healthcare update panelists jeffrey lundgren, u.s. chamber of commerce jeffrey lundgren, u.s....
TRANSCRIPT
Healthcare UpdatePanelists
• Jeffrey Lundgren, U.S. Chamber of Commerce• Mike Kahley, SrVP at Lockton Companies• Don Fox, CEO of Firehouse Subs• David Barr, Chairman of PMTD Restaurants
The PPACA – Where is Washington Taking This Thing?
Jeff LungrenU.S. Chamber of Commerce
64% franchise / 53% non-franchise businesses believe the health care law will have a negative impact on their businesses
29% franchise / 41% of non-franchise businesses are already seeing health care costs increase due to the law
More than 50% of franchise and non-franchise businesses are planning to make decisions, such as reducing employee’s hours, to comply with the law’s employer mandate
Source: Chamber/IFA survey
November 13, 2013
PPACA Impact on Business
PPACA Regulatory Onslaught
Red Tape Tower—300+ pounds
—7 feet 3 inches
—20,000+ pages
“Despite all of the good news, there’s plenty of horror stories being told. All of them are untrue, but they’re being told all across America.”
-- Sen. Harry Reid
Remarks on the Senate Floor
February 26, 2014
Political Reality – PPACA Has Ardent Defenders
in Powerful Places
Law is here to stay – glaring warts and all
Administration frantically trying to put out political fires caused by implementation— www.healthcare.gov debacle
— Wave of cancellation notices
— Employer mandate blowback (volunteer firefighters/adjunct professors)
PPACA – Where Are We?
Republicans pushing hard to undercut implementation— Targeted repeal votes
— Seeking other ways to gum up implementation
Democrats unsure of their message and approach— Tout its benefits and argue GOP wants to go back to bad old days
— Tout its benefits and support targeted fixes
PPACA – Where Are We?
Administration’s Theme: do almost anything to mitigate political problems— Possible areas of action
— Addressing policy cancellations
— Addressing rate shock
— Open network requirements
PPACA – Where Are We Going?
Regulatory side:— Do not expect any new regulations impacting 2015
— Fall of this year: start seeing regulations governing 2016
Legislative side:— 40 hour work week definition
— Medical device tax?
PPACA – Where Are We Going?
July 2, 2013 – delayed until 2015 for all employers
February 10, 2014 – “transition relief” for 2015 and 2016 for employers with more than 100 full-time equivalent employees (FTEs)
—70% coverage in 2015
—95% coverage in 2016
Employer Mandate Delay + “Transition Relief”
February 10, 2014 – “transition relief” in 2015 and 2016 for those with more than 50 BUT less than 100 FTEs—Maintain workforce and hours of service
—Maintain previously offered coverage
—Certify that it meets these requirements
Employer Mandate “Transition Relief”
Opportunity for enactment this year? Passed House April 3 248-179
— 18 Democrats supported
Some Democratic support in Senate— 2 Ds cosponsor legislation
White House veto threat
40 Hours Full Time Legislation
For more information:
Jeff Lungren, U.S. Chamber of [email protected] or 202-463-5607
www.uschamber.com/health-care
Today’s ACAMeasurement &
Workforce StrategyMike Kahley
Lockton Companies
ACA: It’s a Continual Planning and Decision Process
Plan Design & Contributions
Participation & Underwriting
Measurement Period & Eligibility
Compliance & Communication
Renewal Costs
Qualifying & Affordable Coverage: Must be offered in order to some to
avoid Nuclear Penalty ($2k) Must be offered to employees and
dependent children Must be “affordable” based on 9.5% of
W-2 or Federal Poverty Level
Employer Play or Pay
Full-
time
empl
oyee
s
& de
pend
ents
Qualifying C
overage: 60%
AV
Affordable Cost: 9.5% W-2 or FPL
Employer’s “Play or Pay”
How Many Employees are Likely to Enroll in Coverage?
Total # of full-time employees
Less # in Measurement Period
Less # of <26 years who opt out
Less # eligible for government programs
Less # other opt-outs
# covered by plan
Employees less than 26 years old may elect to get coverage under a parent’s plan
Employer mandate requires coverage offered to full-time employees (work 130 hours per month/30 hours per week)
Variable and Seasonal employees may be eliminated from offering until full time status is determined
Employees eligible for Government programs (i.e. Medicaid, Medicare, Tricare, Indian Nation) not likely to elect employer coverage
Other employees may opt out due to cost or availability of coverage through spouse; employer only required to offer coverage
Determine number of employees likely to elect employer coverage or to purchase coverage on exchange
Serving Three Employee Populations
I am excited about the insurance plan offered to me for
the first time.
