Some Transport Firms Weigh Benefit Cuts to Counter Higher Costs From Health Law

This story appears in the Dec. 2 print edition of Transport Topics.

Some transportation employers say they are bracing for higher costs and are reassessing the scope of employee health-benefit plans to meet requirements under the Affordable Care Act.

The new health law, which requires everyone to get health insurance either through an employer or on their own — or pay a penalty for not having coverage — takes effect Jan. 1.

Implementation of the law has been plagued by technical problems, and President Obama has offered a plan that would allow insurers to extend by one year existing policies that don’t meet the law’s requirements for coverage and benefits.

In the meantime, employers are grappling with how to maintain health benefits for employees while minimizing the added cost of providing insurance.

“Employee health benefits as we now know them are undergoing a radical change,” said Sharon Whittle, a compensation and benefits consultant with Grant Thornton LLP in Dallas. “Employers are reevaluating whether — and how — they will provide health benefits to employees.”

Lee Connor, president of John S. Connor Inc., said his company, a freight forwarder and logistics firm based in Baltimore, is facing a 26.6% increase in rates for renewal of the company’s health insurance policy in 2014.

“We can’t pick up a 26% increase,” Connor said. “We pay 75% to 85% of healthcare costs for all employees and their families, and it looks like we will be passing on more costs to employees and/or lowering some aspects of coverage unless we can find some other, better option.”

Steve Crawford, president of Steve Crawford Trucking as well as SCT of Ohio Inc., said he took steps to renew existing policies early for 43 of his employees who work as contractors for FedEx Ground, so that renewals in 2014 come later in the year.

“We will be able to see what our increased exposure will be and will have a better view of the rates,” Crawford said. “So far, this has not impacted any decision to add employees, but that may be something to assess next year.”

Thomas Connery, chief operating officer of New England Motor Freight, a unit of Shevell Group — and a major less-than-truckload carrier in the northeastern United States — said his company is “definitely looking at increased expenses” under the healthcare law, including a fee of $63 per person that will cost the company about $315,000 in 2014.

Connery said the company also has cut back on the hours of part-time employees to avoid having to provide them the same benefits as full-time workers.

The Transitional Reinsurance Program Assessment fee — one of several levies imposed by the health-care law — applies to health insurers and employers that are self-insured such as New England Motor Freight.

The assessments are designed to raise $25 billion over three years to offset the cost of providing insurance to individuals with high medical bills, in part, because the new law prohibits insurers from denying coverage to people with pre-existing conditions.

A survey conducted by Transport Capital Partners in the third quarter found that trucking executives are “gradually coming to terms” with what they must do to comply with the law and are adopting different strategies to deal with the rising cost of health care.

While some companies surveyed said they are considering dropping all health-care coverage for employees, the largest percentage of respondents (44%) said they are implementing wellness programs.

About 30% of companies said they are considering implementing health savings accounts to help employees pay for insurance, and 24% said they would consider using more independent contractors as an alternative to having employees and being required to provide insurance.

Driver health and wellness appears on the latest list of critical issues for trucking by the American Transportation Research Institute. The issue ranks No. 10 and appears on the list for the second consecutive year, having ranked No. 9 a year ago.

In a recent webinar, Kim Beck, vice president of benefits consulting for Cottingham & Butler Inc., an insurance brokerage firm in Dubuque, Iowa, and Kathryne Feary-Gardner, an attorney for Scopelitis, Garvin, Light, Hanson & Feary, an Indianapolis law firm, outlined the steps carriers must take to comply with the law.

Employers first must evaluate current plans and survey employees to determine the number of full-time workers eligible for coverage. Employees working at least 30 hours a week, or 130 hours a month, are considered full-time employees.

Feary-Gardner also said companies that use owner-operators should expect to see increased scrutiny from state and federal agencies over proper classification of independent contractors.

“Independent contractors are responsible for securing their own health-care coverage,” Feary-Gardner said.

Additionally, Beck said, some companies are looking at offering “skinny” plans that pay for most preventive medical care but exclude coverage for catastrophic or expensive procedures.

An analysis by the American Staffing Association found that some employers are trying to shrink the size of their operations to get below the thresholds of 50 employees or 30 hours a week that trigger compliance with the health-care law.

However, employers who try to thwart the law by “splitting” hours of workers to keep them under the limit could be subject to penalties, said Toby Malara, government affairs counsel for American Staffing.