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Business Officer Magazine

Here's to Your Health Care

For Marywood University, compliance with the Affordable Care Act is further incentive to continue what the institution has always done: Celebrate wellness by including staff in conversations that inspire an active lifestyle and lead to lower costs.

By Patricia E. Dunleavy

*The Patient Protection and Affordable Care Act (ACA) presents challenges to every employer, in part because some provisions of the law are in flux, while many others are still being fleshed out. Despite delays, changes, and the ongoing uncertainty surrounding health-care reform impacts, Marywood University administrators have been working since the ACA passed to develop a forward-leaning strategy that will ensure compliance and provide the university's 500 full-time employees with quality health care at affordable costs.

Marywood, Scranton, Pennsylvania, offers the same health benefits package to all employee groups, generously supporting both individual and dependent health-care coverage. The university currently pays 83 percent of individual health-care costs and 75 percent of costs for dependents enrolled in its HMO plan. In addition to the base HMO, Marywood offers an enhanced HMO and a PPO. All three plans are offered through Blue Cross of Northeastern Pennsylvania. More than 75 percent of Marywood employees are enrolled in one of these three plans. While the university has enjoyed moderate-to-flat premium increases in recent years, that hasn't always been the case.

Salute to Core Values

In 2004–05 Marywood moved to a self-funded arrangement for health care. At that time the university routinely faced double-digit annual rate increases. Our population was and continues to be older than our regional Blue Cross network, and historically we have had higher incidents of chronic conditions than the network as a whole—factors which had contributed to our being on the plus side of any annual rate increase range.

Plan design may play a part in whether the university is able to comply with the ACA affordability provision in the future, should health-care rate increases outpace salary increases.

As the university transitioned to its current self-funding arrangement, the administration began an education campaign to inform and empower employees to make better health-care decisions. During one open enrollment season, human resources staff held more than 25 meetings for all full-time employees. We explained that claims make up approximately 90 percent of premium costs, and that the actions of each person in the group could influence future premium costs.

With assistance from experts on our faculty, human resources staff explained how generic drugs and mail-order and home-delivery pharmacy options could save individual out-of-pocket expenses as well as cut costs for the Marywood plan as a whole—and how this could also help control premium costs going forward.

The educational campaign worked. We saw generic drug use and mail-order and home-delivery use skyrocket. At a time when pharmacy rates were trending upward in excess of 20 percent, Marywood's plans saw pharmacy rates stabilize. During the next eight years we saw total rate increases of less than 10 percent each year, and in three of those years we had no rate increase at all, including for our current 2013–14 fiscal year.

More recently, the university began working with Wells Fargo in 2012 to study our employee population and develop a multiyear strategic plan for the institution that will address all of the provisions of the ACA. From the start, our approach has been to ask questions centered on the university's core values as a Catholic institution. For instance:

  • How will our decisions affect the most vulnerable employees in the university—those at the lowest end of the salary scale?
  • Will our plans meet ACA standards for affordability?
  • Do we have the best mix of plans available to meet employee needs?
  • What arrangement provides the best stewardship of our financial and human resources?
  • How can we ensure that employees are empowered to make the best decisions for their needs?
  • Have we given all employee groups the opportunity to express ideas, raise concerns, and have their questions answered thoroughly and respectfully?

Uncertainty about certain provisions of the law hasn't kept us from moving forward with specific components of ACA implementation that we have deemed beneficial to our workforce. As one example of our proactive approach, Marywood administrators made an early decision to extend coverage to dependent children up to age 26 before that requirement of the ACA became effective. We did so despite predictions of a spike in rates, which to date has not occurred.

The university has also launched an enhanced wellness program that takes advantage of the differential in premium rates allowed under the ACA. Our plan is to make this a multiyear effort that helps control future rate increases and provides opportunities for our employees to take better care of their health.

Several earlier deadlines under the ACA have already passed. In addition to extending coverage to dependents up to age 26, the university prepared and distributed the Summary of Benefits and Coverage, adjusted its medical spending account cap, and eliminated some over-the-counter drugs as required. Marywood is compliant with the preexisting conditions, annual and lifetime limits, and waiting period provisions of the ACA, as well as reporting the value of the health coverage provided to employees on IRS Form W-2.

