The federal health care reform saga continues. A Florida judge now has ruled the individual mandate unconstitutional in the very lawsuit Maine joined under the direction of its attorney general, William Schneider. As an insurance broker and consultant, I hope for a quick path to the U.S. Supreme Court and a final decision. The uncertainty is becoming an enormous burden for Maine businesses.
I’ll leave the argument for or against the law for the politicians, but I will say that the current uncertainty is becoming a real problem. I can’t tell you how frustrating it is to work with clients and ask them to make decisions in the midst of uncertainty. We all need to realize that businesses are incurring costs today that are directly related to this law.
For example, the federal law expands the reach of section 105(h) nondiscrimination rules to fully insured plans. I won’t bore you with too many details, but 105 essentially affects how an employer defines eligibility requirements and contributions for their health plan.
One client of mine offers retiree health coverage. They generally do not contribute toward the cost of the plan for retirees, but there are a few exceptions from past employment agreements with key executives. In the past, provided that the retiree plan was insured and not self-funded, this was allowed. Because federal law extended the application of 105 rules effective January 2011, this employer spent time and money analyzing their retiree plan to ensure they were compliant.
This involved time spent in meetings with their insurance broker (yours truly). It also involved hiring an attorney to review past employment contracts and run testing to check for compliance. When all was completed, the IRS announced that the application of 105 rules to fully insured plans has been delayed until further guidance is issued.
We are also, in many cases, just two renewals from having to comply with the bulk of the law’s provisions, which take effect in 2014. Let’s assume that your group health plan renews July 1. You have a renewal in 2011 and 2012 that will carry you until July 2013. Your renewal then will need to comply with federal law, as your plan year will run into 2014.
Looking ahead, we know that plans will need to meet new standards regarding “essential benefits,” assuming your plan is not grandfathered, which most will not be. We await final guidance to know what “essential benefits” will be.
We also know that contributions will need to meet new affordability standards for employees. We have a sense of what will be required in terms of affordability; however, employers lack the information in most cases to determine by individual employee if they are meeting that threshold. It is a reasonable assumption that many Maine companies will need to make some level of adjustment to their plan and-or contributions.
In addition, employers are facing many new reporting requirements, new parameters around plan designs, limits to flexible spending account contributions, new rules regarding eligible expenses in FSAs, health reimbursement arrangements and health savings accounts. All of these changes can translate to needing amended plan documents, plan design changes, etc. All of this puts an enormous education burden on employers as well. They need to communicate and translate these changes to their employees.
The bottom line is that this federal law is causing a great deal of anxiety and cost — in both hard cost and time invested to understand how they are affected and what changes need to be made — for the business community. The year 2014 is not a long way off, especially when you consider the true workload companies are facing. Add to that the fact that all of this effort could be for naught if the law is ultimately struck down in court.
Whatever side you come down on in terms of love or hate for this law, we should all agree that a speedy track to the Supreme Court is to all of our benefit. The lack of certainty quickly is becoming the pressing problem for Maine’s business community. It also is keeping our focus away from where we need it most, solving the health care cost conundrum that continues to plague us and will with or without federal reform.
Joel Allumbaugh is president of the Maine Association of Health Underwriters and CEO of National Worksite Benefit Group in Hallowell.