Last month I mentioned there are two issues dominating the discussions in most hotel management companies regarding human resources. The first issue, which I discussed at length, is the upcoming labor-union negotiations. The second issue is, of course, the Affordable Care Act, or “Obamacare.”
With the re-election of President Obama and defeat of the Republicans in the Senate, it became clear that “Obamacare” would not be repealed and would go into effect beginning this year. Many HR professionals are still trying to figure out how to comply with the requirements of ACA and still provide cost-effective health-care plans for hotel employees.
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Randy Pullen |
One of the key elements of the Act is to implement wellness programs in companies. Recently, it was reported that CVS Caremark employees who do not participate in an annual voluntary wellness review would have to pay a penalty of $600. Employees could also be fined more if they did not meet certain specified health targets such as weight, body fat and blood pressure. This is becoming a more prevalent practice as companies move to engage employees in helping control rising health-care costs.
In a survey recently completed by HR consulting company Aon Hewitt of 800 employers covering more than 7 million employees, it found nearly 60% of the employers surveyed plan to “impose consequences on participants who do not take appropriate actions for improving their health” in the next few years, such as completing a health-risk questionnaire.
The motivation behind getting employees involved in their health care is the looming cost of the so called “Cadillac Plans.” ACA levies a 40% non-deductible tax on the annual value of health-plan costs for employees that exceed $10,200 for single coverage or $27,500 for family coverage. Surveys indicate that as high as 60% of employers will be subject to this tax. It is estimated that it will only require as little as a 6% a year increase in current plan costs over the next five years for them to exceed the limits.
For example of how the tax would be levied, assume a company health plan with single coverage cost of $11,200 for participants in 2018; it would exceed the limit by $1,000 and the company would be assessed a tax of $400. If 20,000 employees were enrolled in that plan, the total tax bill would be $8 million. The tax is paid by the company either through increased premiums or a surcharge levied by the administrator of a self-funded health plan.
You can quickly see why employee wellness plans will become the norm. Companies will try to reduce plan costs by having a healthier workforce with fewer claims resulting in lower premium costs through the health-care exchanges.
One of the leaders in addressing the future of health care in the hospitality industry is Loews Corporation. Alan Momeyer, VP of HR for Loews, recently addressed the HR in Hospitality Conference & Expo in Las Vegas about how Loews recognized in 2007 that employee health was a key factor in managing the future cost of health care.
This past week, I had the opportunity to speak with Alan as well as Barbara Molloy, Loews’ corporate director of benefits, regarding their innovative approach to addressing employee wellness. Beginning in 2007, Loews looked at how to improve employee health as part of a self-insurance program. The company saw the benefits of a healthier workforce not only costing Loews less for medical care but also fewer sick days on the job.
Company executives started by incentivizing employees to complete a risk assessment at no cost to them, and they would receive $50 for their trouble. Approximately 70% of employees participated in the program. With this initial success, Loews increased the incentive to $200 the next year but required employees to agree to a telephone coaching program regarding their health. The participation level dropped to 22%. After walking around talking to employees, executives figured out that employees wanted to hear it from their own doctor. So, the program was adjusted and saw the participation rate increase dramatically. Now, employees go to their doctor to get a preventive exam and do a biometric screening.
Over the past few years, Loews added additional incentives to its wellness program such as having employees voluntarily pick three activities to improve health. Activities included joining a nutritional plan such as Weight Watchers, joining a fitness club, joining a group exercise plan, getting a dental exam or telephone coaching.
Next year, in conjunction with ACA, Loews will remove the direct incentive but will have a two-tiered health plan where if employees have an annual biometric exam with their doctor and select three approved healthy activities to participate in, they will qualify for a lower cost plan. If not, the employee will have a health-care plan with a higher premium as required by their plan administrator.
The hope is that employees will become engaged in wellness activities, choose healthy living habits and help contain health-care costs below the Cadillac tax limit. If for any reason this does not happen, Loews employees have been brought into the discussion that the option of increasing the portion employees pay for their health-care premium, currently set at a low level, may become the only alternative. That's a real incentive, and innovation at work.
Randall Pullen is president and CEO of WageWatch, Inc., which he founded in 1999 to design and implement Web-based wage and benefit surveys. Mr. Pullen‘s work experience includes more than 30 years of software development and consulting to the hotel industry. Mr. Pullen is a certified public accountant and a member of the AICPA. He earned a Bachelor’s Degree in mathematics and an MBA from Arizona State University. He serves on the boards of a number of companies and associations, and is currently the treasurer of the Arizona Housing Finance Authority.
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