Employers Fear Obamacare Will Hike Health Costs

(MoneyWatch) Obamacare may cost more than experts previously thought, according to a survey of 900 employers released Wednesday. As companies scramble to prepare for a wave of new health care rules that go into effect next year, an increasing number have become pessimistic about the cost, according to Mercer, a benefits consulting firm.

Roughly one in five employers (19 percent) now expect that health care costs will rise by more than 5 percent as the result of the law. When asked the same question two years ago, only 14 percent of respondents thought the Affordable Care Act would significantly raise costs. Moreover, just 9 percent of employers still think the law will have little or no impact on costs. When asked the same question two years ago, a quarter of the respondents thought the impact would be minimal. Almost a third of employers say they still can't predict the impact.

This confusion is understandable, says Mercer President and CEO Julio A. Portalatin. Even though employers can calculate how many workers will be newly eligible for coverage, they can only guess at how many will choose to buy coverage. 

All individuals are required to have health coverage in 2014, but the penalty for failing to enroll in an insurance plan is a relative pittance in 2014 -- just $95 per individual or 1 percent of household income, whichever is greater. Since that penalty is likely to be far smaller than even the employer-subsidized cost of insurance, employers speculate that many workers who didn't choose to get coverage in the past will remain uninsured.

By the same token, employers may be making the choice more difficult by opting to pass on an increasing amount of the cost. Nearly one-third say they will require a bigger contribution for dependent coverage next year and 13 percent will hike the contribution for employee-only coverage. As a result, just 17 percent of employers are budgeting for an increase in health care enrollment.

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Employers Say No to Obamacare

 Highlight transcript below to create clipTranscript:  Print  |  Email Go  Click text to jump within videoFri 15 Mar 13 | 07:52 PM ET A new report says employers will have to pay an extra $63 for every person insured when Obamacare takes effect. Gracie-Marie Turner, Galen Institute president; Democratic Strategist Jimmy Williams; and CNBC's Michelle Caruso-Cabrera, share their opinions.

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States, Employers Junking Obamacare 'Calculators'

Two online health calculators designed by federal officials to help states and employers comply with Obamacare mandates are riddled with so many flaws that users are abandoning them, The Washington Examiner has learned.

Users say the calculators - one used by state officials, the other by private employers - too often are confusing, produce contradictory results, do not reflect real world conditions, and use old data.

The problem is so acute that several states are weighing whether or not to create their own calculators. The Obamacare program is supposed to be fully implemented and functioning on Jan. 1, 2014.

The employer calculator particularly baffles those who offer health insurance plans and are struggling to comply with the law.

Under Obamacare, states sponsoring health insurance exchanges must use the federal calculator to evaluate their standardized plans for individuals and small groups. Each plan must offer services in 10 medical categories.

Federal health care officials can use the results produced by the calculators to force states to change premium prices and out-of-pocket expenses for consumers. The plans are supposed to go into effect October 1 in the phased implementation of Obamacare nationwide.

Employers use the second calculator to report line-by-line benefits and employee costs. A failing calculator number can force employers to pay stiff fines.

The Centers for Medicare and Medicaid Services in the U.S. Department of Health and Human Services designed both calculators. A CMS spokesman declined to comment for this story.

States and insurance companies are supposed to use an "Actuarial Value" calculator. The actuarial value measures benchmarks for the four state standardized plans.

An AV value of 60 means the state plan covers 60% of the costs and enrollees pay 40%. The four plans range from 60% to 90% coverage.

Employers are to use a "Minimum Value" calculator, which assesses whether an employee health plan meets minimal federal criteria.

CMS released "beta" versions of the calculators in November 2012 and a "final" calculator this February.

The most glaring problem, according to users, is that the calculators do not reflect real world conditions.

Paul Hencoski, a lead partner at KPMG, the audit and accounting firm, said the AV calculator does not always reflect the true value of a proposed policy. His firm represents 19 states trying to set up health care exchanges.

"There's been some question around the results they've been getting. And whether they represent the true actuarial value of what was being offered, Hencoski told The Washington Examiner.

Julie Peper, a senior consulting actuary at Wakely Associates in Denver, CO whose firm is advising Oregon, Vermont and Massachusetts agrees. "There are some things that are different in the AV calculator than what will be in practice," she said.

Mark Jamilkowski, director of KPMG's actuarial services practice told The Washington Examiner the situation is so acute "There are some states we know of that are interested in launching their own calculator." KPMG would not identify the states.

Insurance brokers who assist employers say the MV calculator contains flaws too. Susan Rider, an account executive with the Indianapolis brokerage firm of Gregory & Appel told The Washington Examiner, "they don't ask the right questions. There are a lot of things missing from it that I as a broker look for in a plan."

