Healthcare reform and collective bargaining impacts - Frequently asked questions
My district/community college has not decided if they want to pay or play regarding the Free Rider Penalty. When do we have to make a decision?
The government has issued a one year extension on the Free Rider Penalty. It will now begin on January 1, 2015, or if your insurance plan year begins in October, then it would begin October 1, 2015, for employers 100 or more full-time equivalent employees. For employers with between 50 and 99 full-time equivalent employees, the penalties will apply beginning January 1, 2016. The extension will give employers more time to make important decisions regarding benefit plans and the opportunity to review rates on the exchange. Employers will also have more time to determine to which employee groups they want to offer insurance contributions or cash stipends instead of offering insurance. Once decided, employers may have to negotiate the changes into their collective bargaining agreements.
The delay in implementation also gives employers the opportunity to train administrators and all employee groups as to the impacts of the PPACA and the possibilities the exchange may provide them and their families. It will undoubtedly take time to change the way in which employees think about insurance benefits and to absorb the possibility of purchasing insurance through the state exchange. If the education is completed prior to negotiations, all parties can come to the table knowledgeable about the potential impacts of the PPACA and engage in a richer conversation regarding the future of District insurance offerings and contributions.
Should our district/community college “pay or play” in regards to the free rider penalty?
There is “no one size fits all” to this question. Employers must carefully evaluate the best decisions for their own district/community college and employees based on plan rates (both on the exchange and their insurance carriers), revenue and budgets, the demographics of their employees and the potential impact to the community.
It is also important to consider how it may affect the district’s/community college’s ability to attract and retain new employees in the future should it decide to not offer insurance to certain groups. Considering not offering insurance to some employees and paying the penalty creates a major in shift in thinking; however, there are many employees who may benefit from purchasing insurance from the exchange. It could also lead to huge revenue savings for employers. Once employers decide upon a plan, plenty of time must be allowed for the potential negotiation of collective bargaining agreement language to allow the implementation of the plan.
How does the full time employee definition affect our labor agreements?
Collective bargaining agreements throughout Oregon have varying definitions of what constitutes a full time employee, and there are many ways employers determine which employees qualify for employer offered insurance.
The PPACA defines, for purposes of the shared responsibility provisions, a full time employee as an employee who works on average 30 hours or more per week or 130 or more hours per month. The Free Rider Penalty will be triggered for employers who do not make insurance available to those employees who work 30 hours or more per week. The PPACA definition of full-time employee is different from the Department of Labor’s definition of full-time employee, an employee who works 40 or more hours per week full time.
Generally, no changes will be necessary. Most Oregon employers within the education field offer insurance to half-time or more employees. Many of the collective bargaining agreements address the employer’s monthly insurance contribution in terms of part-time or full-time, but it does not impact which employees to whom the employer offers insurance. The language is purely clarifying what portion of the employer’s monthly insurance contribution those part-time employees will receive.
Bargaining Strategy: Negotiate clear language as to whom the employer is offering insurance. Identify employees based on numbers of hours worked per week (or per month) and not merely as part-time or full-time. Contributions may still be pro-rated based on the number of hours worked but the employer must be aware of the effect the pro-ration has on employees working 30 hours or more but less than 40 hours per week.
Revenue Saving Strategy: Employers may also want to consider restructuring positions to stay below the 30 hour a week threshold. This could limit the amounts of fees the employer may have to pay as part of the shared responsibility provisions (pay or play).
Our district/community college has 130 employees and 35 of them opt-out of our offered health insurance. How is insurance opt-out language in a collective bargaining agreement affected by the PPACA?
- Opt-out with HRA Contribution: If your current opt-out language requires the employer to contribute money into a Health Reimbursement Account (HRA), the language may need to be modified or a Memorandum of Agreement agreed to with the Association to address changes taking effect beginning January 1, 2014. Employers will no longer be able to contribute money into an HRA for all opting-out employees. Any employee who opts-out of employer offered insurance must show proof of other insurance through a group plan. Exchange plans do not qualify as group plans.
- Opt-Out with Other Form of Incentives: If your current collective bargaining agreement contains opt-out language for employees who can provide proof of another form of group health insurance coverage and the District currently provides a cash stipend or a contribution into the employee’s Section 125 account (flexible savings plan), or a combination of those two contributions, probably no change to the language is necessary.
A reminder that a cash stipend paid to the employee will add the cost of associated payroll expenses so the employee should consider negotiating smaller cash stipends to offset the additional associated expenses.
- No Opt-Out Incentive: If the District does not provide any opt out incentive, then no changes to the collective bargaining agreement language should be necessary.
- Possible Migration Back to Employer Plans: It is important for employers to know not only how many of the employees opt-out, but what the ramifications are should any or all of those opt-out employees return to employer offered insurance. There is an expectation that many private companies may end insurance offerings or at least end insurance offerings to anyone but the employee. This could greatly impact public employers who offer insurance to the employee, the employee’s spouse and the employee’s dependents. This change in insurance offerings by private employers could easily push spouses and dependents back into the district’s/community college’s offered insurance. Returning opt-out employees could cause significant increases in district/community college insurance costs.
Should our district/community college negotiate contributions to a health savings account (HSA) or a health reimbursement account (HRA)?
When deciding whether to contribute employer funds into either HRAs or HSAs, it is important to understand the differences and similarities between the two. One advantage of the HSA is both the employer and employee can contribute funds into it. HRA contribution limits are generally set by the employer, but there currently are no limits set by the IRS. HSA contribution limits are set by the IRS. In 2013 the contribution limit for individual coverage is $3, 250 and $6,450 for family coverage. The 2014 limits are $3,300 for individual coverage and $6,550 for family coverage.
