Several facets of the Affordable Care Act come into play beginning in 2016, raising questions about how the law’s continuing implementation will impact the senior housing industry.
A survey released earlier this year by the International Foundation of Employee Benefit Plans found that 33% of employers expect the greatest cost increase from the ACA to take place in 2016.
Two senior housing providers and a human resources-focused consulting firm recently chatted with SHN about what they expect in the next few months and how they’ve prepared. Providers don’t necessarily see 2016 as a crisis point, but requirements of the historic health care reform law passed in 2010 are still creating notable instability and cost pressures, which are expected to persist in the years to come.
A Keen Eye on Costs
Being a relative newcomer in the senior living sector, Anthem Memory Care anticipated where the ACA was headed when it started up about three years ago. A developer and operator based in Oregon, Anthem has built and leased six assisted living communities with over 1,500 beds dedicated to dementia and Alzheimer’s care in California and Colorado, with projects underway in Illinois.
Decisions regarding the ACA have been made on the front end of business planning, allowing Anthem to provide competitive insurance coverage for employees right off the bat, Principal Lewis McCoy told SHN.
“We didn’t want to engage in certain employee benefits and then make a whipsaw change when ACA mandates happened,” McCoy said.
Despite careful planning, though, McCoy acknowledged there are still some unknowns that could force Anthem to make some changes.
Currently, McCoy said 25% of Anthem’s staff is choosing not to take out health insurance through the company, whether that’s because employees are on a spouse’s plan or don’t want the deduction from their paychecks. As such, he said he and his staff are sitting down with workers to ensure that they understand ACA requirements mandating that people have a certain amount of health insurance coverage, and the penalties they might face if they don’t comply with them.
This effort to educate the Anthem staff proves an administrative burden, albeit slight, McCoy said, and could result in more employees enrolling in Anthem’s insurance offerings. Over the next couple of years, then, the cost for Anthem to insure its employees could escalate given the company’s coverage model. Anthem presently covers 100% of health insurance premiums by an employee’s third year of enrollment, a format that may require alteration if it becomes too expensive, McCoy said.
Anthem also intends to pay close attention to the hours worked by part-time and on-call staff to ensure that these employees are not averaging more than 30 hours a week, which would make them eligible to receive benefits and add further costs for Anthem to shoulder, McCoy said.
The ACA employer mandate defines anyone who works an average of 30 hours each week as full-time, and employers are required to provide a minimum level of insurance coverage for these employees or face penalties. Businesses with more than 100 full-time equivalent employees will be required to insure 95% of full-time workers by 2016, while small companies with 50 to 99 full-time equivalents will need to start insuring full-time workers.
Still, McCoy said he doesn’t have any significant qualms as 2016 approaches, and that the “sky is not falling” when it comes to ACA implementation.
Reporting requirements slated for 2016 will prove the costliest for Benchmark Senior Living in terms of ACA compliance, said Sabrina Wiley, senior director of human resources operations at Benchmark.
Benchmark, which operates 51 communities in six New England states and one in Pennsylvania, maintains about 5,300 full-time and part-time associates.
Each month, employers will be required to file certain forms with the IRS that show the health coverage they offer to their employees meets ACA requirements. Given the nature of the reporting, Benchmark opted to outsource the task, a move that Wiley said makes it manageable, but expensive.
Come 2017, however, Wiley said reporting will be completed in-house, eliminating the added cost to adhere to the requirements.
Otherwise, Benchmark actively measures the hours worked by each employee, and has been doing so since 2014, informing communities when someone is approaching the 30-hour threshold. As a rule of thumb, Benchmark attempts to stick with a 60-40 ratio of full-time to part-time employees, but scheduling to ensure that isn’t strictly enforced across the board.
“We set hours more around the needs of residents and less around benefits and budget concerns,” said Timothy Reilly, vice president of human resources for Benchmark.
Not in the Clear after 2016
As 2016 draws near, Merit Senior Living advises senior housing providers to make sure they have all their ducks in a row to guarantee smooth ACA implementation and avoid unnecessary costs.
Merit has partnered with 70 senior living clients over the past 14 years to facilitate employment needs for their clients’ more than 6,000 employees.
Employers should ensure that if they have 50 employees considered full-time, that they are prepared to be in compliance with the employee mandate, said Merit President Lisa Welshhons.
Senior housing providers should also make sure they have the adequate capacity for ACA reporting components and ensure that they have a solid method for tracking hours, Welshhons said.
Providers that employ between 50 and 99 full-time employees, specifically, should also prepare for adjusted community rating rules, Welshhons said. These entail different premiums for different ages if an employer’s workforce varies from the makeup of the national workforce.
“This rating structure will no doubt create administrative challenges with different rates for each employee based on their age and family size, not to mention the difficulty for the employer to budget accordingly,” she said.
Despite Benchmark predicting that 2016 will be the costliest year regarding the ACA and Anthem not citing serious financial concerns, however, Welshhons said she expects costs stemming from the ACA to continue to increase.
“I don’t see a lot of stabilization,” she said. “From an overall cost perspective, I wouldn’t anticipate a decrease by any means.”
For one, Welshhons said health care premiums are expected to continue to trend upward, and more enrollment in employee plans over time will drive them up further. And in 2018, many providers will be impacted by the Cadillac tax, which imposes an annual 40% excise tax on plans with annual premiums exceeding $10,200 for individuals or $27,500 for families, to be paid by insurers.
“It’s going to be more challenging to provide affordable health care, but at the same time, providers are going to have to be competitive with what others are doing, especially as premiums continue to go up,” she said.
Written by Kourtney Liepelt