Local Governments Prepare for Health Law's Employer Requirements

Like any other employers, local governments are preparing themselves for full implementation of the Affordable Care Act (ACA) in the coming year, weighing their options about improving health coverage for employees or letting their workers test the private markets on the health insurance exchanges.
by , | October 9, 2012
 

Like any other employers, local governments are preparing themselves for full implementation of the Affordable Care Act (ACA) in the coming year, weighing their options about improving health coverage for employees or letting their workers test the private markets on the health insurance exchanges.

The federal health-care reform law takes full effect in 2014, when Medicaid is expanded and the exchanges open for enrollment. In the meantime, the most important task for local government officials might be reading up on all of the law’s provisions, according to surveys conducted by the International City/County Management Association (ICMA). Half of those surveyed by ICMA at its annual conference in Phoenix this week said they had no idea what the financial impact of the provisions would be for them. Last December, more than 60 percent of those surveyed by the group said they needed to learn more to assess how the law would affect their offices.

“There are still a lot of unknowns about the fiscal impact of the Affordable Care Act,” said Ron Carlee, ICMA’s chief operating officer, in a conference call with reporters. “But generally, we see it as a challenge and an opportunity.”

Local governments, like their private sector peers, have been taking some familiar routes to keeping employee health-care costs under control in recent years: 61 percent have shifted cost-sharing toward employees, keeping with broader national trends.

Now, with the ACA, they will have new decisions about health insurance to make. The law requires that employers meet some financial obligations (particularly making sure that 60 percent of typical costs are covered by the plan) or face penalties (as much as $3,000 per employee). Employers have the option of modifying their plans to satisfy those requirements or allowing their employees to enroll in the health insurance exchanges to choose from the plans sold there and paying the penalty.

Local officials are left to determine which option is more fiscally responsible. Some localities, experts say, have already concluded that it would be cheaper for them to pay the penalty and allow their employees to test the exchanges rather than expand their coverage to meet the ACA’s provisions.

But most haven’t gotten to that point yet. According to the ICMA survey, 54 percent said they were going to wait and see or were unwilling to speculate about what they might do. Another 44 percent said they were not currently planning any changes. Just a sliver (2 percent combined) said they were going to shift their employees to the exchanges or drop health coverage entirely.

With 2014 looming, the impetus is on local governments to have those conversations and choose a course. Last year, only 4 percent of those survey said they had conducted a cost-benefit analysis about moving their employees to the exchanges. Another 14 percent said they were planning to do such an analysis this year. But that means that the vast majority still appear to have no plan of action to deal with health reform’s new requirements. That has to change, said Reggie White, regional vice president of Cigna Government and Education, which provides health coverage to the public and private sectors.

“The smart ones are not so much taking a wait-and-see approach, but being aggressive,” he said. “It’s smarter to do the work today to prepare for what’s going to come down tomorrow.”

In the long term, localities are also looking at employee health. More than a quarter have started wellness programs and 7 percent launched chronic care management programs, according to ICMA surveys. Cities like Ashville, N.C., have opened on-site employee health clinics that allow public workers to receive primary care at their place of work -- an idea that, as Governing found at its Cost of Government Summit last month, has already demonstrated an ability to create savings for cities.

“The only true solution to rising medical costs is improving employees’ health,” White said.

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