Health Care in the Workplace

DR. ALICE LOUISE KASSENS JOHN S. SHANNON CHAIR OF ECONOMICS ROANOKE COLLEGE

The Management Institute March 2014

Session outline
Sick days and the workplace
Purpose, structure of plans Pros and cons Evidence and current research Status of state, city mandate

PPACA and the workplace

Employer mandate
Details, updates Information for small businesses Information for self-employed

Individual mandate
Details , updates

Sick days in the workplace

PURPOSE, STRUCTURE, EVIDENCE, & STATUS OF LAW

Sick days
Several studies around 2004 brought the issue of paid sick days into the national spotlight
49% of all workers were not able to take paid sick leave for themselves or to care for a sick family member (Lovell 2004) 54% of all workers cannot take leave to take care of a sick child without losing pay or vacation time (Galinsky, Bond, and Hill 2004) 83% of workers go to work when sick; 21% of whom do so explicitly to save their sick days to stay home when their children are sick (ComPsych Corporation 2007) High wage workers are twice as likely as low wage workers to be able to take time off without penalty to care for sick children (ComPsych Corporation 2007)

To address lack of paid sick leave, several localities have taken upon paid sick leave laws (San Francisco one of the first in 2006)

Sick days
A variety of structures for sick days
State mandated Paid vs. unpaid Accumulate vs. use it or lose it Full time vs. part time workers Size of business (# employees) Number of days allowed Time commitment prior usage of accumulated days Ratio of hours worked to hours earned Maximum number of hours earned Type(s) of illness covered

GROUP CHAT

Get into small groups and discuss the sick day structure at your place of work.
Do you have sick days? Are the paid? Can you bank days?

Are sick days only for FT workers?

(Take note on the incentives that these items create. We will return to this issue later in class.)

Sick days
GROUP CHAT Assume that you are the owner of a business and you are considering adopting a paid sick day policy. 1) Working alone, make a list of pros and cons of adopting such a policy (including incentives/disincentives created) 2) Team up with two other classmates (assume they are co-owners of the business) and share/discuss your lists 3) As a group produce a finalized list that all members agree upon. We will share the finalized lists with the class.

Sick days - paid

Pros
Job and income security particularly for low income/wage workers Reduction in public health risks from spread of illness to customers, fellow workers, and other vulnerable populations* Reduced presenteeism, turnover

Cons Added employer expense

Reduced hires, increased unemployment

Difficulties maintaining business operations Abuse of policy

Improved workplace morale, productivity

Sick days definitions

Hall & Gould 2011, pg. 6

Sick days public health issue

CLASS ACTIVITY 1) Read the article by Drago and Miller (2010) Sick at Work: Infected Employees in the Workplace during the H1N1 Pandemic 2) Answer the following questions:
A. How would paid sick days helped reduce the spread of the illness? B. What are the costs to employers of having PSD? Of not having? C. What are the benefits to employers of having PSD?

Sick days facts

In Handout
See handout for sick days by state What trends do you see?

Sick days CT as an example

July 1, 2011 Connecticut became the first state to pass legislation requiring many employers to allow workers to earn paid sick leave (law took effect January 1, 2012)
Covered many part-time and hourly workers; disproportionately affected Per diem and temporary workers are NOT covered Only for employers with 50 or more employees, excluding manufacturing and nationally chartered non-profits Earn up to 5 paid sick days per year Accrue one hour/40 hours worked; can begin to use after 680 hours of employment

Sick days CT as an example

Sick day benefit can be used to provide wage replacement for
Employees own illness, injury, health condition, medical appointment Childs or spouses illness, injury, health condition, medical care Varity of remedial purposes if worker is a victim of family violence or sexual assault
Time to see a lawyer, other legal council

Sick days analysis from CT

Between June and September 2013 a survey of 251 CT employers covered by the law conducted along with a subsample of onsite interviews with managers (Appellbaum, et al., 2014)

Employers initially concerned about cost and potential abuse of program; viewed it as anti-business
After enactment, in most cases = modest impact, no impact on business operations
Due partially to many carve outs of law; also many businesses covered already offered sick day plan

No indication that has been a job killer (employment grew in covered sectors and actually fell in exempt sectors)

Sick days analysis from CT

Share of employers surveyed who offered benefit rose from 88.5% prior to passage of law (at least 5 paid sick days or their equivalent) to 93.7% in mid-2013

Average number of paid sick days rose modestly over same time period from 6.9 to 7.7 days
Large differences across industries by change in proportion of employees with access to paid sick days
Greatest change in health, education, and social services; retail; hospitality industries Greater change when union not present

Sick days analysis from CT

Appellbaum et al. 2014, pg. 8

Sick days analysis from CT

Appellbaum et al. 2014, pg. 9

Sick days analysis from CT

Appellbaum et al. 2014, pg. 10

Sick days analysis from CT

Appellbaum et al. 2014, pg. 11

Appellbaum et al. 2014, pg. 11

Sick days analysis from CT

Appellbaum et al. 2014, pg. 13

5 minute break

Sick days thoughts

GROUP CHAT Do you think that cost increases from sick day policies were evenly dispersed across businesses? Of those reporting cost increases, which do you think had the greater incidence of cost increase? Why? Size of business? # part-time workers? Etc

Discuss these in small groups and then we will discuss as a class.

