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2015 benefits management outlook shaped by courts and congressional changes


The U.S. Supreme Court and Congress will play key roles in the future of the health care reform law.

By the end of next June, the court will decide whether to uphold or reject IRS rules that allow lower-income individuals to use federal subsidies to buy health insurance in state and federal public exchanges.

Opponents argue that the health care reform law allows such subsidies only in state-operated public exchanges. The problem is only 13 states plus the District of Columbia have set up state-operated exchanges. The remaining 37 states have either federally operated or state-federal partnerships that operate their exchanges.

Federal appeals courts have split on the issue, and the Supreme Court in November agreed to hear that case and could uphold the IRS rules or limit premium subsidies to state-operated public exchanges.

Roughly 85% of those who have purchased exchange coverage also received a federal premium subsidy.Without those subsidies, “there would be a huge impact” and enrollment in public exchanges would plummet, said Rich Stover, a principal at Buck Consultants at Xerox in Secaucus, New Jersey. “There would be more uncompensated care. That is a certainty.”

That would affect employers. With a spike in the number of uninsured receiving care, hospitals, for example, likely would pass those costs on through higher prices for patients that do have employer-provided insurance.

Should the high court limit subsidies only to state-operated exchanges, Democratic lawmakers would have to decide what provisions of the Patient Protection and Affordable Care Act they would be willing to change to get Republican support of legislation to make the subsidies available in any public exchange, observers say.

“It could open the door to a lot of horse trading,” said Brian Marcotte, president and CEO of the National Business Group on Health in Washington.

With Republicans controlling both houses of Congress in the coming session due to November election gains, GOP leaders promised to continue their efforts to repeal the Patient Protection and Affordable Care Act, while congressional Democrats, as well as the Obama administration, are certain to resist major changes.

The likely result, observers say, is some political give and take on issues such as whether to maintain the 30-hour per week definition of full-time employees, whom employers must offer coverage or pay a penalty.

Court decisions on other ACA-related challenges are expected in 2015.

The most significant is a mandate that employers offer prescription contraceptive coverage.

Following the Supreme Court's 2014 ruling that family-owned for-profit employers cannot be forced to provide prescription contraceptive coverage if it violates closely held organizations' religious beliefs, the nation's highest court granted an injunction sought by Wheaton College that filling out the form, to state the religiously affiliated Illinois college's objections and authorize its third-party administrator to provide coverage, was too onerous.

Another complaint was brought by Catholic university Ave Maria that objected to providing health plan information under revised federal rules, and a Florida federal judge blocked enforcement in October. A ruling is expected sometime this year.

While the future of public insurance exchanges remains cloudy, employers' use of cost-saving private exchanges is expected to grow in 2015.

For example, Mercer L.L.C. said in October that nearly 250 employers will offer coverage in 2015 to about 500,000 employees and retirees through the benefit consultant's exchange — about five times as many as 2014.

“You scale back the administrative burden,” said Michael Thompson, a principal with PricewaterhouseCoopers L.L.P. in New York, referring to employer moves to private exchanges.

“Exchanges mean more choices for enrollees,” said Randy Abbott, a senior consultant at Towers Watson & Co. in Boston.

Exchanges can mean more predictable costs for employers since they typically give employees a fixed contribution toward the health insurance premium.

While hundreds of employers already have moved to private exchanges, “there are still a lot of employers who are in a wait-and-see mode and want to see the experience of the early adopters before making a decision,” Mr. Thompson said.

As far as pension plan de-risking, Motorola Solutions Inc. and Bristol-Myers Squibb Co. joined that bandwagon in 2014 and more are expected to do so in 2015, some experts say.

“2015 will be a bigger year than 2014,” said Matt Herrmann, leader of Towers Watson's retirement risk management group in St. Louis.

Employers also look to continue their efforts to control their health care costs overall. As 2015 begins, several studies project more employers will adopt high-deductible health plans, which cost substantially less than traditional plans.

For example, 7% of employers with at least 500 employees now offer only a consumer-driven health plan at their largest worksite, while 18% say they are likely to do the same within three years, according to a Mercer L.L.C. survey.

In addition, experts expect more employers to impose premium surcharges for dependent coverage when employees' spouses are eligible for coverage from their own employers.

Dependent coverage has “come under scrutiny” as employers look for ways to manage health plan enrollment growth, Mercer said.

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