Tag Archives: health insurance

Employer Health Care Benefits — Preparing for 2018


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I last wrote about health care in late March, shortly after the House of Representatives failed to bring the American Health Care Act (AHCA) to a vote. Since then, after a few amendments, the House did pass the AHCA, but with all the other brouhahas in Washington over the last few weeks, it’s questionable whether the Senate will get to health care anytime soon.

There are some good provisions in the AHCA as passed by the House. Among other things, the AHCA makes the following changes to Obamacare:

  • The individual mandate was repealed, as was the employer mandate;
  • The 2.3% medical device tax was repealed;
  • The net investment tax was repealed, as was the .9% Medicare high earner tax;
  • The Cadillac tax for expensive plans was delayed (and will probably never be permitted to take effect, since neither Republicans nor Democrats like this provision); and
  • Health Savings Accounts were expanded, effective in 2018

All of these provisions provide less government control over the health care marketplace. In the long run, these changes would generally be helpful for employers.

Still, as most people recognize, without an individual mandate, some incentive is necessary to get healthy people to opt into health insurance before they get sick and to maintain that coverage. The AHCA continuous health insurance coverage incentive replaces the individual mandate penalty. This incentive operates much like HIPAA certificates of coverage. As long as they do not let their health insurance lapse for more than 63 days, individuals cannot be charged higher premiums because of preexisting conditions. Moreover, the premium penalty for the first plan year cannot exceed 30%.

There is an exception to this 30% limit, but the exception permits insurers to charge late enrollees with pre-existing condition higher premiums only if the state has waived the community rating rule and the state has established a high-risk pool to help people with preexisting conditions fund their coverage.

The AHCA is far from a perfect bill, and it is likely to face substantial amendments in the Senate before it comes to a vote in that chamber. And Congress has many other priorities this session as well. So what will happen with respect to health care legislation by the end of the year is anyone’s guess.

Nevertheless, we are at the time of year when many employers are examining their options for health plans for their employees for the year ahead. What should employers do in this time of uncertainty?

Obamacare, the Affordable Care Act, is still the law, so until Congress acts, employers must comply with the mandates and reporting requirements. With the individual mandate in place, employees will want to know their employer-provided health care options in a timely fashion.

Moreover, although the Cadillac tax has been kicked down the road and its ultimate implementation is uncertain, avoidance of the tax—or preparation for it—will take time to structure.

For 2018 at least, the current employer responsibilities are likely to remain in place. Employers must continue to manage their benefit plans, tweaking them as makes most sense for their workforce. There remain many reasons why employers should support their employees’ health and wellness if they want to be employers of choice.

Employers, what concerns you the most about health benefits in 2018?

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The Obamacare Squeeze


Supreme Court building, from Wikipedia

Supreme Court building, from Wikipedia

We will know much more about the future of Obamacare (the Affordable Care Act, or ACA) after the Supreme Court rules later this month in King v. Burwell.  That case will decide the future of tax-credit subsidies to individuals purchasing health insurance on exchanges run by the federal government, rather than by the states. These subsidies are an important element of the ACA design that encourages lower- and middle-income individuals to buy coverage.

But King v. Burwell is not the only issue under Obamacare that confronts Americans, their employers, state governments, and the federal government. There are other structural issues in the ACA design that will require rethinking, no matter what the Supreme Court decides.

The U.S. system of financing healthcare has been a morass at least since employers became involved in the 1940s, when employers began offering health insurance to their workers in lieu of raising wages under World War II price and wage controls. Healthcare financing got more even complex when healthcare costs started rising much faster than inflation, requiring employers to start managing costs more closely.

Healthcare Reform: Know Thine EnemyAnd now, with Obamacare, the financing of healthcare is being complicated even further. Under the ACA design, consumers and providers are getting squeezed on all fronts, and the squeezes will get tighter in the years ahead, no matter what the Supreme Court decides in King v. Burwell.

Here are the reasons for the squeeze on employer plans:

1. MANDATED BENEFITS

Healthcare plans must include an ever-broadening list of products and services. This started prior to the ACA with a variety of state mandates. But the ACA federalized the mishmash of state requirements. Now, to qualify as an acceptable plan under the ACA, healthcare insurance must provide “essential health benefits” in ten categories. There are only narrow exceptions permitting people to choose catastrophic coverage, and they still cannot any categories of benefits they don’t think they will need. This is like requiring every car owner to carry not only liability coverage, but also collision coverage to the full replacement value of the vehicle and roadside assistance as well.

     2.  “AFFORDABLE” COST

Healthcare plans cannot cost too much. Employer plans under the ACA must have an option that offers “minimum essential coverage.” This coverage must include all the “essential health benefits” and must cover at least 60% of the cost of those benefits. Moreover, such a plan must not charge more than 9.5% of household income for the employee’s share of individual coverage. If the employer does not provide such an option under its healthcare plans, the employer will have to pay a substantial penalty per employee.

     3.  BUT NOT TOO GENEROUS

Employer healthcare plans cannot provide too much in the way of subsidies. In 2018, the so-called “Cadillac tax” will kick in for employers who provide more than $10,200 in individual coverage or $27,500 in family coverage to their employees (amounts adjusted for inflation). The Wall Street Journal reports that most employers think they will exceed these thresholds with their plans as currently designed by 2018 or soon after.

Because of these factors, employer-provided healthcare benefits plans are in a vise. The floor is the benefits that must be covered . . . and Obamacare raised that floor. Both sides of the cost equation are pushing in. Obamacare sets the maximum that employees can pay (and the 9.5% maximum will rise only as fast as wages rise) and also sets the maximum that employers can pay (which will go up at the rate of inflation).

Over time, more and more employers will be forced into a Hobson’s choice: (1) pay the increasing costs of healthcare to keep their plans “affordable”, which leads to the Cadillac surtax, or (2) drop employee healthcare benefits, which leads to employers paying the penalties for not offering “minimum essential coverage”.

Regardless what happens in the Burwell case, Obamacare is not sustainable from employers’ perspective.

We are long past the days of complaining about President Obama’s inaccurate statement “if you like your healthcare plan you can keep it.” We now must wonder if we can keep employer-provided healthcare at all. And if we can’t keep employer-provided healthcare, how will Americans pay the unaffordable costs of “essential health benefits” without subsidies?

Should we reconsider linking healthcare coverage with employment?

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