“ASAE supports quality, affordable, accessible health care for all Americans. ASAE supports national uniform standards for funding benefits and employee protections. ASAE further believes that association health care plans possess many years of proven experience in the delivery of benefits through purchasing coalitions. As such, association health care plans can lead the way to the reform goals of providing the efficient delivery of quality health care to more citizens.” – ASAE Board Approved Position Statement #6
An issue of increasing concern to the association community is the upcoming Cadillac tax, a 40 percent non-deductible excise tax on high-cost health plans that goes into effect in 2018. Many in Congress have pledged to support a repeal of the tax, but action has yet to be taken and the IRS continues to create regulations. The tax is projected to raise $87 billion over the next ten years.
Under the ACA, beginning in 2018, both fully insured and self-funded employer health plans will be assessed a nonrefundable 40 percent excise tax on the dollar amount of any employee premiums that exceed annual limits of $10,200 for individual coverage and $27,500 for family coverage. While stand-alone dental and vision plans are excluded from the cost limits triggering the tax, the law does include several other costs paid by employers and employees such as contributions to flexible spending accounts or health savings accounts.
One third of U.S. employers are at risk for paying the tax if they don’t adjust their current benefits, and the percent impacted in the association community is expected to be much larger. In October Deloitte released a study finding just 37 percent have calculated their exposure to the tax.
While the White House has said the tax will help lower healthcare spending, its opponents say that employers will look to make changes to their benefit plans to avoid the tax. In comments submitted to the IRS last month, ASAE said these likely changes will reduce benefits and transfer the cost of insurance to employees through increased deductibles, reduced covered services, use of private exchanges, and the reduction or elimination of flexible spending accounts (FSAs).
ASAE is working with a broad coalition to address this issue in Congress. Repeal of the tax currently has bipartisan support, but changes to the ACA are very difficult to make.
The employer mandate, which requires that employers with more than 50 full-time employees offer health coverage to their workers or pay a penalty, was originally set to take effect in 2014, but has been delayed until 2016 to give businesses more time to comply with the law. This has allowed all employers additional time to ascertain how they can best help their employees find acceptable coverage under the ACA.
State Insurance Exchange
Many state Exchanges across the country have had very public financing and enrollment issues and are struggling to become sustainable. Federal financial support for state exchanges ends in 2016 and many state exchanges are contemplating major changes in order to address major cost and viability concerns. If state exchanges are not self-sufficient by 2016 they will have to join the federal exchange. This deadline was pushed back once by the Administration, originally scheduled for 2015. Oregon and Nevada have already moved to the federal exchange after a state exchange wasn’t successful. Massachusetts and Maryland have decided to switch from enrollment web sites in an attempt to keep their state-facilitated Exchange. The Wall Street Journal reported five states that launched Exchanges are scheduled to spend as much as $240 million to fix the sites or switch to the federal Exchange. Continued success of Exchanges may also be impacted based on the outcome of multiple lawsuits on the issue of penalties and insurance subsidies.
In October the Obama administration reported a surprisingly pessimistic forecast for 2016 Exchange health insurance enrollment levels. The goal is to have 10 million people with coverage next year, only about 100,000 above recent enrollment levels. The Congressional Budget Office predicted in March that reenrollment would reach 11 million this year and 21 million in 2016. The administration said this calculation was based on invalid assumptions.
ASAE is continuing to monitor the Obama administration’s pending regulations to raise the salary threshold at which eligible workers qualify for overtime pay. Under current DOL regulations – last updated in 2004 – employers are required to pay all employees time-and-a-half for any hours they work in excess of 40 hours per week if they make less than $23,660 per year, regardless of the employee’s job responsibilities. The proposed rule would more than double that salary threshold so that any employee earning a salary of less than $50,440 per year would become eligible for overtime pay. In addition, the minimum salary would automatically increase each year to match the 40th percentile of the average salary earned by full-time employees in the United States.
ASAE has heard from many association professionals who are concerned that some of their exempt employees will now be eligible for overtime under the new salary threshold or will have to be switched to hourly pay. Many association employees are classified as exempt from overtime eligibility because they are paid on a salary basis at an annual rate of at least $23,660 and because their primary duties meet the test for the executive, administrative or professional (“EAP”) exemptions under the Fair Labor Standards Act. While the rule isn’t likely be finalized until spring at the earliest, the change is forcing companies to consider keeping closer tabs on hours worked by overtime-eligible employees, including how to handle work done out-of-office, such as responding to emails in the evening or working at a conference over a weekend.
ASAE submitted comments focused on several concerns, including the “one-size-fits-all” minimum annual salary threshold proposed by DOL, and ASAE’s preference to key the salary threshold to government data on regional cost-of-living differences. ASAE also believes the minimum salary level should be set lower than the proposed level of the 40th percentile of average full-time employee salaries, either across-the-board or for the nonprofit sector. Under the current over-inclusive proposal, too many senior-level exempt employees would be reclassified as overtime-eligible because of their salary level, particularly in nonprofit organizations, ASAE said. Finally, ASAE urged the Department not to make any changes to the duties test in the regulations without providing notice of the specific proposed changes and another opportunity for public comment.
ASAE is working with a coalition on this issue. We expect there will be legislative and potentially legal efforts made to work to prevent this rule from going into effect.