Does the district/community college need to bargain any special provisions into the collective bargaining agreement to address employees who are double covered?
There is no requirement for the employer to do so, but it is recommended. The employer could negotiate language requiring the double covered employee to select the plan with the lowest insurance premium. For instance, if the employer offers OEBB Plan H, then the collective bargaining agreement should state that if one of the two employees selects Plan H, the other employee must also select Plan H in order to provide double coverage. Plans A – F have lower reimbursement amounts that conflict with Plan H.
The district/community college currently has its insurance rates determined based on a composite rate. Do we have to change to tiered rates? And if so, what changes must be made to the current collective bargaining agreement language?
The PPACA penalties and tax were developed utilizing tiered or step rates. If the employer does not use tiered rates, there is no requirement at this time to change to tiered rates. For those employers buying insurance through OEBB, OEBB is not yet requiring all participating employers to move to tiered rates. It is recommended the employer begin considering what changes will be necessary should it be required to move to the tiered rates. An employer using composite rates will have greater difficulty finding health insurance plans not subject to the Excise “Cadillac” Tax in 2018.
Bargaining Strategies: Employers bargaining successor agreements and economic reopeners over the next two years should give consideration to negotiating tiered rates prior to 2018 in order to limit the risk of paying the Cadillac Tax. Another option is to negotiate language into the collective bargaining agreement making it clear the employer’s current monthly insurance contribution is based on a composite rate. By specifying the contribution is based on a composite rate, then if (or when) the employer has its insurance premium rates calculated based on tiered rates, then the agreement can be reopened and the negotiations would be expedited per ORS 243.698. Reopener language could also be negotiated into the agreement. Should the employer choose a more general reopener, it is recommended the bargaining process set out in ORS 243.698 be utilized.
Our collective bargaining agreement has language regarding an insurance committee. The insurance committee is comprised of only Association members and they get to determine the insurance plan offerings for employees. Should we consider any modifications to that language? Is there even a need for an insurance committee anymore?
Yes, modifications should be made to any committee language granting the Association or employees total authority as to plan selection. Plan selection is a critical element in determining penalties the District may face under the PPACA. It is imperative that over the course of 2014 employers work educate their employees and if possible their association representatives. The employer can then offer proposals at the bargaining table that redefine insurance committees and gives back plan selection to employers.
If the current language addresses the number of plans the committee may select, the employer should consider modifying the language to address the required selection of the highest deductible plan (currently OEBB Plan H) and not allowing the two plans with the lowest deductibles (or highest premiums). By offering a plan with a high deductible, it is doubtful the employer will have to pay a penalty based on the shared responsibility provisions (free rider penalty/pay or play). By not offering those plans with the extremely low deductibles, the employer lessens the possibility it will have to pay a “Cadillac” tax based on the offered insurance plans.
There may no longer be a need for an insurance committee. The employer must look to the duties of the committee and review the current collective bargaining agreement (CBA) language to determine whether or not the employer has final decision-making authority as to plan selection and the number of plans offered. Many employers created insurance committees as a means of educating the employees about insurance usage and the available options in the market place. It was also impossible for employers to foresee the importance of retaining control over plan selection so as to not receive a penalty from the federal government.
Our district/community college has an insurance based early retirement incentive in the collective bargaining agreement. Is that affected by PPACA?
If the retired employee receives either a financial contribution from the employer in order to participate in its currently offered plans or the retired employee self pays the insurance premium to the employer, the language is not affected by the PPACA. The language must clearly stop access to employer insurance upon eligibility for Medicare, however.
Our collective bargaining agreement (CBA) contains a provision that new employees must work for the District/College 90 days before becoming eligible for insurance. Do we need to update the language?
Yes, the language must be updated to reflect the changes to the law effective January 1, 2014. Under the PPACA waiting periods may not exceed 90 days. This means the CBA language must be updated to reflect this change. The language may be modified to reflect the employer agrees to comply with employee waiting periods as defined in the PPACA. A Memorandum of Agreement (MOA) could be drafted, if the employer is not currently negotiating, to reflect this change. Then, the language in the MOA could easily be inserted in the insurance article during the next round of collective bargaining, provided the language continues to meet the employer’s needs.
What are other educational entities doing in regards to the collective bargaining agreement and negotiations?
Here are some of the following strategies employed during recent negotiations:
- Offering OEBB Plan H to employees and negotiating a contribution to the accompanying HSA. Some are funding the HSA based on the savings realized once an employee selects this low cost/high deductible plan.
For tiered rates some are offering tiered HSA contributions. Others are determining the savings for the individual tiered rate and offering that amount as a flat rate HSA contribution across all other tiers.
- Some have calculated the savings when an employee elects Plan H and does not offer the full savings back to the employee. Instead the employer offers a contribution amount and a form of supplemental insurance for groups concerned about the limitations of Plan H.
For example: if the total savings of an employee who selects Plan H is $175.00 a month, the employer may offer a $75 dollar HSA contribution and a hospital indemnity plan costing $25.00 at a group rate, and keeps the $75.00 balance as a savings to the employer.
- In an effort to save money on the cost of insurance and provide the employer protection from the Free Rider Penalty, some have considered proposing language offering insurance only to those who work 30 or more hours a week and providing a stipend to those employees working less than 30 hours a week for them to go to the exchange and purchase insurance.