider the risks of captives or self-insurance, and they have to know their own employee risk pool."

Because of the ACA, more contractors are now considering wellness programs as a way to mitigate cost increases, Casinelli says. His firm promotes wellness and safety to all of its construction clients to manage risk and lower the overall cost. "One of our clients offers a number of incentive programs, such as a ‘Biggest Loser’ competition in which the winner gets cash and other prizes," he says. "The company also encourages its employees to participate in walks/runs for local charities, and they regularly educate their employees about the benefits of healthy eating and exercising."

There are important reporting requirements starting in January, particularly for companies that have more than 50 employees but up to 99 employees (larger companies had to start reporting this year), says Jason Blomquist, senior vice president, employee benefits practice leader at Assurance Agency in Schaumburg, Illinois, a member of multiple AGC chapters. Companies in this size bracket will have to start reporting how many full-time equivalent (FTE) employees are on their payroll, and if they count their union employees, they could possibly cross the 100-FTE threshold and not be subject to additional insurance costs as a "small group" employer.

Mark Lam, Assurance’s vice president, benefits compliance, says that traditionally unions pay the benefits of union employees, so most contractors don’t consider them as employees for health insurance purposes. "But the reality is that unions are simply membership organizations and the workers employed by contractors still count," Lam says. "That might get contractors out of the small group market, as counting union employees could keep them in the large group market."

This is good news because the federal government is in the process of creating a national uniform definition of small groups to replace all of the varying state rules, under what is being called "small group reform," he says. For those contractors that will be reclassified from a large group to a small group, their insurance carrier will move them to a different risk pool set up to handle expected claims in a completely different manner. As a result, contractors in those risk pools can likely expect around a 30 percent bump in the cost of their insurance premiums.

On the flip side, contractors in large groups this year should have included union employees in their FTE count under the employer mandate, Lam says. They will be held accountable by the Internal Revenue Service to provide appropriate coverage at affordable prices to all FTEs, Lam says. If contractors pay the unions to provide health insurance, that is allowed as long as the provided coverage meets the ACA’s requirements for a minimum value plan.

"Typically this is not a problem because union plans are typically very rich and very inexpensive to members," he says. "But the catch is that the union needs to provide contractors with the required data that the contractors need to report to the IRS and not all unions are prepared to do that."

Contractors need to make sure the unions’ plan sponsors are working on being able to issue this data on the IRS form 1095C, he says.

Assurance is "definitely" seeing more interest from contractors for outcomes-based wellness plans (those that provide incentives if certain biometric targets are met), to cover not only rising health care costs but also rising workers’ compensation costs, Blomquist says. More contractors are incorporating wellness into safety programs, which can help reduce the duration and the extent of worker injuries.

"If the programs can get a person moving more, they’ll have more flexibility, which can lessen the severity of their injury," he says.

Rick Leon, senior vice president, operations at West Coast Group Benefits in San Diego, a San Diego Chapter member, says "the dust is just starting to get kicked up" on many issues related to the ACA, including the implementation of the so-called Cadillac Tax, which "will play a major role in the direction and sustainability of the ACA and employer groups."

Moreover, every business will likely be impacted by the health care industry’s consolidation, including Aetna’s recently announced deal for Humana and Centene’s recently announced deal for Health Net, combined with increasing shortages of providers, Leon says.

"Compliance alone continues to impact costs for most companies, from reporting mandates to the cost of navigating existing, changing and upcoming regulations," he says. "I think time will provide a better barometer for how the ACA will affect employers and their bottom line."

To mitigate ACA impacts, members can consider The AGC Alternative, a private-labeled version of the Willis Private Exchange that has a few unique features exclusive for members, says Christi Reimer, director, private insurance exchange, AGC of America. The exchange is being rolled out in phases, due to varying ways that states handle small group health benefits.

Currently, the program is available exclusively to AGC member firms with 100-plus employees in all states and for firms with 10 or more employees that are located in Arizona, Connecticut, Florida, Georgia, Illinois, Maine, Maryland, Minnesota, New Jersey, New York, North Carolina, Pennsylvania, South Carolina, Tennessee, Texas, Virginia and Wisconsin. "With a private exchange, members will be able to give their employees greater choice, with up to six plan options for major medical," Reimer says. "There are also voluntary benefit offerings available, including dental, vision, short- and long- term disability, life and legal services. Plus, the state-of-the-art online exchange provides employees with step-by-step guidance needed to choose a benefits portfolio tailored to their individual needs."

Jim Perrin, senior vice president, human capital practice at Willis North America in Washington, D.C., says that the AGC Alternative allows members to comply with the requirements to cover eligible FTE employees in a way that will have as minimum of an impact as possible to their business. Employees can choose plans that are designed to be just slightly above the ACA’s affordability requirements or use part of their defined contribution dollars to help buy richer plans. "We are learning that member firms still want to do the right thing and take care of their employees, but they are looking for ways to gain better control over their employee benefits budget," Reimer says. "So, instead of making a traditional defined benefit commitment and paying a percentage of current and future premiums, the AGC Alternative allows them to simply pay a flat dollar amount by setting a defined contribution. This helps members better predict their employee benefits budget as they work to control the increasing cost of health care."

The AGC Alternative also has wellness program offerings, Perrin says. "The only way to really impact long-term costs on an ongoing basis is to emphasize wellness," he says.