What is in this article?:
- Expert shares advice on mitigating health care mandates
- Looking at the variables
Lockton Companies' Mike Kahley offers a closer look at the Patient Protection and Affordable Care Act
Looking at the variables
There are some adjustments restaurateurs can make to help address higher costs associated with the health care law, Kahley said.
One option is to reallocate labor and hours. Kahley said operators could reward their best performers by scheduling them to work more than 30 hours, thereby allowing them to be eligible for the health care benefits the company offers. At the same time, marginal performers can be managed to a part-time status of 28 or 29 hours a week, therefore disqualifying them from receiving benefits.
“That strategy will help a company retain its best employees,” he said.
The law is also expected to provide foodservice operators with an initial 90-day “free pass” during which time they are not required to provide health insurance to new full-time employees or to pay the penalty. Given the industry’s high turnover rate, this can help lower associated costs and ease the operational burden of insuring those employees who may not stay with the company or work only part-time.
In addition, the law allows employers to examine the work history of veteran employees in a “look-back period” that can extend up to 12 months to determine whether the employees average a minimum of 30 hours per week or 130 hours per month. Lockton suggests that this could help operators whose employees work variable hours on a seasonal basis as well as employers who suffer from high turnover. Again, this will enable operators to better manage how many full-time workers they employ and insure.
Leveraging a wellness program
The PPACA also allows businesses to implement an outcomes-based wellness program. It is designed to help an employer better manage the risk associated with the overall health of employees, decrease absences and mitigate costs associated with health care coverage.
For example, if a medical exam or health screening reveals that an individual has an unhealthy cholesterol level, the employee would be notified and given a designated period of time to address the problem. If the problem is not corrected, a surcharge of up to 20 percent can be added legally to the amount of the premium that employee must pay. Under the law, tobacco use can boost the surcharge to as high as 50 percent, Kahley said.
These surcharges could potentially elevate the price of coverage beyond what an employee is willing to pay, which could persuade the individual to purchase insurance on the exchange where the cost might be lower. Employers, however, risk being penalized for that move.
That's because the law states that employers with more than 50 full-time employees will be charged a nondeductible $3,000 for each employee who seeks federally subsidized coverage at an exchange because the employer’s plan is not deemed "affordable" or "qualified" under the law. The PPACA maintains that "affordable" plans cannot cost the individual employee more than 9.5 percent of the total shown on their W-2 form. In addition, "qualified" plans must cover at least 60 percent of an employee’s health care costs.
The addition of surcharges could likely boost the cost beyond the 9.5 percent mark for the employees, which would qualify them for a subsidy on the public exchange and result in an employer penalty. However, according to Kahley, the $3,000 penalty would almost certainly be deemed less expensive for an employer than having to insure a high-risk individual on the company plan.
Contact Paul Frumkin at firstname.lastname@example.org.
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