Employer Paperwork Could Discourage Group Coverage

The employer mandate was supposed to encourage large employers to offer or to continue to offer health coverage to their employees, and the threat of penalties for failure to comply with this requirement will certainly be incentive enough for some companies to stick with their group health plan.

However, the mandate is having just the opposite effect on other employers. These companies, after being told that they must offer coverage “or else,” are doing the math and deciding whether “else” might be a better option. By using analytical tools like HPA’s Insight Catalyst Report (ICR), brokers are able to help their clients with the play or pay analysis necessary to make an informed decision.

One of the other factors that is important to an employer’s decision, of course, is the impact of the decision on its employees. As we’ve discussed in countless blog posts and industry updates, offering group health coverage in effect blocks most employees and their dependents from the generous government subsidies that are available in the individual market, so employers could actually be hurting their employees by offering health insurance.

Well now a third reason for employers to drop coverage has emerged. In addition to the fact that offering coverage could hurt their employees and dropping coverage may be less costly than paying a shared responsibility penalty, employers who continue to offer health insurance will have several new compliance requirements to contend with. Examples include the summary of benefits and coverage that must be provided to all employees at renewal time each year and to new enrollees when they join the plan, new COBRA notification requirements, and the auto-enrollment which will go into effect soon for companies with 200 or more employees. Additionally, ERISA audits are increasing, so the chance of being caught and fined if a company slips up on the paperwork is greater than ever.

On top of the other compliance headaches, starting next year employers will have even more reporting requirements. To help with the enforcement of the individual and employer mandates, the government is requiring employers to complete an annual report stating whether they offer minimum essential coverage, whether that coverage provides minimum value, and who is eligible to enroll in that coverage. The final rules on these reporting requirements were issued in March by the Treasury Department, and they’re very confusing – so confusing, in fact, that Senator Mark Warner (D-VA) has introduced Senate Bill 2176, the Common Sense Reporting Act of 2014, to help make it easier for employers that offer health insurance to their employees to comply with the law, as reported in last week’s Washington Update from the National Association of Health Underwriters (NAHU).

Aimed at reducing the administrative burden on the law, the bill would protect the privacy of employees’ dependents, align the employee communication requirements with processes that are already in place in the company, and require the Treasury Department, in conjunction with HHS and the DOL, to prepare a report for Congress about how to create a reporting system. Essentially, Warner didn’t like the final rules and wants Treasury to try again. NAHU and other organizations are supportive of the Warner bill.

While the administrative burden certainly does need to be eased on employers who continue to offer health insurance to their employees, for some employers this paperwork will be the straw that breaks the camel’s back. Group health insurance is already complicated enough. Adding difficult reporting requirements that could result in penalties if not done correctly could (and probably should) discourage some employers from continuing with their group health plan.

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