The Patient Protection and Affordable Care Act of 2010 (PPACA, Public Law #111-148) is changing how, and at what level, employers provide health-care benefits to their employees and retirees. Most state and local government employers currently provide full-time workers and eligible retirees with the option of health-care coverage. Over the next decade, the PPACA will require governmental employers that sponsor group health plans to provide specified levels of health-care benefits or face financial penalties. PPACA and associated federal regulations for implementing it will provide options for how these benefits may be provided, and states are likely to put forth their own additional requirements. Public-sector employers must stay abreast of all new requirements, evaluating whether they need to adjust their health-care programs and operations in order to comply.
GFOA recommends that state and local government employers that sponsor group health plans implement a process for reviewing federal health-care benefit requirements at least annually. Doing so will allow employers to plan ahead, allowing them to use the most cost-effective approach to ensuring compliance while offering appropriate benefit levels and options to employees and retirees. In establishing the monitoring process, state and local government employers should consider the following issues:
- Staffing levels and expertise. Plan sponsors should determine if they have sufficient staffing levels and expertise to monitor and develop viable options for addressing changing health-care benefit requirements. If not, plan sponsors should acquire the necessary expertise.
- Maintaining grandfathered status. Some of the requirements of the PPACA do not apply to employment-based health plans that were in existence on March 23, 2010, when the law was enacted. These are referred to as grandfathered plans. Government employers should work closely with their insurers and plan administrators to assess the costs and benefits of maintaining grandfathered status under the PPACA. Governmental employers that are undergoing significant structural changes in plan design and cost sharing might want to forgo grandfathered status so they can implement strategies that will provide them with more flexibility in plan design and pricing. In other cases, jurisdictions might find it more advantageous to limit future benefit changes in order to retain grandfathered status.
- Ability to comply with requirements. Employers should determine whether their health-care plans currently comply with the many PPACA requirements that will become effective within the next decade. They also need to identify any benefit and operational changes that will be required to achieve compliance, along with the potential economic impact on the plan sponsor, employees, and retirees. Government plan sponsors need to work closely with their insurers and plan administrators to consider how to begin altering their health-care plan designs to support compliance with the PPACA’S new requirements. Potential areas of change include preventive care, emergency care, quality reporting, maximum out-of-pocket costs, clinical trials, wellness benefits, and information sharing.
- Segregating retiree health-care plans. Retiree-only health-care plans are exempt from all of the new group health plan standards required by the PPACA, as well as many provisions of the Health Insurance Portability and Accountability Act (HIPPA). Accordingly, state and local government plan sponsors should assess the advantages of segregating retiree-only plans to allow more design and pricing flexibility. Segregating the retiree plan might make it easier to determine the premium costs associated with active and retiree plans, and then to allocate these costs appropriately to each group in an equitable manner.
- Using state exchanges. The PPACA requires each state to create an exchange in which individuals, small employers, and, ultimately, large employers can purchase health insurance. Public plan sponsors should consider the costs and benefits of using participating carriers in the state exchange to cover their employees and/or retirees, rather than continuing to provide separate self-insured or fully insured health benefit plans.
- Coverage options. Plan sponsors should seek to leverage coverage options. One possibility is assessing the expansion of Medicaid coverage under the PPACA and determining what portion of the government’s workforce might qualify for Medicaid benefits, based on family income. In addition, plan sponsors should examine their prescription drug plan design and coverage for retirees to be sure they are maximizing available subsidies under Medicare Part D. Determining all potential cost saving options is important for controlling the overall cost of the plan and also for calculating and reducing other postemployment benefit (OPEB) liabilities.
- James R. Napoli and Paul M. Hamburger, The New Health Care Reform Law: What Employers Need to Know – A Q&A Guide (Washington, D.C.: Thompson Publishing Group, 2010).
- The Segal Company Health Care Reform Guide (available at http://www.segalco.com/health-care-reform/).
- The Department of Health and Human Services Web site (available at http://www.healthcare.gov).