Let’s take a brief respite from the greater Affordable Care Act (ACA) debate and narrow our focus on what matters most for large group employer health plans.
Based upon the media coverage of the health insurance debate, one might assume:
- Most Americans with health insurance are now covered by individual policies.
- Some remain covered by employer-sponsored health plans.
- All health plans operate similarly to car insurance. The individual or employer pays fixed premiums to the insurance company, and the insurer pays the resulting filed claims.
Facts that might surprise you1:
- The percentage of employers offering group health benefits has not materially changed since the advent of the ACA; 59% of working-aged Americans still obtain health insurance via their employer. Of these 59%, 61% do not have a “health insurer;” their employer’s plan is self-funded. This 61% figure jumps to 83% if we consider employers with 200 or more employees.
- 15% of working-aged Americans are now covered through Medicaid.
- Only 9% of working-aged Americans are covered by individual policies (on or off an ACA exchange or marketplace).
How has the ACA impacted employer-sponsored plans?
- Overnight, 30 hours per week became full-time employment.
- Reclassification of employees into four categories: full-time, part-time, variable hour and seasonal. The ACA ended temporary and intern classifications, for example.
- ACA employer shared responsibility penalty risks created a paradigm shift from “What health benefits do employees value?” to “What health benefits eliminate our ACA penalty risks?” Thus, many employers introduced high-deductible health plans, offering adequate coverage under the “easy button” federal poverty line affordability safe harbor.
- Adoption of self-funding contracts, including level funding, rose due to the elimination of the new ACA Health Insurer Annual Fee (aka ACA premium tax) and the early escape hatch provided to employers with 51 to 100 full-time employees plus full-time employee equivalents from the scheduled 2016 small-group expansion.
Where are we now?*
- The October 2015 PACE Act ended the scheduled small group expansion in all but a few states. Suggestion: If you moved to self-funding to escape this expansion, revisit fully insured pricing.
- ACA employer shared responsibility still applies.
- 1095-C/1094-C forms still apply for tax year 2017.
- The Cadillac Tax hurricane is still scheduled to come ashore January 1, 2020. Thus, as it stands, non-calendar-year plans will likely need to make final adjustments at the beginning of the 2019 plan year.
- Section 125 (aka the tax-favored status of employer-sponsored health plans) remains the largest federal tax “expenditure” and provides $250 billion in income and payroll tax savings to employees and employers annually! Will Congress curtail or eliminate these tax benefits in the future?
What are a few strategies employers can evaluate regardless of what happens next?
- If your plan is self-funded, explain to your employees how the plan operates and why employee stewardship of the plan financially benefits all parties. Emphasize that increases to benefits compensation usually limit increases to cash wages. Ask for your employees’ partnership and ideas.
- If you’re interested in encouraging spouses to enroll in their own employer’s plan, an easier, gentler alternative to implementing spousal surcharges and exclusions is simply setting the payroll deduction differential between single and employee/spouse coverage and the differential between employee/children and family coverage at a rate that is higher than what an individual would pay, on average, for single coverage.
- You might be surprised by the variability between pharmacy benefit manager (PBM) contracts and pricing. Study your current contract, review competitive vendor alternatives and negotiate the best terms for your company and your employees.
Now’s a great time to double-check that your health plan remains compliant, competitive and contractually sound.
1 Source: The Kaiser Family Foundation/Health Research & Education Trust 2016 Employer Health Benefits Survey * as of September 13, 2017