I don’t qualify for the Employer Plan and need to buy
individual coverage.
I like the coverage I have and want to
keep it.
Total Rewards & ACA
Do you need to apply the correct measurement and stability periods for each employee group?
Do you offer the right coverage for each group’s unique needs?
Are your contributions set appropriately to avoid penalties?
Can you pass Section 105(h) discrimination testing?
With varying needs, do you need unique communication and education solutions for each group?
Your Decisions
Somehow, you need to get elections to the right carriers correctly.
Since you don’t know who specifically will enroll, how do you determine the premium and financial impact?
How will Automatic Enrollment potentially change your strategy?
Your Decisions
Total Rewards & ACA
Components of a Group ExchangeEmployer Sponsored
Marketplace/Shopping Experience for the Consumer
Employer Funded Defined Contribution
Online Technology Platform
Enrollment Advocacy Resources
Enrollment Decision Support Tools
Shifting the Paradigm from Payroll Deduction to Providing Funds and Choice
Integrated with or Potential Replacement for Benefits Administration System
Online and Call Center
What’s the Hype?
Predictable Long-term Costs for the Employer
Cost Reduction – Buy downs
Employee Choice = Higher Satisfaction
“Free” Benefits Administration
The Ability to “Get Out of Benefits”
Defined Contribution vs. Defined Benefit
Advisory Services Should be Independent from the Exchange Owner— 69% of Employers Agree that Independence is Very Important*
Employer Remains Plan Sponsor— Own Financial Results
— Accountable to Employees
— Compliance Requirements Remain
Health Plan Optimization Strategies Should be Customized to the Employer
We Believe…
*Source: PWC Private Exchange Evaluation Collaborative (PEEC) employer survey, Dec 2013
Defined Contribution and Private Exchanges Alone Do Not Stop/Slow Medical Trend— CDHP Migration can Reduce Costs
— Health Outcomes and Unit Costs Matter
Multi-Year Agreements Only Work when the Cost and Performance are Guaranteed
ACOs, Evolving Networks and Redirection Represent Significant Savings Potential— Exchanges Need to Support and Enable this Transformation
Employee Choice Helps Drive Satisfaction but Not Necessarily Lowest Cost
We Believe…
*Source: PWC Private Exchange Evaluation Collaborative (PEEC) employer survey, Dec 2013
What Should You Be Doing Now?
Stratifying employees (full, part, seasonal, variable)
Measuring variable hour employees Understand and quantify exposure
Decide offer strategy (pay/play/somewhere in between)
Develop timeline for action
Mike’s Information & Experience
Mike KahleyLockton Dunning BenefitsSenior Vice President
Contact Information:E-mail: [email protected]: 214.720.5762
Food Service Representation
Boston Market CorporationRaising Cane’sConsilient RestaurantsDominos Franchise AssociationFamous Dave’s of AmericaJack In The Box AssociationMAC PizzaSonic Drive-Thru CorpTOMS King Holdings LLCUncle Julio’sVillage TavernWingstop Restaurants
As a husband of sixteen years and father of three, Mike is especially proud of the unique professional, family-oriented atmosphere at the Lockton office. The Kahleys’ live in Highland Village, Texas and enjoy being thoroughly involved in the church and all the Kahleys’ either coach or participate in youth sports. When Mike finds a moment to slow down, you might find him reading history and planning the next adventurous Kahley trip. Speaking Engagements
Chain Restaurant Total Awards ConferenceCorner Bakery Leadership ConferenceMulti-Unit Franchise ConferenceThe Dominos Franchisee AssociationFamous Dave’s FranchisesGE Capital Franchise Finance SeminarsJack in the Box Franchise AssociationNations Restaurant News PanelPeople Report Best Practices ConferenceSonic Advisory CouncilPopeye’s Chicken Fox News Radio
Our MissionTo be the worldwide value and service leader in
insurance brokerage, employee benefits, and risk management
Our GoalTo be the best place to do business and to work
www.lockton.com
© 2014 Lockton, Inc. All rights reserved.Images © 2014 Thinkstock. All rights reserved.
