Five things employees need to know NOW about PPACA

John Crable

For more than a year, Human Resources professionals have been talking about the Patient Protection and Affordable Care Act (PPACA). We’ve all paid attention to the updates and monitored the progress of implementation of this massive law.

However, that is not necessarily true of rank-and-file employees at your organization. Consider this: earlier this spring, roughly half of respondents to a Kaiser Family Foundation poll said they had not heard anything about the implementation of PPACA in their state. For the most part, employees know the positives of PPACA for healthcare consumers. They know the new law expands dependent coverage, provides for guaranteed issue and preventive care. However, all indications are that the details of healthcare reform and its impact remain a mystery to group employee benefits plan participants. Given this lack of awareness, HR professionals and benefits managers need to be prepared for the coming reaction and potential confusion.

Forward-thinking HR departments will begin to educate employees now. As you’re well aware, there is more than a little complexity involved, and repetitive employee communications will be needed to help explain benefits and the effect, if any, of PPACA on their specific situation.

With this in mind, here are five things your employees need to know now about PPACA:

  • They have more responsibility. One of the goals of PPACA is to give more ownership over health to individuals. Of course, this is a double-edged sword, because it means they must take ownership. As we like to say at Corporate Synergies, healthcare reform starts with you, the individual.
  • Costs will likely rise next year. In 2014, there will be new taxes and surcharges on carriers, who will in turn pass this cost on to employers. From there, employers will feel pressure to pass the cost along to employees, whether in the form of higher contributions or greater cost sharing.
  • Employers do not have to offer coverage for spouses. Of course, they don’t currently have to, either. The point is that PPACA is focused on employees. If employers’ costs rise, this could be something they choose to cut, meaning that spouses currently on an employee’s insurance may have to pay for coverage in 2014 and beyond. This could possibly hit some employees hard. If that’s the direction your organization intends to go, it’s better to communicate the bad news sooner rather than later. Please note that employers do have to offer coverage for dependent children (but that coverage is not subject to an “affordability” test; see below).
  • If you offer “affordable coverage,” they’re not eligible for a subsidy to buy insurance on a government exchange. Even if the employee chooses not to enroll in a plan deemed affordable, he or she will not be eligible for the public exchange subsidy. To be clear, the employee can still enroll in the public exchange, but will have to pay for it out of pocket. Most employer-sponsored coverage will be a better option for employees. The public exchanges are likely to be expensive (without a subsidy) and offer lesser coverage compared to typical employer-provided group employee benefits. Public exchanges figure to be even less appealing for many employees, given that navigating their complexities could be difficult and confusing and premiums will be paid with after-tax dollars.
  • There are harsh new penalties available for employees that do not work on their unhealthy behaviors. The National Association of Insurance Commissioners reported several years ago that 70% of healthcare costs are driven by behavior. Consequently, PPACA dramatically increases penalties for unhealthy behaviors such as smoking. It’s important to remember that one of the goals of PPACA is to change behavior and hopefully make Americans healthier. Therefore, the law allows for greater surcharges for those who willfully ignore that goal. Under PPACA, smokers could be required to contribute up to 50% more for their health insurance. Penalties for other unhealthy behaviors are as high as 30% (up from 20%). While these penalties cause outrage in some quarters, there is some logic to them. For instance, if you have a car accident or two, you are deemed a less safe driver and your insurance rates rise. If you don’t pay your bills on time, your credit rating plummets and you pay more for credit. This is the same general principle.

It’s important to realize employers are in something of a precarious position as PPACA gets implemented. They are the ones who will be in direct contact with employees, and they are the ones who will be delivering news that may be perceived as bad. In many instances, employers will be forced to make difficult decisions, such as reducing hours for some employees, or passing along cost increases. When employees complain, it’ll be tempting to blame healthcare reform, but this can quickly become a political statement, and therefore risk alienating some employees.

A better way to look at healthcare reform is to see it as an opportunity. Clear, honest employee education and communications can create stronger employee relationships and build greater trust within your workforce.