Insurance Fee For Big Businesses Helps Fund Obamacare
The world of health care, like any, is full of haves and have-nots. It's not hard to the haves at Sherwin-Williams' corporate headquarters in downtown Cleveland where some 2,500 employees have access to an in-house health and wellness center. The huge paint company offers comprehensive health coverage to its employees and encourages them to take a break from work for an exercise class, a workout on the elliptical trainer or a run on the treadmill.
Like many other large employers, Sherwin-Williams serves as its own health insurer. Because the company pays for employees' health claims, it has a strong incentive to keep workers healthy. Sherwin-Williams is betting it will be better off bearing those costs directly rather than paying premiums to an insurance company.
"The key is to have healthy, engaged, productive, present employees," says Martha Lanning, the company's director of health and wellness plans.
Sherwin-Williams and its employees aren't likely to use the individual Obamacare marketplaces, but they will help bear part of the cost.
Lanning says it takes time and money for companies like Sherwin-Williams to sorting through the legal and administrative issues surrounding the Affordable Care Act. There are direct costs, too. "We also have to pay that transitional reinsurance fee that totals for us, with some other aspects of the Affordable Care Act, about $4 million in 2014," she says.
The government collects $63 from large self-insured employers and insurance companies for every person covered by a plan — both employees and their dependents. All told, these fees are expected to amount to $25 billion over three years.
The money goes into a fund to reimburse health insurance companies for some extra costs involved in providing coverage to high-risk people on the Obamacare exchanges.
You might think of it as a subsidy from big business for making insurance coverage available to everyone without regard to pre-existing conditions.
The fee will be reduced next year and is set to disappear completely by 2016. Mark Hall, a professor of law and public health at Wake Forest University, says it's a sensible solution to a temporary problem.
"The great feature of the Affordable Care Act is it now makes everyone qualify for coverage, but that means the first people to sign up or to show up are going to be the folks who need it the most," Hall says. "So we expect, particularly at the outset, that there is going to be a heavy load on the insurance pool of high-cost people."
But Helen Darling, who heads the Washington, D.C.-based National Business Group on Health, fears the fee won't go away as planned.
"Once something is in law and somebody's got an idea about a new tax, you're always nervous that that's going to become a way to finance something else and something that is supposed to go away and be sunsetted wouldn't be because they needed the money," Darling says.
For Sherwin-Williams with $10 billion in sales last year, the added cost appears modest, at most.
In fact, human resource executives at companies nationwide said as much in a recent national survey by Mercer, the consulting company. The survey concluded found 55 percent of executives felt the Affordable Care Act was having no effect on business operations and performance apart from benefits.
And to the extent there is a financial burden, employers are shifting some of it to employees. Mercer also found that most large employers are requiring workers to pay part of the ACA fees.
Sherwin-Williams, for its part, is committed to providing insurance to its employees, says Lanning. "It's going to be the differentiating factor for businesses moving forward," she says.
After all, she adds, the key to an engaged and productive workforce is its health.
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