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Health care reform developments dominate benefits management issues in 2014

Opponents move forward with legal challenge while market adapts

Health care reform developments dominate benefits management issues in 2014

Topped by the U.S. Supreme Court's decision to review whether individuals can obtain premium subsidies to buy health insurance in federal exchanges, developments related to the health care reform law dominated 2014.

The first major one of the year came in February, when the Treasury Department temporarily eased a Patient Protection and Affordable Care Act provision and earlier rules mandating that employers offer coverage or be liable for a financial penalty starting in 2015.

In the final rules, Treasury said large companies — those with at least 100 employees — would not be liable for the law's $2,000 per employee penalty in 2015 if they extend health coverage to at least 70% of their full-time workers. Treasury delayed its earlier 95% coverage requirement to 2016.

Treasury also exempted employers with 50-99 employees from the coverage requirement until 2016.

In May, regulators said enrollment in public exchanges hit 8 million, a sign that technology-related problems that crippled many of the exchanges following their launch in October 2013, were largely resolved.

In November, though, regulators, put the exchange enrollment figure at 6.7 million, with much of the enrollment decline due to enrollees not paying premiums. In addition, administration officials acknowledged that about 400,000 people with stand-alone dental plans were incorrectly counted as having secured health coverage through the health insurance exchanges.

Among other major benefits management-related developments in 2014:

A year after the U.S. Supreme Court struck down provisions of a 1996 law that defined marriage as the union of one man and one woman, the ramifications continued. For example, numerous federal courts in 2014 struck down various state laws banning same-sex marriages.

In addition, the Internal Revenue Service made it clear that employers must offer married same-sex couples the same pension and retirement plans that they provide to opposite-sex couples as of June 26, 2013, the date of the Supreme Court ruling in United States v. Edith Windsor, the landmark case.

In May, consultant Accenture P.L.C. projected that private health insurance exchange enrollment could hit 40 million by 2018, up from a projected 9 million next year, and private exchanges proved popular among employers.

The reasons for that growth are simple: Having employees and retirees choose plans in an exchange frees employers from the administrative hassle of directly offering health insurance, and employers can more precisely predict their costs.

In June, the Supreme Court ruled that family-owned for-profit employers cannot be forced by the health care reform law to provide prescription contraceptive cover.

In the 5-4 decision, the justices said the requirement, implemented by Department of Health and Human Services regulations, violated a 1993 federal law that bars the federal government from actions that substantially burden the exercise of religion.

In the wake of the ruling, HHS laid down a new approach for organizations and firms with religious objections to the mandate to receive the coverage

Under that approach, which would apply to both closely held, for-profit companies, as well as nonprofit religiously-affiliated organizations, such as hospitals, the entities would provide written notification to HHS of their objections to the coverage. For insured employers, HHS would notify the insurer, with the insurer responsible for providing the coverage.

For self-funded organizations, the Department of Labor would notify the organization's third-party administrator, with the TPA then arranging the coverage.

But litigation challenging the revised HHS requirements will continue into 2015.

In November, the Supreme Court set the stage for a 2015 decision that could be crucial for the public health insurance exchanges' future. The justices agreed to review the legality of a 2012 IRS rule that made federal premium subsidies available in state-operated and federal-operated exchanges. Critics argue the law clearly limits premium subsidies to state exchanges.

With about 85% of enrollees in the 37 federal exchanges receiving subsidies to secure coverage, the Supreme Court decision will be pivotal in whether the 2010 law will be able to achieve a key congressional objective: significantly reducing the nation's uninsured rate.

Also in November, the Pension Benefit Guaranty Corp. said the deficit in its multiemployer pension program leaped fivefold in one year to more than $42 billion for the roughly 1,400 plans that provide benefits to unionized employees covered by collective bargaining agreements with several employers.

With collecting just over $120 million a year in premiums from multiemployer plans, the PBGC's insurance program has a 90% chance of going broke by 2025 as several massively underfunded plans could collapse in the next decade, the agency said in its 2014 annual report.

Congress, though took action to reduce the likelihood of that happening, when it passed legislation allowing trustees of financially distressed multiemployer plans to cut retirees' benefits.

Moves by employers to “de-risk” their pension plans by purchasing group annuities and shifting liabilities to insurers or giving former employees the option to convert their monthly annuity to a cash lump sum continued throughout 2014.

Bristol-Myers Squibb Co. and Motorola Solutions Inc. were among well-known employers signing multibillion-dollar deals with Prudential Insurance Co. of America, shifting the obligation to provide benefits for tens of thousands of retirees to the insurer.

Those deals come on top of earlier moves by General Motors Co. and Verizon Communications Inc. to do the same.

In addition, well-known employers such as Hartford Financial Services Inc., Newell Rubbermaid Inc. and Ryder System Inc. offered former employees the opportunity to convert their monthly annuity benefit to a cash lump sum.

Several factors are driving both de-risking approaches. By reducing the size of their pension plans, employers are less vulnerable to having to pump more money into their plans, such as when interest rates fall, inflating the value of plan liabilities.

In addition, with fewer participants in their pension plans, employers shrinking the plans pay less in PBGC premiums, which are based in part on head count.

In 2014, increases in group health plan costs remained modest.

For example, a survey of more than 2,500 employers that Mercer L.L.C. released in November found that per employee costs increased an average of 3.9% — up from a 2.1% rise in 2013, but still sharply below the 7% average annual increase over the past 15 years.

A key reason for the continuing moderation in group health plan costs was employers' accelerating adoption of less costly high-deductible health plans. In 2014, 23% of employees were enrolled in consumer-driven health plans, up from 18% in 2013 and the biggest one-year increase since Mercer began tracking CDHP enrollment about a decade ago.

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