Human Resources Should Bet on Business and Money to Drive Results

What can YOU do to bring YOURSELF and HR to the forefront in your organization?  This question is posed over and over in different fashion or formats, but the underlying premise remains the same (what can I/we do to make HR more relevant?)

I tend to have a default answer to this question, and it is this.  Make sure everything you do in HR is business related and do everything you can do to ingratiate yourself to the finance people in your organization. Business and money are the two things to bet on, IMO.

So in keeping with this theme, one thing you do not want to be a party to is blind siding  your finance department with some unknown or unplanned expense.  So I am going to share with you something I know about “Obama Care” that you should know.  This was part of an email I recently received from an insurance company representative…

NOTICE: AFFORDABLE CARE ACT (ACA) FEES

ACA established a number of taxes and fees that will affect our customers and their benefit plans. Two of those fees are: (1) the Annual Fee on Health Insurers or “Health Insurer Fee”; and (2) the Transitional Reinsurance Program Contribution Fee or “Reinsurance Fee.”  Both the Reinsurance Fee and Health Insurer Fee go into effect in 2014.

Section 9010(a) of ACA requires that “covered entities” providing health insurance(“health insurers”) pay an annual fee to the federal government, commonly referred to as the Health Insurer Fee.  The amount of this fee for a given calendar year will be determined by the federal government and involves a formula based in part on a health insurer’s net premiums written with respect to health insurance on certain health risk during the preceding calendar year. This fee will go to help fund premium tax credits and cost-sharing subsidies offered to certain individuals who purchase coverage on health insurance exchanges.

In addition, ACA Section 1341 provides for the establishment of a temporary reinsurance program(s) (for a three (3) year period (2014-2016)) which will be funded by Reinsurance Fees collected from health insurance issuers and self-funded group health plans.  Federal and state governments will provide information as to how these fees are calculated. Federal regulations establish the fee at $5.25 per member, per month for 2014.  The temporary reinsurance programs funded by these Reinsurance Fees will help stabilize premiums in the individual market.

Beginning with your bill for January 2014 coverage, your premium will be adjusted to reflect the effects of the Health Insurer Fees and Reinsurance Fees, which will be inclusive of any additional applicable federal and state taxes. We estimate this adjustment to 2014 billed premiums to be approximately 4.0%. This is pending the completion of the State Department of Insurance’s review of our 2014 rates. Should further regulations and guidance regarding these fees become available, we will share additional information with you.

So what does this mean? Well if your brain works like mine, I started doing internet searches for Section 9010(a) of ACA.  This is what I learned besides having to pay for coverage for employees, employers are going to be charged a significant tax on that service.   For illustrative purposes, let’s put these fees into a couple of equations.   Let’s say your company provides coverage to 100 employees, and in total you cover 250 lives.  Let’s say the cost of this coverage is $1000 per month per employee. Now let’s calculate your new taxes.

100 employees X $1000 per month $100,000 per month or $1.2 M per year.  The new tax on this (at 4%) is $48,000.

The tax on people is 250 X $5.25 per month is $1312.50 per month and $15,750 per year.

The two taxes together $48,000 + $15,750 = $63,750 annually.  (Obama care is a revenue bill.)

Ok I did these illustrations to prove the point that there is a significant cost to Obama care that is not really being discussed.  Those of us in HR need to follow this, as this develops and changes. You also need to give the finance folks a heads up, before they come and ask you about it.  Remember you want to add value to the business.

At this point the administration can not tell us what these cost are going to be.  Many of the state exchanges have not been established.   No doubt the partisan bickering will trickle down and continue at the state level, which will only slow down the implementation of the Affordable Care Act.  But short of some divine intervention this is going to happen – we just don’t know what it is going to cost our organizations.   Stay tuned – be a business advocate.

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Dave Ryan

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