77% of employers say exchanges not ‘viable alternative’
Most companies aren’t making drastic changes in order to stay on the right side of the Affordable Care Act (ACA), but the law continues to make employers at mid-size companies with 50-99 full-time employees nervous.
Earlier this year the Obama administration extended the deadline for businesses with 50 or more employees, meaning that they will not have to provide coverage to employees until 2016. Many companies are taking advantage of the extra time to prepare.
Reactions among Upstate employers are in line with the findings of a recent national study from professional services company Towers Watson. Their top priority is avoiding a 40 percent excise tax on high-cost plans that will be levied beginning in 2018. Known as the “Cadillac Tax,” it is a separate tax from the penalties employers could pay if their health insurance offerings are deemed inadequate. The study found that 54 percent of employers will trigger the tax by 2020 if their health care benefit strategies remain unchanged.
Howard Einstein, president of Rosenfeld Einstein Employee Benefits/Marsh McLennan Agency in Greenville, said his clients are no different.
“Many are moving to a self-funded option as it eliminates the 4 percent Health Insurance Industry Fee, and [has] no state premium tax. This also allows the client to begin to better manage the plan via data mining and population health management,” Einstein said. “We have a full-time physician who does this for our clients to manage cost long-term. More employers are beginning to get more aggressive with health and wellness and putting in outcome-driven programs.”
Such programs are part of a larger cost-cutting push that also includes rethinking coverage for spouses, using new payment methodologies to hold providers more accountable, expanding account-based health plan enrollment and adding cost-management strategies for specialty pharmacy spending.
Overall, few employers plan to drop their health insurance benefits. According to the study, 77 percent don’t see individual exchanges as a viable alternative for employees. Charlie Moseley, CEO of Group Benefit Strategies, said companies with 10 employees or fewer are the ones likely to drop coverage for employees.
Although exempt from the mandate to offer health insurance, employers at small Upstate companies with fewer than 50 full-time employees say they wonder whether they will be able to continue to offer insurance as costs rise. They say ending insurance offerings and letting employees shop on exchanges is a lingering, albeit unfavorable option.
Einstein said he does not see many employers dropping coverage. In fact, many staffing and hospitality companies are beginning to offer benefits because of the ACA. Those costs are being passed on to employees, but Einstein said that might change over time. On the other hand, he said moving to insurance through exchanges would be a “win/win” for some small companies where employees’ low salaries would qualify them for government subsidies that reduce the cost of the insurance. Mid-size companies have the option of providing insurance through the government’s Small Business Health Options Program Marketplace (SHOP).
“We have decent offerings on the groups side for SHOP. I’m not overwhelmed by the quality of what we have for individuals,” Moseley said. “I hope those will improve in 2015. The biggest shortcoming in the individual is we don’t have a decent product with health savings accounts anymore.”
“I think the private exchange for employers will have some traction in 2016,” Einstein said. “This moves to a defined contribution approach and more choices for employees,” which will eventually become the norm. Whether the benefits are offered through a private exchange or traditional benefits administration, expect to see online enrollment on the rise.
His advice to employers has changed little since the employer requirements rolled out. Companies should run “pay or play” models this year and every year to be able to decide whether providing coverage or paying a fine is the best option for their companies.
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Employment actions as a direct result of ACA*
[ezcol_1quarter][/ezcol_1quarter] [ezcol_1quarter]Have done so or plan to[/ezcol_1quarter] [ezcol_1quarter]Don’t plan to [/ezcol_1quarter] [ezcol_1quarter_end]Don’t know[/ezcol_1quarter_end]
[ezcol_1quarter]Move employees to Directed Health Plans[/ezcol_1quarter] [ezcol_1quarter]73%[/ezcol_1quarter] [ezcol_1quarter]19%[/ezcol_1quarter] [ezcol_1quarter_end]8%[/ezcol_1quarter_end]
[ezcol_1quarter]Raise employee contributions toward health insurance[/ezcol_1quarter] [ezcol_1quarter]71%[/ezcol_1quarter] [ezcol_1quarter]24%[/ezcol_1quarter] [ezcol_1quarter_end]5%[/ezcol_1quarter_end]
[ezcol_1quarter]Cut back coverage eligibility (dependents, etc.)[/ezcol_1quarter] [ezcol_1quarter]27%[/ezcol_1quarter] [ezcol_1quarter]64%[/ezcol_1quarter] [ezcol_1quarter_end]9%[/ezcol_1quarter_end]
[ezcol_1quarter]More rigorously ensure part-time workers work fewer than 30 hours per week[/ezcol_1quarter] [ezcol_1quarter]23%[/ezcol_1quarter] [ezcol_1quarter]73%[/ezcol_1quarter] [ezcol_1quarter_end]3%[/ezcol_1quarter_end]
[ezcol_1quarter]Increase the proportion of part-time workers[/ezcol_1quarter] [ezcol_1quarter]12%[/ezcol_1quarter] [ezcol_1quarter]87%[/ezcol_1quarter] [ezcol_1quarter_end]1%[/ezcol_1quarter_end]
[ezcol_1quarter]Limit the number of full-time hires (because of ACA)[/ezcol_1quarter] [ezcol_1quarter]10%[/ezcol_1quarter] [ezcol_1quarter]89%[/ezcol_1quarter] [ezcol_1quarter_end]2%[/ezcol_1quarter_end]
[ezcol_1quarter]Cut back the hours of part-time workers[/ezcol_1quarter] [ezcol_1quarter]9%[/ezcol_1quarter] [ezcol_1quarter]89*[/ezcol_1quarter] [ezcol_1quarter_end]2%[/ezcol_1quarter_end]
[ezcol_1quarter]Move current employees to public exchanges[/ezcol_1quarter] [ezcol_1quarter]1.5%[/ezcol_1quarter] [ezcol_1quarter]90%[/ezcol_1quarter] [ezcol_1quarter_end]9%[/ezcol_1quarter_end]
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Source: USC Darla Moore School of Business survey; 560 human resources officers responded
* Due to rounding, not all percentages equal 100
