Now that the first Affordable Care Act (ACA) enrollment period has ended, what is the impact for employers? I recently attended a Healthcare Businesswomen’s Association (HBA) panel discussion on “Beyond the Basics of the Affordable Care Act.” Our speakers included: Stephen Reid, Founder and CEO, PharmSpective; Tom Sibson, CFO, Bayada; and Linda Taylor, Sr. VP of Sales, Independence Blue Cross.
According to the panel, we are beginning to get a better idea of enrollment patterns and potential premiums and credits for 2015. Contrary to initial predictions, the plan selected by most participants was the mid level silver plans not the lowest level bronze plans. High deductible plans were popular and are here to stay. According to Mr. Reid, the number of younger people enrolling in insurance fell far below the 40% goal of the administration, which may not bode well for premium prices for 2015. According to Ms. Taylor, Blue Cross has experienced an average policy increase of 5%. As part of the ACA, the relationship between the premium for a 64 and an 18 year old has been compressed to a 3/1 ratio from a 6/1. As a result, the premium in 2014 for businesses with younger workers rose at a faster rate than for those with older workers. In addition, the large insurance companies will be reporting their earnings over the next few weeks. United Health Care kicked off the earnings season with improved first quarter revenue but lower margins as a result of newly effective ACA taxes, ACA provisions and sequestration negatively impacting first quarter earnings by nearly $0.35/share. Of course, we can’t forget about the Cadillac Tax that employers will pay if plans are overly generous and premiums exceed prescribed levels by 2018.
So, how are businesses addressing these challenges? Ms. Taylor spoke about the rising interest in self-insurance. While large firms have used this option, more midsize companies are considering self -insurance, as it is less restrictive under the ACA compliance guidelines. In order to protect against exposure for catastrophic illness, they are using a stop loss provision to place risk with a third party provider. Also, organizations are considering defined contributions where they tell employees that they will contribute $xxx.xx for benefits. Of course, this defined contribution amount needs to meet the ACA compliance criteria or the employer will be penalized. For large employers, the concept of defined contribution is being pared with a private exchange. Employers are providing employees with options via a benefit portal and it is up to the employee to select the type of coverage that works for them. The employer isn’t really part of the decision process. Employers make their defined contribution and deduct from the employee’s pay for the differential to pay for the coverage that the employee has selected.
If this sounds a great deal like the change from pensions to 401K plans, you are correct. The panel agreed that we are going to continue to see a rise in employee directed decisions. As employees take on a greater responsibility for their health insurance premiums and out of pocket expenses, there will be a rise in consumerism. Already, we are seeing employees discussing the cost of medicine and procedures with physicians. In order to provide employees with the tools to make decisions, we are seeing greater transparency. According to Ms. Taylor, Blue Cross has information on procedure costs and outcome results by provider and they are increasingly making this information available to insured parties. In the not to distant future, she envisions a marketplace like Amazon where an insured can look for services like an MRI and select a provider based on a number of factors such as price, reviews, and outcomes. Providing information to educate employees as you empower them to make these benefits decisions is important as well.
For full details of the ACA impact on employers, please use this link. https://www.ibx.com/health_care_reform/for_businesses/index.html.
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