The looming shadow of regulation: a health reform bill may contain onerous reporting and accounting requirements for employers

A health reform bill may contain onerous reporting and accounting requirements for employers.

Should President Clinton's Health Security Act pass, certain regulations, including data collection, accounting requirements, and penalties for noncompliance, may be onerous for small and large employers alike. In fact, businesses are likely to face new and difficult requirements in any reformed health system.

The federal government will need more control in a system with an employer mandate, says Chip Kerby, an attorney in the Washington office of William M. Mercer Inc., benefits consultants. "We're moving from a system in which employers can choose to do nothing to one in which they will have very specific requirements. Kerby notes, "Obviously, the federal government will have to find ways to ensure those requirements are met."

To ensure compliance with the provisions of the employer mandate in Clinton's proposal, the 1,342-page Health Security Act outlines a number of fines and criminal penalties for many of those involved in health care. Fortunately, in the "All-Payer Health Care Fraud and Abuse Control Program," an enforcement mechanism in the Clinton bill, most of the penalties would not be imposed on employers. Physicians, health alliances, drug manufacturers, and medical suppliers would also be at risk.

But the federal authorities who run the program would have strong incentives to go after corporations, the entities perceived to have the deepest pockets, says Bradley A. Smith, assistant visiting professor at Capital University Law School, in Columbus, Ohio. The regulatory authority would receive virtually no budget. All of its revenue wouldcome from penalties and property forfeitures, according to the bill.

"Obviously, an employer today that fails to pay a premium to the insurance company is in some trouble," says Smith. "But [failure to pay] doesn't cause a set of federal sanctions to fall down on its head." An employer responsible for paying premiums on behalf of its employees would face criminal charges if it failed to do so, Smith says.

Moreover, employers would face new reporting requirements and the potential for more penalties if those requirements are not met, Smith adds. For example, failure to register workers with a health alliance in a timely manner could result in fines of as much as $10,000 per enrollee.

And while some employers are not worried so much about penalties for non-compliance, they might be more concerned about complying with some provisions in the final legislation that could be burdensome. The structure of health alliances may make it necessary for national corporations to deal with hundreds of providers. Tom Billet, a principal in the Stamford, Conn., office of A. Foster Higgins & Co. Inc. benefits consultant, says the diversity of premiums will pose an administrative burden similar to that of collecting and paying state income tax, unemployment insurance, and other state requirements. "This is certainly not something corporations can't handle. But there would likely be some confusion in the early stages," Billet says.

Carolyn Kelley, director of the American Payroll Association in New York, says she worries that data collection requirements of the Health Security Act would burden employers severely. She points out that already the Medicare and Medicaid Coverage Data Bank, instituted this year to collect information on Medicare and Medicaid coverage, requires employers to provide detailed information on the health insurance they provide to employees. She estimates that converting information systems to comply with the new requirements of health reform would cost $50,000 to $100,000 for small companies and possibly more than $3 million for large, international companies. Under the Health Security Act, employers would have to report benefit information not only for covered employees, but also for spouses and dependents.

Kelley adds that a large bureaucracy with responsibilities divided among regional alliances and a National Health Board would be created by the Health Security Act, and make reporting requirements difficult. "In theory, each of those alliances can have different withholding, reporting, and depositing requirements," she says. Accordingly, a national company may find itself in a situation similar to that of having to deal with different state and federal tax entities.

CORPORATE ALLIANCES

Companies that form their own corporate alliances would find they have undertaken a new set of liabilities. "All the rules that apply to regional alliances will apply to a company that becomes its own corporate alliance," says Grace-Marie Arnett principal of Arnett & Co., health policy consultants in Washington.

Companies that establish their own alliances would have to open their books to federal authorities, and be prepared to comply with accounting and other rules to avoid penalties. For instance, federal authorities would likely check that a corporate alliance is financially stable and that it is putting money aside for future claims.

If one plan in an alliance fails, the other plans may be required to pay as much as 2% of their annual premiums for as long as necessary to generate sufficient revenue to cover any outstanding claims against the failed plan. In the final version of the act, some of that financial liability may fall on the corporate alliance, says Arnett. "It would be risky for companies to run their own corporate alliances," she continues. "I suspect few will chose to do so under health reform, at least during the early stages after the bill is passed."

In addition, corporate alliances would have to supply the secretary of labor with any information he or she may require on the benefits the company offers. Failure to comply could mean a $100,000 fine.

Health plans, including corporate alliances, that fail to provide proper data on "clinical encounters" or that fail to submit data in the form required by the Quality Management Council, which would be responsible under the Clinton plan for monitoring quality of care, can be fined as much as $10,000 for each violation.

Corporations that opt to form their own alliances should also be aware that once an individual is enrolled in a health plan, the plan may not "terminate, restrict or limit coverage...for any reason, including nonpayment of premiums," according to the Health Security Act.

DUE PROCESS

Benefits consultants also noted that employers would have to provide detailed due-process rights for individuals denied treatment under a company-sponsored health plan.

An employee denied treatment for any reason could begin an elaborate appeal process involving the employer, health plan, and the alliance. The process has at least four steps including a review in a regional compliance office, a state hearing office, federal health plan review board, and the federal courts, Smith says. And if the employee prevails, the employer may be liable for attorneys' fees and court costs.

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