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Impact of the Affordable Insurance Exchanges on
Employer-Sponsored Health Care

The “play or pay” provisions of the Affordable Care Act require organizations with 50 or more employees to pay penalties for not providing sufficient or affordable health care coverage to their employees and dependents.

For example the Affordable Insurance Exchanges, will be rolled out. These exchanges will offer (among other things) individuals a choice of health plans that meet certain benefit and cost standards. Eligible individuals (who fall below certain income guidelines) will be able to claim and apply premium tax credits to purchase health coverage through these exchanges.

If one (or more) of an employer’s full-time employees* obtains a premium credit through an exchange, employers will face a penalty.

Additional penalties may be incurred if an employer’s plan is deemed to be “unaffordable”. This means that the employer does not pay at least 60% of health care expenses and coverage costs more than 9.5% of employees’ household income.

The big question for many is how these provisions will influence health insurance coverage across the nation after January 1, 2014.

A survey conducted by the International Foundation of Employee Benefit Plans found that most employers will not stop providing health insurance for their full-time employees* in 2014.

Over 46% report that they will continue to provide health care coverage, while almost 40% state that they are “very likely” to do so. Only 1% of respondents claim that they will not provide coverage, and 4% claimed that it was “likely” that they would not offer coverage.

Among those that said that they continue to offer coverage, the reasons were:

  • Retain current employees (55.4%)
  • Attract future talent (55.4%)
  • Maintain/increase employee satisfaction/loyalty (53.5%)
  • Retention of tax advantages (9.1%)
  • Retention of tax advantages (9.1%)
  • Retention of tax advantages (9.1%)

Among those that would possibly not offer or discontinue coverage, the reasons were:

  • Cost is becoming too high (45.1%)
  • Other organizations in same industry discontinued coverage (27.5%)
  • Exchanges will provide adequate health insurance coverage for individuals (12%)
  • Employees will voluntarily move to the exchanges (9%)
  • Other organizations in same geographic area discontinued coverage (4.8%)

When asked, almost 1/3 of employers (who do not currently offer health insurance coverage) stated that, because of the “play or pay” provision of the ACA, they would “definitely” offer coverage in 2014. Another quarter stated that it is “likely” that they would offer coverage in 2014 for this same reason.

When the Affordable Insurance Exchanges open, very few employers (8%) stated that it was “likely” that they would drop coverage for all employees and direct them to the exchanges. Less than a quarter (24.1%) stated that it was “likely” that they would continue to provide coverage to “some employees” but direct others to the exchanges. *Defined as an individual who works 30 hours a week.

The only thing that is certain right now about the ACA is that there is a lot of uncertainty. The exact rules and guidelines for implementing this legislation are being continuously written by various government agencies. The information available out there can be mind-boggling, with no one certain about what to do or what others might be doing.

This is where Snelling can help. We are watching the rules and guidelines as they are being announced. Contact your local office, we are here to help.

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