Rain Delay – Postponing Play (or Pay)

By Ron E. Peck, Esq.

Sr. VP & General Counsel – The Phia Group, LLC / Phia Group Consulting, LLC

A Delay In Play (or Pay) – The News Isn’t As Good As You May Think

The Obama administration announced that it is postponing the requirement that employers provide employees robust, affordable health plans; also known as “pay or play.”  You may think that this is good news…  It’s another year to consider options, prepare funds, and study the intricacies of PPACA.  DON’T BE FOOLED! 

Regulatory officials have stated that the delay was prompted by so-called “compliance complexity concerns.”  Employers have attacked the rule from every angle; targeting unrealistic expectations, costs, and difficulties in reporting.  In addition, many employers have threatened to “trim” their employment rosters.  Employers with fewer than 50 employees (or full-time equivalent employees) are exempt from the rule.  It should have come as no surprise, then, that some employers were going to cut employees’ hours or terminate staff, dropping below 50 lives.  With all of this in mind, the administration – “thankfully” – pulled back on the reins.  Great news, right?  Wrong!

At The Phia Group, we hope for the best but plan for the worst.  For the following reasons, now is not the time to disregard cost containment efforts.

Mandates Everywhere; But Only One Delayed – The Need for Coverage in 2014 Remains…

Take note; the delay (applicable only to the employer mandate) does not affect the individual mandate.  Individuals (such as employees) will need to secure coverage for themselves by 2014, or pay a penalty.  That means employees will look to their employers to offer affordable, robust health plans.  Now, more than ever, employers need to consider how they are going to supply employees with the type of coverage the law requires individuals to secure.  The Phia Group has been at the forefront of assisting employers in doing just that.

The Phia Group has been helping employers – whether by their own free will or in response to the “pay or play” mandate – gear up to offer affordable, robust health plans.  For many employers, this meant innovative, new insurance formats – such as smaller networks and self funded plans.  This desire by employers, to “play” rather than “pay,” caught the regulators off-guard.  Indeed, the “powers that be” assumed employers would – in a flurry of exasperation and red-tape – surrender; dropping their plans, paying the (relatively small) penalty, and exiling their employees to the exchange.  The exchange would then be flooded by low risk, healthy lives… building up the risk pool and enabling the exchange to bear the cost of insuring a previously uninsurable population, also headed for the exchange.  Imagine their surprise, then, when employers with healthy, low risk populations instead chose to self-fund health plans, and keep those desirable lives to themselves.  This phenomenon came to be known as adverse selection. 

Another Way to Counter Adverse Selection? 

The Phia Group and its allies have been regularly updating you regarding the National Association of Insurance Commissioners’ (the “NAIC”) and State legislators’ scramble to limit small employers’ ability to obtain stop-loss protection, and thus, self-fund.  By restricting stop-loss access, these regulators effectively increased the risk borne by the employer, made self-funding less viable; convincing some employers to – as previously hoped – ship their healthy lives to the exchange. 

Most States, thanks in large part to this industry’s efforts, didn’t follow suit.  As a result, facing the pay or play mandate, employers across the nation worked with us to prepare for implementation of cost-effective health plans in 2014; keeping healthy lives to themselves and ensuring their employees enjoyed affordable, robust benefits.  Now, however, those employers are being told to hold off… wait a second… and spend 2014 “planning” for 2015.  Don’t fall into this trap; friends don’t let friends slacken benefits coverage.  Now, more than ever, the innovative cost-containment services offered by The Phia Group are needed.

Don’t Relinquish Your Momentum – Now is the Time for Innovative Benefit Plans!

Rest assured; employees – driven by the individual mandate – will look to employers for their health benefits in 2014.  If they don’t get what they want, they will buy into the exchange.  This is why, in 2014, employers and those that service them need to open dialogue with The Phia Group, so that we can ensure affordable, attractive coverage is made available to these employees.  Why?  If employees purchase coverage via the exchange in 2014, employers will not be able to shift those lives back to their employment based plans in 2015.  This simple concept – momentum – is tangible.  If the momentum we’ve built over the last two years, (momentum geared towards innovative employer plans retaining lives), shifts in 2014; if people buy into the exchanges in 2014, because employers are now “off the hook” for a year; these low-risk lives will not be coming back.  As a result, in 2015 and beyond, employer plans will face great difficulty in securing lives for their plans, maintaining affordable programs, and avoiding the pay or play penalties.

Confusion Reigns Supreme

This alteration in deadlines has caused mass confusion.  The Phia Group is here to help.  For instance, in light of the delayed enforcement of the Employer Mandate, employers have started to question how this will impact their Summary of Benefits and Coverage (SBC) for 2014.  The short answer is: it won’t.  This year the agencies provided a revised template, for use in creating SBCs in 2014.  One of the changes to the SBC template was the addition of a statement regarding whether the plan meets the minimum value standard.  Fortunately for those who have consulted with The Phia Group, their SBCs are on-track.

Indeed, it should be noted that while the employer plan does not have to meet the minimum value standard or pay a penalty … in 2014, an individual will potentially still need to have a minimum value standard plan.  Thus, the determination as to whether the plan meets this standard will still be relevant to include on the SBC for 2014.  So, for this and other reasons, even though the “pay or play” mandate has been postponed, employees will still need information about their employer-sponsored plan (i.e. if it’s affordable and meets minimum value standards) if they are planning on enrolling in the exchanges, since this is information they wouldn’t know on their own.  On the health plan’s SBC, a plan must indicate if it meets the minimum value standard.  Likewise, in the DOL’s “Model Notice of Coverage” for employers who offer a health plan, the employer will need to provide to all its employees basic information about the employer-offered health coverage.  There is a check box on the notice that states, “this coverage meets the minimum value standard, and the cost of this coverage to you is intended to be affordable, based on employee wages.” 

This and other requirements for 2014 cannot be ignored.  Luckily, The Phia Group is here to help.

The Bottom Line

In our opinion, we must all proceed as if the pay or play mandate remains in effect for 2014, strive to retain employee lives, and maintain robust health plans.  We must ensure that the momentum stays in our favor entering 2015.  Contact The Phia Group’s Director of Client Services – Andrew Milesky – at Andrew.Milesky@PhiaGroup.com, so that we can help you maintain positive momentum and face a post-reform future with confidence.