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Jan. 28 — While no one yet knows how big the trend is, retailers Trader Joe's Co., Target Corp. and Home Depot Inc. are definitely far from alone in reducing or eliminating health insurance coverage for some or all employees, and human resources departments across the land should brace themselves not just for the paperwork hassles involved, but for the broader implications of such changes, experts in the area of HR and benefits said in interviews with Bloomberg BNA.
Target was the latest major company to reduce health care coverage, announcing Jan. 22 that it would stop providing health insurance to part-time employees beginning in April.
“I think HR is struggling with how much they should become involved with helping employees decide on the options that are available,” attorney Khristan Heagle said.
While the trend of some employers dropping health coverage is widely blamed on the Affordable Care Act, “it is difficult to say” whether that's really the main reason or if older and broader trends in the health insurance market like the chronic premium increases of recent years are also to blame, attorney Khristan Heagle of Klein Zelman Rothermel Jacobs & Schess LLP in New York City said Jan. 28.
Whatever the case, “it is definitely something that we are hearing about from our clients,” she said, adding that many are calling to ask the employer-side law firm's advice and find out what other employers in similar industries are doing. “It is bubbling up from small-to-medium-sized companies,” Heagle said. “They are receiving notices from their insurance companies that the policies they have been offering their employees are being cancelled. Then they are offered other options, but with fewer benefits and a premium increase of 15 to 30 percent.”
The benefit reductions from insurance carriers include “cutting out entire medical facilities,” such as New York City's renowned Memorial Sloan-Kettering Cancer Center and Mount Sinai Hospital, she added. “Employers often don't know about the major changes that have been made, and that puts employers in a very difficult position where they have to do a complex analysis of do they continue to offer health care coverage, or not, and eventually take the penalties and direct employees to the exchanges where they can get more comprehensive care at lower premiums,” Heagle said.
When employers do choose to eliminate health insurance coverage, “I would expect that such companies will at least educate the employees on the public exchanges and how they can get insurance. Doing otherwise can be perceived as non-caring and lead to negative labor relations,” George Boué, vice president of human resources at Stiles Corporation, a commercial real estate firm in Fort Lauderdale, Fla., said in a Jan. 25 e-mail. He said that neither his own company nor his colleagues at other area companies are cutting coverage, however.
“The biggest issue is a morale issue—whether employees will feel valued if the employer drops their medical insurance or dramatically changes what they offer as a result of changes with the carriers,” Heagle said. “It's not much of an issue for larger employers, who will continue to seek the best deal. For small-to-medium employers it's a question of whether to continue to offer coverage or not—they have to do what's best for the organization, recognizing that health insurance is so prized by most employees.” Withdrawing coverage may have a serious impact on organizations' recruitment and retention, she added.
Mike Patrick of the Atlanta office of consulting firm Towers Watson had a similar point of view. “U.S. employers recognize that employee health care is a business issue that affects workforce performance and in fact, our research suggests that nearly half of organizations expect to evaluate their health strategy within a broader total rewards context. Linking a health and productivity strategy to the organization's employee value proposition (EVP) is key for organizations to get the most from their investment in driving and sustaining healthy behaviors,” he said in a Jan. 28 e-mail.
That leaves a lot of uncertainty for HR to sort out. “I think HR is struggling with how much they should become involved with helping employees decide on the options that are available,” Heagle said.
“How an organization balances the mix of its total reward programs in response to health care reform will depend largely on its overall business strategy as well as EVP,” Patrick said. “Some employers place greater emphasis on health care benefits, while others focus the total rewards package on base salary and incentives. While questions still remain about what further actions employers will take as more health care provisions take effect, most U.S. employers continue to seek a deeper understanding of the implications for their EVP and total reward programs.”
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