Download ACA Impact on County - Jackson Chamber of Commerce

294 words
Over the past several months, the Jackson County Administrator/Controller’s Office, Human
Resource Department, Finance Department, and Consultants from McGraw Wentworth have
been assessing the impact of federal and state health care reform from an employer’s perspective
– one that remains committed to the prospect of continued sponsorship of a group medical plan
to its employees and retirees. The analysis encompassed a variety of moving parts, not the least
of which was the “shared responsibility” requirement under the Affordable Care Act (ACA).
This provision of the law, which was to be in effect in 2014 and now delayed until 2015,
required large employers like the County to maintain group benefits that were both affordable
and of at least a minimal value as defined by the law. Plans that fail to satisfy the standards set
forth by the ACA face a penalty of $2,000 annually per full time employee (defined as averaging
30 or more hours per week). Additionally, the County reviewed a multitude of mandates that
were introduced by the law over the past three years, which included significant expansion of
eligibility rules and benefits payable under the plan, thus increasing the number of individuals
covered and the claims cost of the County.
Like most employers, the County struggles with identifying the true increase in County expense
attributable to the ACA since its passage. While there’s no question that County costs have
increased due to the law, pinning down an exact figure is difficult given the complexity of ACA,
as it has touched the County’s health plan in so many different ways. What is known is that the
County has been successful in mitigating some of this increase through aggressive plan
management, negotiation with vendors, and adoption of a new wellness strategy designed to help
keep employees and their families healthier. In spite of these efforts, the County’s health care
costs will increase approximately 14% in 2014. Much of the increase is inflation and usage
driven, but approximately 5% is in due to the ACA. The ACA cost increase is the result of new
taxes and fees that the County will have to pay to the federal government to subsidize new
programs and the public exchanges being launched in 2014. The County estimates over $85,000
of new taxes and fees will be paid in 2014. Looking forward to 2015 when the “shared
responsibility” requirement kicks in, the County conservatively expects ACA to increase costs
by as much as 7% to 8% annually, but once again these increases are in addition to normal
expected increases of 8% to 9% per year. Therefore, the cumulative three year increase in
County costs – after employees pay their 20% share of premiums – could be as much as $1.4
million.
Combatting this increase will be difficult, as much of the ACA requirement is effectively
compulsory and unavoidable. In an effort to reduce expenses, the County has already struck
deals with its numerous bargaining units to step up premium cost-sharing to conform to
Michigan’s Public Act 152 requirement, under which minimum cost-sharing thresholds are
established by ‘hard caps’ on employer contributions, or maximum 80% funding of plan costs by
the employer. The County has also introduced a program through Blue Cross Blue Shield of
Michigan called Healthy Blue Incentives through which employees and their spouses are
encouraged – indeed rewarded - through the design of the plan to take a more active role in
managing and improving their health. Every cost managing step is crucial, not only from the
standpoint of reducing current expenses, but also due to the looming “Cadillac Tax” provision of
the ACA that begins to apply in 2018. This provision applies a 40% excise tax on “high value”
plans by instituting a maximum permissible single and family premium that can be incurred by
the employer, over which the tax applies. This new financial threat serves as an enormous
motivator for all employers to get creative and aggressively manage expenses. It is conceivable
that the County may bump up against this tax in 2018 if recent increases in cost continue. All
things remaining equal, the County must anticipate as much as $500,000 of excise taxes for 2018
through 2020, unless it is successful in bending the cost curve from now until then. The added
pressure of other ACA mandates will make that job just that much more difficult.
The County is currently moving forward with several important initiates aimed at reducing costs.
Aside from conforming to Michigan’s Public Act 152 cost-sharing requirement, the County is
also looking at consolidation opportunities with its Department of Transportation, formerly the
Jackson County Road Commission. A crucial element of this process is a public marketing
already underway of all of the County’s group benefit plans. Expectations are that the combined
group size will attract aggressive bidding within the competitive marketplace for such services
and products offered by the County to employees. Additionally, the County Commissioners
recently approved changes to the retiree health benefits for most pre-65 retirees. Such changes
are anticipated to reduce claims paid by the County by introducing deductibles for certain types
of services.
The next few years will continue to pose an enormous cost management challenge for Jackson
County. Not unlike most other public and private organizations that provide comprehensive
group benefits to their employees, the County will be facing the stress of continually escalating
expenses that will require a multi-faceted and disciplined approach to manage this liability. The
County Commissioners and Administration have indicated that all options are on the table for
consideration. I believe in the current environment, that is exactly what is necessary.
Michael Overton
Administrator/Controller