Rich Stover, a partner with New Jersey-based Bucks Consulting, an actuarial firm, says the MV calculator is so rigid it cannot accept special features in large employer plans.

"Unfortunately many large employer designs, there is some nuance or tweak in the design that won't fit the model. And that's a problem."

Jessica Waltman, a Senior Vice President for the National Association of Health Underwriters concurs. "Anything non-standard doesn't give me the option," she told The Washington Examiner.

CMS has permitted states and employers to opt out of the calculator, but then must hire expensive actuaries to certify the plans meet federal standards.

Opting out costs money. "That's frustrating for employers because it means you've got to incur additional costs and effort just to have the minimum value determined," says Stover.

There also is frustration the "beta" and "final" AV calculators deliver different results.

Peter Van Loon, the Connecticut Exchange's chief operating officer said three of its plans accepted by the November calculator were rejected in February.

"We put the plan that passed the muster in the November Actuarial Value calculator into the new one in February and lo and behold, we were out of compliance," he explained.

Another complaint is that CMS is using old data. Rider says, "They're using 2009 data." Waltman agrees. "One of the concerns we had was that the data is old."

CMS has acknowledges it received many complaints. "Many commenters noted a variety of potential technical issues in the proposed AV Calculator" it stated in the February 25, 2013 federal register.

Richard Pollock is a member of The Washington Examiner Watchdog investigative reporting team. He can be reached at rpollock@washingtonexaminer.com.

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GOP Governors Refusing To Expand Medicaid Could Cost Their States’ Employers More Than $1 Billion

The Republican governors who are refusing to accept Obamacare’s optional expansion of the Medicaid program typically cite financial concerns; despite all evidence to the contrary, GOP leaders claim that accepting federal funds to extend health coverage to additional low-income American will end up being too costly for their states. According to a new study, however, they have it backwards. Continuing to resist health reform could be significantly financially riskier than simply agreeing to expand Medicaid.

Each governor resisting Medicaid expansion could end up costing the employers in their state over $1 billion dollars, a new Jackson Hewitt Tax Service report finds. That’s because, since the health reform law seeks to ensure that everyone has access to insurance, Obamacare holds businesses with more than 50 employees responsible for making sure their workers have adequate benefits. Employers won’t be penalized for failing to offer health care to their low-wage workers if those employees can access public insurance through Medicaid — but if states don’t expand their Medicaid pools, the workers who have no other way to get health care could end up costing their employers:

A clause in the 2010 health-care overhaul penalizes some employers when their workers aren’t able to obtain affordable medical coverage through the company. Employers can avoid those fees if their workers qualify for Medicaid as part of an expansion that as many as 22 states have rejected, according to a report today by Jackson Hewitt Tax Service Inc.

Without Medicaid, a “shared responsibility” payment of as much as $3,000 may be triggered for each employee who can’t get insurance through their company. In Texas, the largest state to refuse to increase Medicaid, employers may be liable for as much as $448 million in fines, the study found. In Florida, where the legislature has refused an expansion supported by Governor Rick Scott, employers may pay as much as $219 million. [...]

Of course, this won’t come as welcome news to many of the companies that have so far gotten away with denying their workers health benefits. Employers are decrying Obamacare’s “shared responsibility” provision for potentially raising their costs, threatening to slash their workers’ hours, freeze hiring and lay off staff, or raise the prices for their products.

But the health law is simply trying to work within an employer-based insurance system that hasn’t historically been able to ensure that poor Americans can access the benefits they need. If low-wage workers can’t qualify for public insurance programs because their governors won’t expand Medicaid’s eligibility levels, then they will need to be able to get health care from their employers. And if their bosses won’t provide it, they’ll have to turn to the subsidized insurance on Obamacare’s health exchanges — triggering the employer fine.

Even aside from Medicaid expansion’s potential to help alleviate the “shared responsibility” fee, several reports have projected that the states choosing to expand their Medicaid programs will actually save money by doing so. The financial benefits are largely thanks to the increased federal funding that will free up states’ funds for other purposes, but also because of the reduced strain of providing fewer health services for the uninsured once more people are covered.

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Employers Eye Bare-Bones Health Plans Under New Law

Employers are increasingly recognizing they may be able to avoid certain penalties under the federal health law by offering very limited plans that can lack key benefits such as hospital coverage.

Benefits advisers and insurance brokers—bucking a commonly held expectation that the law would broadly enrich benefits—are pitching these low-benefit plans around the country. They cover minimal requirements such as preventive services, but often little more. Some of the plans wouldn't cover surgery, X-rays or prenatal care at all. Others will be paired with limited packages to cover additional services, for instance, $100 a day for a hospital visit.