Since January 2013, the university has adjusted the Medicare payroll tax, recently filed IRS Form 720, and paid the appropriate Patient-Centered Outcomes Research Institute fees. At the time this article was written, we also had plans to provide notice of the Health Insurance Marketplace to employees prior to the Oct. 1, 2013, deadline required under the ACA. This was of some concern to Marywood administrators because to that point, Pennsylvania had not yet finalized its plans for the commonwealth.

Provisions Pending

Two provisions of the ACA in particular are of more immediate concern to Marywood administrators, and we have begun working closely with our consultants to develop recommendations.

Cadillac Plan tax. As currently devised, this provision—scheduled to take effect in 2018—will impose a 40 percent excise tax on employers whose offered coverage is valued in excess of $10,200 for employee-only coverage, and $27,500 for family coverage. Those amounts are indexed moving beyond 2018. In order to balance the many needs of the university, Marywood is considering alternate plan designs that would avoid this tax. Among the options the university can consider is a high-deductible plan that would allow employees more control over the spending of their health-care dollars. Employers can choose to fund these high-deductible plans in a variety of ways and at various levels.

A second option is simply to alter the co-pays and deductibles on an employer's current plans. While that may work in the short term, caps on out-of-pocket expenses are built into the ACA and scheduled to become effective in 2015.

Finally, some employers are considering moving to a defined contribution model, similar to the way most 403(b) retirement accounts are funded.

Employment status. The second provision of the ACA that is of immediate concern to university leadership is the inclusion of employees who work 30 hours per week under the definition of full-time status. Marywood employs a large number of adjunct faculty as well as seasonal staff who may be affected by this provision of the ACA. The university's current definition of full time encompasses employees who work 35 hours or more per week.

For faculty positions, the ACA requires that educational institutions count classroom time as well as other time required to perform one's job, such as class preparation and test grading. In addition, the ACA includes guidance on counting extended academic breaks. We are currently working with our consultants to determine which of the measurement period calculations will work best, not only for the university's budget, but also for our employee population.

The ACA "pay or play" mandate will require employers like Marywood to provide minimum essential health-care coverage to those employees working 30 hours per week or more, and at the same time, ensure that such coverage is affordable (defined by the ACA as not exceeding 9.5 percent of an employee's Box 1, W-2 wages) and that such coverage meets the minimally required actuarial value of 60 percent. At this point, the 30 hours per week is the only provision that Marywood must clarify and potentially address.

However, plan design may play a part in whether the university is able to comply with the affordability provision in the future, should health-care rate increases outpace salary increases. Noncompliance with the "pay or play" mandate carries substantial fines. Although enforcement of this section of the ACA was recently delayed for one year, Marywood administrators believe it is in the best interest of the university and our employees to move forward with our plan design review during this current fiscal year.

Flashback ... 28 Years Ago

In a July 1985 Business Officer article on wellness and the health care system . . .

"Experts have suggested that employers must begin to recognize that wellness programs produce positive economic benefits through increased productivity and savings in medical costs. Many employers have seen higher morale and greater attendance among employees who participate in fitness and self-care, prevention-oriented programs."

VIVIEN DEBACK, project director of the National Commission on Nursing Implementation Project; and JUDEEN SCHULTE, assistant professor of nursing and director of the Nursing Center for Wellness, Alverno College, Milwaukee, Wisconsin

Beyond the "pay or play" mandate and the inclusion of newly defined full-time employees, additional provisions of the ACA are set to roll out during the next several years, including automatic enrollment for full-time employees and caps on deductible and out-of-pocket expenses, both of which are scheduled to take effect in 2015.

Marywood administrators are currently reviewing data and available options and preparing recommendations during the latter part of 2013 to present to the president and her cabinet for executive review. Once approved, human resources staff will begin a broad-based educational campaign to share information with and gather input from our full-time employees.

Keeping Employees in the Loop

Much like the concerted education efforts the university launched in connection with our prescription drug benefits, we are prepared to engage with employees in a comprehensive communication campaign to explain ACA-related changes to our university health plans. In addition to direct interaction with employees through multiple group sessions to accommodate faculty and staff schedules, we will conduct individual consultations and meetings as needed.