Sick days analysis from CT

Impact on locality will depend upon makeup of labor market, industry mix

Impact on business will depend upon makeup of employee base, industry

What do you notice?

Impact on employees will depend upon prior coverage, labor market status, industry
Appellbaum et al. 2014, pg. 14

Sick days additional analysis

San Francisco passed a city ordinance in 2006 First city to do so
Worker only used 3 of 5-9 sick days available Parents with PSD > 20% less likely to send a sick child to school 6/7 employers did not report any negative effect on profitability 2/3 employers are supportive of the bill

Drago & Lovell 2011, pg. 3

Sick days additional analysis

What do you notice? (also on handout)

Drago & Lovell 2011, pg. 10

Sick days additional analysis

What do you notice? (also on handout)

Drago & Lovell 2011, pg. 13

Sick days
GROUP CHAT - Revisited
Would you change anything on your list?

Assume that you are the owner of a business and you are considering adopting a paid sick day policy. 1) Working alone, make a list of pros and cons of adopting such a policy (including incentives/disincentives created) 2) Team up with two other classmates (assume they are co-owners of the business) and share/discuss your lists 3) As a group produce a finalized list that all members agree upon. We will share the finalized lists with the class.
Based upon your lists, would you implement a PSD policy at your business?

Sick days updates

National Partnership for Women & Families 2014, pg. 1

Sick days updates

State
Alaska Arizona California Hawaii Iowa Illinois Maryland Massachusetts

Size of business
15 or more none none none none 20 or more 10 or more < 10 10 or more 6-10 <6 10 or more < 10

PST/work ratio
1/40 1/30 1/30 1/30 5.5/40 1/40 1/30 1 (unpaid)/30 1/30 1/30 1 (unpaid)/30 1/30 1/30

Maximum/year
none 72 hrs/yr none 9 hrs/yr 144 hrs/yr 2 days/yr 56 hrs/yr 56 hrs/yr 56 hrs/yr 40 hrs/yr 40 hrs/yr 72 hrs/yr 40 hrs/yr

Michigan

Sick days updates

State
Nebraska New Jersey New York South Carolina

Size of business
none 10 or more < 10 10 or more < 10 10 or more 6 - 10 <6 5 or more

PST/work ratio
1/30 1/30 1/30 1/20 1/20 1/40 1/40 1 (unpaid)/40 1/30

Maximum/year
40 hrs/yr 72 hrs/yr 40 hrs/yr 80 hrs/yr 40 hrs/yr 56 hrs/yr 40 hrs/yr 40 hrs/yr 56 hrs/yr

Vermont

Washington

250 or more 50 249 5 - 49

1/30 1/40 1/40

72 hrs/yr 56 hrs/yr 40 hrs/yr

Sick days GROUP CHAT

Connecticut 50 or more employees Arizona All workers

1 hour PST/40 hours worked, up to 40 hrs/yr

Start using after 680 hours worked

1 hour PST/30 hours worked, up to 72 hrs/yr

What are the potential differing experiences by employees in the two states? What are the potential differing experiences by businesses in the two states? What are the potential differing labor market outcomes for workers in the two states? What additional information would you like to know to fully address these questions?

5 minute break

Employer Mandate
DIFFERENCES BETWEEN SMALL AND LARGE EMPLOYERS

Employer mandate overview

Beginning January 1, 2016 employers with 50-99 FTE employees MUST offer health insurance that is:
Affordable Offers minimum essential coverage OR Pay a penalty

Pay or play mandate If less than 50 FTE, not penalized if do not offer

This is a delay in the employer mandate; employers with 100 or more workers begin January 1, 2015

Employer mandate overview

Employers must provide at least 50% of premium costs of employees health coverage Health coverage purchased for an employee cannot exceed 9.5% of their gross family income for employee only coverage.

Affordability

Employers must insure their employees if they have over 50 full time workers or they will face a penalty or "shared responsibility fee".
Penalties

The penalty for small businesses not covering their workers is $2000 per employee and $3000 if they purchase health insurance through the exchange with premium credits The first 30 workers are excluded from the penalty. High end insurance plans will be subject to a 40% excise tax.

Employers with less than 25 full-time workers making less than $50,000 a year may be eligible for cost assistance via premium tax credits.

Employer mandate overview

Minimum essential benefits:
ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental health and substance use disorder services, including behavioral health treatment; prescription drugs; rehabilitative and habilitative services and devices; laboratory services; preventive and wellness services and chronic disease management; pediatric services, including oral and vision care

Employer mandate - penalties

Although firm size determined by FTE, penalty is only assessed on full-time workers (30+ hours per week)

2015 2016

See handout for more details

Employer mandate - penalties

Details on the employer mandate from the Chamber of Commerce

Employer mandate - penalties

Determination and application of employer penalty by type of employee

What types of incentives might arise?