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More Employers Setting Up Nap Rooms for Weary Workers

Workers can be forgiven if they look at the company with envy. Armed with technology and operating in a global economy, they are a tired lot.

(Read More: Mobile Wipes Out Eight-Hour Workday)

Without the benefit of a brief afternoon nap, they have turned to habits both healthy and unhealthy to fight their fatigue, only to be faced with the same early-morning wake-up call the next day.

Health experts have gone so far as to say worker fatigue is an epidemic that is weighing on workers' health and productivity. And employers who have ignored it—most of them—have done so at their own risk.

"The measures we have (of productivity) don't necessarily measure quality," said Joel Naroff, an economist based in Holland, Pa. "What workers learn is to get the job done. While they may be trying to get it done as best as possible, the operative phrase is 'best as possible,' not 'best.' "

Sleeping on the Commute

Many workers throughout the nation may feel particularly groggy Monday morning. They lost an hour by setting their clocks ahead over the weekend for the annual ritual of daylight saving time.

New Jersey Shore-area workers arrived at the Middletown, N.J., train station one recent Monday for a trip to northern New Jersey or New York that would take upward of an hour, trudging along the sidewalk, coffee and smartphones in hand, while they waited for the train.

While some commuters scoffed at the idea that they were sleep-deprived, others flashed a knowing smile at the question. Jessica Chepauskas, 23, of Middletown, was one of them. She used to drive part of the way to her job, but recently changed her routine and now takes NJ Transit "so I get an extra hour of sleep," she said.

Technology may be getting faster and the world may be getting smaller, but the number of hours in the day hasn't changed.

American workers emerging from the recession have been under pressure to work harder, with fewer hands on deck. They've been handed technology to help them remain in constant touch. And they've been taking care of children and aging parents.

Some 43 percent of Americans ages 13 to 64 said they rarely or never get a good night's sleep on weeknights, according to a 2011 poll by the National Sleep Foundation, a research group based in Arlington, Va.

Part of the Problem?

Humans are designed to set their sleep patterns around daylight and nightfall. Yet almost everyone—95 percent—said they use electronics, including television, computers, video games, cellphones or a combination of them within an hour of bedtime, subjecting themselves to an artificial light that isn't conducive to restful sleep, researchers from the foundation said.

(Read More: How a 390-Year-Old Family Business Avoids Layoffs)

It creates all sorts of hazards. Fatigued workers have trouble concentrating and are more likely to suffer from chronic diseases such as hypertension, diabetes and depression, according to the U.S. Centers for Disease Control and Prevention.

And they can put others' lives at risk. Continental Flight 3407 from Newark, N.J., to Buffalo, N.Y., crashed on its approach in February 2009, killing 49 passengers and crew members and one person on the ground. Investigators from the National Transportation Safety Board said the pilots' performance was probably impaired by fatigue.

"Reducing accidents and incidents caused by human fatigue has been on the NTSB's Most Wanted List since 1990," the agency wrote in its accident report.

Despite alerts such as that from the NTSB, employers have been slow to pay attention to sleep, said Carol Ash, director of sleep medicine at Meridian Health System in New Jersey, who consults with Fortune 500 companies.

It seems odd. Employers, trying to rein in soaring health care costs, have increasingly taken on more oversight of their workers' wellness. They have prodded their workers to exercise. They have encouraged them to keep their blood pressure, cholesterol and weight in check. But they don't think twice about asking them to be on call 24/7, Ash said.

Meanwhile, until the fourth quarter of last year, employers recovering from the recession had tried to stay afloat with gains in productivity, squeezing more work from their existing staff, according to Labor Department statistics.

But the figures don't measure the quality of work.

"For the vast majority of people, it's a formula for failure," Ash said. "The more you have a sleep deficit, the lower the productivity. It's an inverse relationship."

Not that every employer needs to carve out space for naps. Ash said workers needing time to nap could be cured if they got a restful night of sleep. (A 2010 survey by the Society of Human Resource Management, a trade group, found just 5% of employers had a nap room on site.)

But Colleary saw the possibilities.

He had an internship with a bank in New York that touted a nap room, only it wasn't well-thought-out. There was room for three people. There were no assigned times. He would open the door, turn on the light, and inadvertently wake anyone who was trying to nap.

At Nationwide Planning Associates, he gathered data showing the benefits of napping, scheduled a meeting with management and persuaded them to spend as much as $10,000 on the project.

Colleary said they make sure there are enough employees to handle calls from clients. And if they are short-staffed on a given day, they will forgo their nap. But the bulk of his co-workers have taken the company up on the perk.

