SALT LAKE CITY — Legislators are trying to piece together the risks and benefits of health care coverage in the aftermath of a federal deadline extension.
Members of Utah's Health Reform Task Force met Thursday to review the consequences of risk adjustment and for updates to the Patient Protection and Affordable Care Act.
Risk adjustment refers to the sharing of risk among individual and small-business insurance carriers, as mandated by the Affordable Care Act. In the past this only applied to large businesses — those who employ 50 or more employees — according to Rep. Jim Dunnigan, R-Taylorsville, chairman of the task force.
"The idea is that there's this risk-sharing going on among the carriers," he said.
This means if one company has to pay out more on claims than others, other companies will need to pay to help that company out.
Because Utah's system is bifurcated — meaning uninsured individuals can apply for health insurance through the federal government and the state will handle small-business insurance options — the state's eligibility for federal risk adjustment is in question.
It may be possible for the state to run a state-based risk adjustment program under the Affordable Care Act, according to Cathy DuPont, the legislative task force's associate general counsel.
The benefits of this could be seen in the cost of premiums. Under the federal program, insurance carriers do not know if premiums are too high or too low until the following summer — after they have set rates for the following year.
"It's like if you're building a house and you're constructing it and you find out what it cost a year and a half later," Dunnigan said.
The federal government will cover risk adjustment for 2014. Now Utah officials need to decide whether they want to take control in 2015.
Wakely Consulting will conduct a cost-benefit analysis of opting for a state-based versus a federal risk adjustment program, and will release the results on Sept. 19.
The task force also discussed the announcement that the federal government will delay enforcement penalties for large employers who do not offer coverage for full-time employees.
The delay was announced July 2 and means businesses with 50 or more full-time employees have one more year before being subject to a penalty if they did not have insurance for their employees, Cathy DuPont, associate general counsel for the task force, said.
The federal government delayed this in part because there were unanswered questions about enforcement, DuPont said. For instance, state employers did not know who qualified as a state employee.
"Part of the reason that we have this delay of enforcement is because employers don't have the answers to some of those questions and the penalties they would face are high."
As high as $2,000 to $3,000 per employee, Dunnigan said.
The formula for large employers to determine whether or not an employee requires coverage was complex, he said, which is another reason he thinks the federal government delayed the decision.
The enforcement has caused two groups to be created, he said — what he calls the 29ers and the 49ers. The 29ers are employers who cut their employees to fewer than 30 hours so they do not have to give them benefits. The 49ers are those employers who employ no more than 49 employees to avoid being qualified as a large business.
"It's not good for the economy," Dunnigan said. "It's not good for the employees."
Dunnigan said he is glad the government delayed enforcement so they can figure out how to address these issues.
For more information, including background and meeting times, visit www.le.utah.gov.