Retrieved from http://www.fas.org/sgp/crs/misc/R41159.pdf 11/13/2013

Employer mandate (less than 50 FTE)

Choices for small employers: 1. Are not penalized if do not offer point employees to individual exchanges (www.healthcare.gov) 2. Employers can buy health insurance from Small Business Health Options Program (SHOP) for 2015 (SHOP opens Nov. 2014)
An online exchange (much like the exchange for individuals) Could quality for tax credits to offset costs (not permanent); can deduct remainder from taxes Way of attracting new employees increased total compensation?

3. Work with insurance company/broker to buy group coverage in private market (nothing new)

Employer mandate more on SHOP

Open to employers with 50 or fewer FTE employees
In 2016 this will increase to those with 100 or fewer FTE employees

Self-employed can use individual exchange, but not SHOP

If offer through SHOP, must offer to all FT employees (~30 or more hours per week)
In many states, at least 70% of your eligible employees must enroll in your SHOP plan Employees sign up using the SHOP webpage after you have selected a plan

Coverage will not take affect until approved by employer after enrollment period is over

Employer mandate more on SHOP

How to offer your employees coverage through the Federally-facilitated SHOP Marketplace in 2014 For small businesses in states with a SHOP Marketplace thats run by the federal government, we are making changes to make sure that you can take advantage of SHOP coverage and the tax credit as soon as possible. Specifically, for 2014, small employers will enroll their employees in coverage through an agent, broker, or insurer that offers a certified SHOP plan and has agreed to conduct enrollment according to HHS standards. This process, called direct enrollment, is similar to how most small employers get insurance today. You dont need to apply for SHOP eligibility before enrolling, or to use HealthCare.gov, unless youd like to see information on your plan options, including which insurance companies offer SHOP Qualified Health Plans in your area. The agent, broker, or insurer will enroll your employees, and the SHOP Marketplace will review your application and can determine later whether your business and employees are eligible for SHOP coverage. You dont need to wait for the SHOP to determine your eligibility, because it doesnt affect your ability to enroll in a Qualified Health Plan, like the ones the SHOP offers. Even if the SHOP later determines that youre not eligible to enroll through the SHOP, you and your employees may remain enrolled in your chosen plan in the small group market. The main reason for you to get the SHOP eligibility determination in 2014, is to allow you, to claim the expanded the Small Business Health Care Tax Credit at the end of your tax yearas long as you also meet all the other requirements for the tax credit.
www.healthcare.gov posted November 27, 2013 (online enrollment was delayed with this announcement)

Employer mandate - SHOP rates in area

SHOP Rates in Roanoke/Salem area

Family 2 adults age 30, 2 children

Single Parent Family 1 adult age 30, 2 children Couple 2 adults age 40, no children Plans priced by primary business location

$1,000.00

$800.00

$600.00

$400.00

$200.00

$0.00 Adult Individual Adult Individual Age 27 Age 50 Average Family Median Single Parent Family Min Max Couple Child

Employer mandate (indirect effects)

Uncertainty
When will SHOP be functional?
How much will insurance cost the employer?
Its all very confusing and it didnt answer my main question how much is it all going to cost? (Washington Post, 11/7/2013)

How much time/money will be spent learning the system? If choose to offer and use tax credit, will the benefit be affordable after credit expires?

Individual Mandate
DIRECT AND INDIRECT EFFECTS ON SMALL BUSINESSES

Individual mandate
Beginning in 2014, all individuals must by health insurance with essential benefits (minimum essential coverage) Self-employed individuals can get health insurance through the state exchanges just as any other individual If do not buy health insurance, face a penalty (unless have an exemption) Penalty is the greater of:
$95 or 1% of household income over the filing threshold in 2014 $325 or 2% of household income over the filing threshold in 2015 $695 or 2.5% of household income over the filing threshold in 2016

Individual mandate penalty example

Suppose you are single and earn $40,000 per year.
The filing threshold for 2014 for single individual is $10,250 The amount over the threshold is $40,000 - $10,250 = $29,750 1% of this is ~$300
What would you do?

Exchange for a single person under the age of 49 making $40,000 offers coverage ranging from $120.10/month to $1720.90/month (50 options, Roanoke)
All include coverage for doctor visits, Rx, hospital, maternity/newborn care, preventative care Qualify for some aid (cut off $45,960) although Kaiser calculator says that I will pay more and not qualify for a subsidy Pay $300 in penalty or at least $1,441.20 per year in premiums (risk of penalty is low since cannot be denied coverage if get sick)

Individual mandate (indirect effects)

Some individuals will have a new or higher expenditure less disposable income
Income determines personal consumption Income falls consumption falls demand for goods and services falls (a continuous cycle) Those businesses operating on a small margin might find can no longer cover average costs of production

Feel free to contact me Dr. Alice Louise Kassens kassens@roanoke.edu (540) 375-2428 (office) @RnningEconomist

The PowerPoint presentation will be available on my blog:

www.therunningeconomist.blogspot.com

Thank you