At the same time, human resources staff will reach out to various university standing committees such as the employee benefits committee and the university budget committee, both of which include representatives from all employee groups (support staff, professional staff and administrators, and faculty). Likewise, we will work with the support staff senate, the professional staff senate, and the faculty senate to make sure that accurate information is provided and that all concerns are heard.

Finally, we will tailor information to take to specific cross sections of the university, including departments (e.g., buildings and grounds or library staff) and other area committees, such as academic council and college policy and operations meetings.

Researching and keeping track of ACA regulations and their deadlines—particularly in light of the delays, ongoing questions, and the multiyear rollout—has been time-consuming and, at times, confusing. As with any major piece of legislation affecting employers, the ACA has challenged higher education leaders across the nation to remain agile and strategic with their programmatic decision-making and communication efforts.

We fully anticipate that the educational campaign we undertake for the ACA will continue for several years. Our goal is to ensure that employees understand the plan options available and the reasons behind the decisions the university makes in any given year going forward.

By obtaining the best available information and data, involving essential stakeholders (administrators, faculty, and staff) in the process, and making decisions based on the institution's core values, Marywood leaders remain confident that the university will meet its goal of complying with the ACA while providing the best health-care coverage possible for its employees and continuing to carefully manage institution resources.

PATRICIA E. DUNLEAVY is associate vice president for human resources for Marywood University, Scranton, Pennsylvania.

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Front-Burner Issues for the CBO

What are the top financial concerns for chief business officers related to implementation of the Affordable Care Act? Here is the short list for Joseph Garvey, Marywood University vice president for business affairs and treasurer:

The Cadillac Plan excise tax is a major issue for the university, particularly because Marywood's existing plans are so rich-with an actuarial value of more than 90 percent. University leaders are proactively considering other plan design options to ensure that we continue to offer quality health-care plans to our employees without incurring this tax.

One alternate plan design model our consultants have suggested is a high-deductible plan funded in part by university contributions to employee health savings accounts. Our concern with this option centers on how to strategically plan for the possible drain on cash flow.

Between now and 2018, university leaders have several decisions to make with regard to plan design. Different budgetary impact models are dependent on how plan changes are made—over a few years or all at once. These impacts have to be considered against the need to provide clear and transparent information to our employees.

Another major concern is the expansion of the definition of "full-time" employee to include employees working 30 hours per week. We are collecting data now to see who will be affected. For the university, the impact on benefit costs and the overall budget going forward could be substantial. We need to develop a solid understanding now of how to address this issue in the best interests of employees and the university alike.

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The Wellness Factor

While health insurance premium rate increases have remained low in recent years for Marywood University and our employees, we recognize that trend cannot continue indefinitely and want to do what we can to contain costs.

The university first launched wellness programming about 10 years ago as annual rate increases skyrocketed. We encouraged participation largely through cash prizes and gift cards. Participation eventually began to wane among all but a core group of employees. (We are not able to measure the number of employees who are still engaged in healthy behaviors but for whatever reason have dropped out of the university's program.)

This fall Marywood is revitalizing its wellness program by implementing a two-tiered premium structure for 2014–15 and asking employees to do three things to move into the lower bracket: complete an online health-risk assessment, complete a basic biometric screening, and sign a statement disclosing whether the employee uses tobacco products.

Employees have between Sept. 1, 2013, and May 5, 2014, to complete the three activities. When they do, they receive a $100 bonus in a subsequent paycheck and will be placed in the lower insurance premium bracket.

Once employees understand the financial incentive and that the criteria for remaining in our lower-premium tier is up to them, we anticipate a steady increase in participation. Less than three weeks into the program we already had more than 4 percent of our eligible employees complete the wellness activities for 2013–14.

Encourage and Empower

Our plan is to encourage employees to work toward healthier behaviors. We will require incrementally more challenging activities that employees need to complete in order to stay in the lower-premium tier. For instance, next year an employee who indicates that he or she smokes might be asked to take a smoking cessation class. While it's possible that not all activities will change each year, the university will identify required activities months in advance so that employees can prepare for future goals.

As we aim to nudge employees to set goals for personal health, less important at this point are the actual measures. This first year is about raising personal awareness so that employees understand the need to take greater control of their health. We believe that when employees are empowered to take charge of their health, we will see improved health outcomes and better control future cost increases.

-Patricia E. Dunleavy

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