Senior housing executives are losing sleep over the universal health insurance coverage provision of the Affordable Care Act (ACA) as they try to predict the eventual costs to their companies.
“The ACA is one of those things that’s keeping me up at night,” said Pat Mulloy, CEO of Kentucky-based Elmcroft Senior Living, during a general session at the National Investment Center (NIC) for the Seniors Housing & Care Industry’s 2013 Regional Conference in San Diego.
Company leaders are trying to get educated on what the law actually means, Mulloy said, and while it’s becoming clearer each month as CMS issues new rules and guidance for implementing the massive healthcare reform bill, it’s hard to predict human behavior.
Employers with 50 or more full-time employees are required to offer affordable, adequate coverage to those full-time employees. By 2015, that coverage must extend to dependents as well. The largest employers, with more than 200 employees, are required under the Affordable Care Act to automatically enroll new, eligible employees for the company-sponsored healthcare plan on an opt-out basis.
Starting in 2014, those who fail to provide this coverage may be subject to a penalty of up to $2,000 per full-time employee, beyond the company’s first 30 workers.
While insurance costs have actually flattened a bit in the past year, according to Mulloy, the big cost driver for many companies will be increased participation.
“My big worry is the cost-factor. I stay up at night fretting about that,” Mulloy said. “If [people] abide by the law, where they’re uninsured today and decide to go get coverage, behaviorally, it will drive up participation.”
Elmcroft has about 5,000 employees, and its current company-sponsored health insurance plan has a 70-30 co-pay. Of the company’s full-time employees, about 65-70% are already enrolled in company coverage. Starting in 2014, though, most people will be required to have health insurance—or pay a penalty if they don’t comply.
Were participation to rise above 70%, and the company continues to contribute about 70% of coverage, Mulloy said, that could substantially drive up health insurance expenses.
“The ‘aha’ moment is, intuitively you’d think people will just go to exchanges—maybe they won’t go to our plan,” he said. “But if they do that, they [would pay] 100% of the cost [of the insurance policy]. However that gets priced out, you’d think behaviorally they’d go to our plan. It’s a huge cost driver in our business.”
Stephanie Handelson, president and COO of Benchmark Senior Living, says she is “absolutely” concerned about how the healthcare reform law’s insurance requirements will impact her company’s bottom line.
“For us, it’s really going to be about the participation and how many more people come onto our plan,” she says. “I believe volume alone is going to be a big issue.”
Benchmark currently has about 2,350 associates who are considered “full-time” under the ACA definition of working 30 or more hours a week. Of those, 60% are enrolled in medical insurance, with an average monthly medical deduction—based on plan enrollment, coverage level, length of service, and Wellness Program participation—of $240, or 7.1% of average monthly pay, meeting the law’s affordability requirements.
While Benchmark currently has two active plans—a PPO and a consumer-driven plan—the company has room to make changes in restructuring contributions and offering lower employer contribution for certain plans, says Handelson, and is exploring a change to a self-insured plan. If they do so, she says Benchmark could avoid the Health Insurance Industry Fee under the ACA that would add 2-4% to the cost of insurance renewal negotiations for 2014.
If Benchmark were to receive a 2014 insurance renewal consistent with industry trends, Handelson says, costs would increase approximately 6-8%. The company is expecting an additional 4% increase as participation levels rise due to the ACA’s individual mandate. The resulting net impact to Benchmark would be about $1.2 million, she says, and would require an additional $3.6 million in revenue to cover the cost.
Four in 10 healthcare services employers expect costs to increase 3% or more due to ACA requirements that start in 2014, according to Mercer’s National Survey of Employer-Sponsored Health Plans.
While most remain committed to offering health coverage, especially among large employers, some are weighing their options and figuring out the cost effectiveness of paying a penalty for not providing coverage.
“Every one of them is concerned [about health care insurance coverage for employees],” says Gregg Hathorne, partner at public accounting and consulting firm CliftonLarsonAllen LLP. “Every one of them is going through an insurance evaluation criteria and thinking through the decision process.”
Written by Alyssa Gerace