The Affordable Care ActMaking Lemonade out of
Lemons
Establishing a Budget
Variables:—Cost of a qualifying policy—Employee portion of the premium—Number of full time employees—% of full time employees who will accept
Establishing a Budget
Employer portion of the premium—Minimum safe harbor for employee
portion: —$7.25 X 30 hours X 9.5% = —$20.66 per week, 1,074 per year
Establishing a Budget
Number of full time employees—Determined by 2013 payroll history
% of full time employees who will accept— ?????
So What Happened at Firehouse?
Firehouse Subs Company Restaurant Example
$791K AUV$89K EBITDA17 employees
— 1 manager
—16 hourly
— 3 full time
—13 part time
Firehouse Policy Highlights
Premium - $5,138—Employee portion = 20% ($1,028 annually; $86
monthly)
Deductible $4K Out of pocket max: $6250 (network) $10K
(out of network) Co Pay: $40 (Primary) $80 (specialist) $100
(urgent) $200 (emergency)
The Result
Silver Plan offered to full time Firehouse employees
Firehouse pays 80% of premium 65% of employees accepted (two per
restaurant) $8K expense per location; 3% sales increase
needed to recoup expense
What to do next?
Determine your status Decide whether to offer health insurance or
not Design scheduling protocols that support your
decision
Avoid Minefields
Employees drifting above and below 30 hours, creating unbudgeted risk
Cutting employees hours due to poor planning
Lawsuits and partial unemployment claims due to cutting hours
Affordable Care Act
David BarrOne Lonely Operator Trying to
Make Sense Out of This
PMTD Restaurants LLC – 23 KFC/Taco Bells/KT’s
A franchisee owner/operator of restaurants in small towns of Alabama and Georgia.
A Case Study
TotalCurrently
EligiblePre-ACA
CurrentlyEnrolledPre-ACA
# of active employees 412 36 30
# of full time 109 36 30
# of part-time 303 0 0
Full time employees are defined using a one year measurement period. Of the 109 full time employees, 36 are salaried and 73 are hourly.
PMTD Restaurants LLC – 23 KFC/Taco Bells/KT’s
PMTD’s Plan Currently Qualifies as Affordable to Employees
EmployeeOnly
FamilyCoverage
Annual premium $5,028 $12,612
Paid by Employer- $- %
$4,07381%
$4,34934%
Total $ paid by Employer $129,000
Paid by Employee $955 $8,263
PMTD’s plan will meet the affordability test (less than 9.5% of employees pay) for its employees as full time employees make at least $10,000 per year and PMTD’s plan is at 84% actuarial value.
ACA Could Increase Insurance Cost To Employer
Total $Paid by
Employer
Currently pre-ACA $129,000
Estimate under ACA with no change to plan $444,000
This approx. $300,000 increase represents 1.5% of sales.
Assumption: All eligible individuals accept plan as currently designed and employer maintains same contribution.
The Bigger Question – Will Employees Sign Up?
They will have different choicesEmployer
PlanGovernment
ExchangeDo Nothing
30+ hours employees with household income > $16,800 (est. Medicaid threshold)
$955/yr.9.5% of Income
$4,800/yr.(Subsidized only
if employer doesn’t offer plan at 9.5%)
2014 - $120/yr.2016 -
$695/yr.Penalty on
taxes
30+ hours employees with household incomes < $16,800 (est. Medicaid threshold)
$955/yr.9.5% of Income
Enroll in Medicaid
$0/yr.
N/A
Summary of Costs and Employees
# of Employ# of
Salaried Employ
# of Hourly Employ Total Cost
Total 412 36 376
Less: Non-fulltime employees (303) (303)
Sub-total of FT Employees 109 36 73 $444,000
Less: Reducing 30-33 hour employees (1/2 of 35)
(17) (17) ($69,200)
Less: Est. Employees that do not sign-up (10% sign-up)
(50) (50) ($203,700)
Less: Employees On Spouse Plan (6) (6) ($24,400)
Benefit of Employees Pay More (36 employees x $100)
($3,600)
Change in Plan design (36 employees x approx. $275) ($10,000)
Ending Total 36 30 6 $133,100
As a Result of Planning for ACA, Costs Can be Managed
Exchange is calculated as 109 employees less exemption for 30 full time employees times $2,000 per employee
Total $Paid by
Employer
Currently Pre-ACA $129,000
Calculated Estimate under ACA
$133,100
Everyone goes into the Exchange (not tax deductible)
$158,000
Healthcare UpdatePanelists
• Jeffrey Lundgren, U.S. Chamber of Commerce• Mike Kahley, SrVP at Lockton Companies• Don Fox, CEO of Firehouse Subs• David Barr, Chairman of PMTD Restaurants