"It was a long time in the making," Colleary said. "It was the middle of the day, and we would say, 'I'm really tired.' 'Me, too, I wish we could take a nap, ha ha ha.' Then over time it became more serious, and we thought, what if we really could do this?"

Advice for your best sleep

Having trouble staying awake at work? Carol Ash, director of sleep medicine at Meridian Health, offers these tips:

Get between seven and nine hours of sleep a night.
Go to bed and wake up at the same time, even during weekends.
Don't nap for more than 20 minutes.
Turn off electronics an hour before bed.
Keep your room dark, quiet and cool, preferably between 65 degrees and 70 degrees.
Avoid spicy food. Avoid alcohol at least three hours before sleep. And avoid caffeine in the afternoon and night.

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Some Employers Could Opt Out of Insurance Market, Raising Others’ Costs

Companies can avoid many standards in the new law by insuring their own employees, rather than signing up with commercial insurers, because Congress did not want to disrupt self-insurance arrangements that were seen as working well for many large employers.

“The new health care law created powerful incentives for smaller employers to self-insure,” said Deborah J. Chollet, a senior fellow at Mathematica Policy Research who has been studying the insurance industry for more than 25 years. “This trend could destabilize small-group insurance markets and erode protections provided by the Affordable Care Act.”

It is not clear how many companies have already self-insured in response to the law or are planning to do so. Federal and state officials do not keep comprehensive statistics on the practice.

Self-insurance was already growing before Mr. Obama signed the law in 2010, making it difficult to know whether the law is responsible for any recent changes. A study by the nonpartisan Employee Benefit Research Institute found that about 59 percent of private sector workers with health coverage were in self-insured plans in 2011, up from 41 percent in 1998.

But experts say the law makes self-insurance more attractive for smaller employers. When companies are self-insured, they assume most of the financial risk of providing health benefits to employees. Instead of paying premiums to insurers, they pay claims filed by employees and health care providers. To avoid huge losses, they often sign up for a special kind of “stop loss” insurance that protects them against very large or unexpected claims, say $50,000 or $100,000 a person.

Such insurance serves as a financial backstop for the employer if, for example, an employee is found to have cancer, needs an organ transplant or has a premature baby requiring intensive care.

In a report to clients last year, SNR Denton, a law firm, wrote, “Faced with mandates to offer richer benefits with less cost-sharing, small and midsize employers in particular are increasingly considering self-insuring.”

Officials from California, Maine, Minnesota, Utah, Washington and other states expressed concern about the potential proliferation of these arrangements at a recent meeting of the National Association of Insurance Commissioners.

Stop-loss insurers can and do limit the coverage they provide to employers for selected employees with medical problems. As a result, companies with less healthy work forces may find self-insuring more difficult.

Christina L. Goe, the top lawyer for the Montana insurance commissioner, said that stop-loss insurance companies were generally “free to reject less healthy employer groups because they are not subject to the same restrictions as health insurers.”

Insurance regulators worry that commercial insurers — and the insurance exchanges being set up in every state to offer a range of plan options to consumers — will be left with disproportionate numbers of older, sicker people who are more expensive to insure.

That, in turn, could drive up premiums for uninsured people seeking coverage in the exchanges. Since the federal government will subsidize that coverage, it, too, could face higher costs, as would some employees and employers in the traditional insurance market.

Large employers with hundreds or thousands of employees have historically been much more likely to insure themselves because they have cash to pay most claims directly.

Now, employee benefit consultants are promoting self-insurance for employers with as few as 10 or 20 employees.

Raeghn L. Torrie, the chief financial officer of Autonomous Solutions, a developer of robotic equipment based in Petersboro, Utah, said her business started a self-insured health plan for its 44 employees on Jan. 1 as a way to cope with the uncertainties created by the new law.

“We have a pretty young, healthy group of employees,” she said.

In Marshfield, Mo., J. Richard Jones, the president of Label Solutions, an industrial label-printing company with 42 employees, said he switched to a self-insurance plan this year “to hold down costs that were going up because of government regulation under Obamacare.”

The Township of Freehold, N.J., made a similar decision in January to gain more control over benefits and costs for its 260 employees.

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Why CBO Figures More Employers Will Drop Health Coverage

The Congressional Budget Office says the year-end fiscal cliff deal that preserved lower tax rates for most households produced a little-noticed side-effect: Fewer people will get health insurance from their employer over the next decade.

That nugget of economic thinking pops up in the nonpartisan office’s annual update of its budget and economic forecast.

The CBO has long said it expects the new federal health law will prompt some companies to drop millions of employees from health plans because workers have new options to buy insurance on their own. In August, CBO put the number at four million over 10 years. Now it’s seven million.

What changed?…

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