HEALTH CARE REFORM: The 'affordability' conundrum
by David Bottoms
August 05, 2013 12:00 AM | 1138 views | 0 0 comments | 2 2 recommendations | email to a friend | print
As many employers are finalizing their strategies to comply with the Affordable Care Act and avoid fines in the process, there is mounting concern the necessary approaches to avoid employer penalties will result in premiums that, despite the title of the Act, will be anything but affordable for many lower-income employees.

In their attempt to ensure that employees have access to at least some health coverage, many employers are considering offering packages of voluntary benefit plans alongside major medical plans, which will be offered in order to comply with the law.

These voluntary benefit packages, often referred to as "skinny plans" are not real major-medical programs, but rather coverage that is best characterized as providing a package of limited medical benefits alongside coverage providing flat-dollar benefits in the event of cancer, critical illness diagnosis and/or accidents.

For some background, the ACA requires that employers with more than 50 full-time equivalent workers offer "minimum essential coverage" to all full-time employees. "Full-time," within the law, is generally defined as employees working a minimum of 30 hours per week. This requirement means many employers will be required to expand eligibility under their current plan which, in the absence of other changes, will significantly increase the cost of the plan to the employer as enrollment increases.

As such, in the attempt to balance the need to comply with the ever-important need to stay in business, some employers are finding their best approach is to offer a base plan to all full-time employees that provides the lowest required levels of "minimum value coverage," while pegging employee-only premiums to 9.5 percent of the employee's annual income, which is the maximum amount allowed in order for the plan to be considered "affordable." This plan and premium reallocation strategy often enables the employer to meet their compliance obligations without increasing aggregate employer cost.

In other words, in 2014, more employees will have access to employer sponsored coverage, but that coverage will, for many, be more expensive than they can afford.

To make matters worse for these employees, because their employer will have checked all the metaphorical boxes within the requirements of the Act, the employees will not be eligible for government premium subsidies within the Exchange, leaving them with a choice to enroll in an expensive plan or go without required coverage and pay a non-compliance tax of $95 in 2014. Many employees will, in the absence of other options, go without coverage and pay the tax.

All of this is leading many employers to conclude that offering a package of voluntary benefit options alongside the other core, major-medical options may provide employees with a level of minimum coverage at a price they can actually afford. To be certain, employees who forgo the major medical plans to enroll in alternative voluntary benefit plans will still be assessed a tax as a result of their non-compliance with the requirement to enroll in "minimum essential coverage;" however, many of these individuals will determine that, tax or no tax, some coverage is better than none.

Especially given that a "skinny plan" package will often have a premium of less than $100 per month, while the average premiums for even the youngest enrollees in the Exchange plans will likely exceed $350 a month.

While "skinny plans" are by no means true medical coverage, they do often provide for a limited number of physician visits with copays, small indemnity benefits for inpatient and outpatient treatment and perhaps most importantly, access to network negotiated pricing for medical treatment.

Network pricing enables the employee to avoid scenarios wherein they are required to pay inflated "charge master" rates for their treatment without the benefit of negotiated network discounts.

Health care reform does many things; however, it does very little to make coverage more affordable and, in most respects, only serves to exacerbate the historical problem of premium increases.

Therefore, while most employers are coming to find that compliance under the law is fairly easy for them to attain, employees will have a tougher row to hoe.

David Bottoms is senior vice president of The Bottoms Group and a principal of TBX Benefit Partners. ]]>
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