During the three years since the Affordable Care Act became law, countless articles have been written regarding how the law will impact employers and what they need to do to in order to comply and avoid penalties.
However, a great deal of confusion remains in the minds of employees regarding how their employer's strategy for coping with the law will impact the plans and pricing they will see offered through their employee benefit plan in 2014 and beyond.
During our extensive interactions with employees regarding their benefit plans, there are three basic questions that we hear time and time again:
- How are my plans going to change in 2014?
- How will my premiums be affected in 2014?
- What is all this I hear about the public exchanges?
As 2014 approaches, employers will need to take care to supplement their plan design strategy with a communication strategy to address these questions and concerns troubling their employees.
That said, it is unlikely that drastic changes will be felt by employees in 2014, at least with respect to plan design.
While some employers will have to adjust their plans to meet the coverage requirements mandated by the law, most employer plans already provide at least the minimum level of benefits required under the law.
However, over time, and as costs continue to escalate, employees should expect that their employer provided plan will likely regress in plan design toward the minimum required by the law. Given that the law defines "minimum essential coverage" as providing for at least 60 percent of anticipated aggregate claims cost, it is likely that deductibles of $2,000, 80 percent coinsurance levels, out-of-pocket maximums of $6,150 and co-pays for office visits for primary care physicians and specialists of $30 and $60, respectively, will come to be the norm, rather than the exception.
Of course, many employers will provide benefits in excess of these minimums for competitive reasons, and most will continue to supplement base plan coverage options with buy-up options for which the employees can pay the excess premium through payroll deduction. Nonetheless, employees should prepare themselves for the likelihood that the government minimum plan designs will become the de facto lowest common denominator plans against which employers will judge the sufficiency of their plans.
With respect to premiums, there is much speculation regarding the impact on premiums given the 2014 implementation of the community rating and guarantee issue mandates in the law. As a result of these new requirements, it is safe to say that the percentage of costs borne by employees is likely to increase quite substantially in the years to come, especially for those employees who are currently covering family members on their employer's group medical plan.
The reason for an expected increase in out-of-pocket costs to insure dependents is that Health Care Reform's "affordability requirement" provides no incentive whatsoever for employers to provide premium contributions toward spouse and dependent coverage. In the attempt to avoid penalties, employers will likely need to shore up their contributions for employee-only coverage by reducing the amount of funding attributed to those with families on the plan.
Last, but not least, despite all of the hype, the public exchanges being developed will likely have very little impact on employees, at least for the next couple of years. To be sure, the Exchanges will be a popular avenue through which the uninsured or those with individual plans will be able to shop for coverage and, in the case of those with income of less than 400 percent of the Federal Poverty Limit, qualify for a government premium subsidy.
Contrary to popular belief, government subsidies for health coverage will not be available for employees who are eligible for "minimum essential" and "affordable" coverage through their employer. Given that employers will be highly motivated to ensure that their plans meet the letter of the law, most employees, especially those employees expecting that their coverage is going to be free in 2014 are likely to be sorely disappointed as they almost certainly will come to see their plan designs reduced and their premium contributions increased in the years to come.