If there has been a theme in 2013 for mid-market health benefits brokers and consultants, it has been preparing clients for the onset of key pieces of the federal health care reform law.

Although the Patient Protection and Affordable Care Act's rule that most employers must offer health insurance to 95% of their full-time workforce won't become effective until 2015, several other fees and coverage requirements under the reform law are slated to take effect in 2014.

Brokers and benefits consultants in the middle market say the law's “uneven implementation” is easily their most frequent topic of conversation with clients.

“The majority of companies we see grappling with it tend to be employers in hospitality, retail — really any industry where you have a lot of hourly and low-wage workers,” said Michael Turpin, the New York-based executive vice president and national health care and employee benefits practice leader at USI Insurance Services Inc. “Because there's still such a massive digestion problem among employers, the biggest single thing they're focusing on is what they have to do now to be certain that they're in compliance, as opposed to what's coming at them later.”

Beyond the sheer complexity of compliance obligations under the reform law, brokers and consultants say they are also fielding a steady stream of questions from their mid-market clients about the law's short- and long-term effects on their total benefits costs.

Next year, employers will have to pay a fee of $63 per health plan participant — either through their group health plan's insurer or directly, if the plan is self-funded — for the reform law's three-year Transitional Reinsurance Program. Also, health insurers will be taxed on their net premium growth, and it is all but certain plan sponsors will bear at least a portion of that burden.

“A lot of our clients are trying to get a handle on the math of it all, and trying to make sure that you're compliant at a base level while not spending more or exposing their firms to some of the costs attributable to health care reform,” said Ed O'Malley, the Austin, Texas-based president of National Financial Partners Corp.'s corporate clients group. “But you can't even deal with the economics of the reform law until you deal with the compliance end of it, and we've spent a considerable amount of our time, energy and money in making sure that our capabilities are up to the challenge on both of those fronts.”

%%BREAK%%

Even absent the new fees and requirements coming with health care reform, mid-market employers remain under pressure to rein in their overall medical care costs. Therefore, brokers and consultants said midsize firms have become increasingly willing to explore alternative benefit plan designs and funding arrangements in an effort to shrink the year-over-year growth rate in their health care costs.

“We're certainly seeing more insurers moving toward the small and midsized group market from a self-funding perspective,” said Kelly Hagan, director of operations for employee benefits at Neace Lukens, a subsidiary of Lake Mary, Fla.-based AssuredPartners Inc. “You're also starting to see captives pop up that allow smaller employers to share their risks. Both of those are strategies that we're seeing midsize employers look at.”

Brokers and consultants said that the increase in interest among midsize employers regarding changes to their benefit plans' care delivery models and/or funding arrangements has had a material effect on the scope of their senior executives' involvement in mapping out their firms' benefits strategy going forward.

“We're seeing mid-market CFOs weighing in much more frequently and heavily in that process,” said Trindl Reeves, San Diego-based principal and chief sales officer at Barney & Barney L.L.C. “It used to be a budget sign-off, but now they're being forced into taking on new risk, whether it's high-deductible plans and HSAs or self-funded plans, and those are serious financial discussions. We've done a lot internally to adjust to that shift and engage the CFOs in our conversations when we're planning out a benefits strategy with our clients.”

The need to control medical costs also has led to a boom among mid-market employers sponsoring incentivized workplace wellness and health management programs, brokers and consultants say. A study published in February by Fidelity Management & Research L.L.C. and the Washington-based National Business Group on Health noted that 77% of midsize employers said they currently offer employees monetary rewards tied to wellness activities and health management outcomes, compared with 38% who were offering the programs in 2010.

“A lot of clients are also looking at it from a workforce and productivity viewpoint, where they know that sick employees are going to impact their company's overall productivity,” said Rusty Reid, president and CEO of Fort Worth, Texas-based Higginbotham & Associates. “They're beginning to measure and look at whether a healthier work environment can lead to a more productive work environment.”