Little Net Impact Foreseen
An analysis by Avalere Health of the ACA’s effect on employer-sponsored insurance suggests a minimal effect overall after the ACA. The report, titled “The Affordable Care Act’s Impact on Employer-Sponsored Insurance (ESI): A Look at the Microsimulation Models and Other Analyses,” suggests that this market will remain “fairly stable, but particular subgroups could experience changes in coverage soon after 2014. Miryam Frieder, a senior manager at Avalere Health, states:
But below the surface there are bigger changes, with employers dropping or offering new coverage and others shifting coverage into the exchanges.” The report,
While the Avalere report predicts net changes in employer-sponsored insurance from –0.3 percent to +8.4% (an increase owing to the individual mandate), in contrast, a report from McKinsey & Co. says that 30% of employers will “definitely or probably stop offering ESI in the years after 2014.”
However, most benefits consultants and experts tend to agree with models showing that changes will be minimal.
According to Lee Doble, CLU, CEBS, managing director of Frank Crystal & Company, the changes will affect smaller employers more than large ones:
Smaller employers, which are those with fewer than 50 employees in most states and up to a 100 in other states, will see reduced flexibility in terms of plan offerings and in choices of carriers. This is partially because of the SBC ( Summary of Benefits and Coverage) requirement, partially because of the health care exchanges being established and partially because the medical-loss ratio requirement that has caused many insurance carriers that focused on the smaller-employer market to withdraw out of the market altogether.
Doble says that more large employers will offer multiple options. Of these options, the more modest will be designed to promote compliance along with the minimum essential coverage and the affordability requirements:
If you had been offering a limited benefit plan, sometimes called a mini-med plan, you need to prepare to be offering an affordable benefit plan meeting the minimal essential coverage standards as those plans will not qualify to avoid penalties in the future.
The Likely Impact on Non-Medical Benefits
But how will the ACA impact non-medical benefits?
Even voluntary insurance will be affected by the health care exchange system, according to Doble. Life and disability insurance will not be available through the health care exchange system, but employers will continue to be able to offer those products on the private side:
A big driver of the private exchanges will be the ability of employers to provide other insurance products, such as life and disability, alongside the medical plan offerings. Life and disability won’t be available through the health care exchange, and we will probably move toward a defined-contribution model similar to what has happened to pensions and savings.
Along with the health care exchange, there will be a special feature allowing for catastrophic plans to be available to individuals under the age of 30, who might otherwise risk the penalties for not purchasing coverage. In addition, employers offering a standalone dental plan as a health plan offering coverage outside the exchange must offer the same plan and premium as inside the exchange. But this requirement won’t prevent additional products being offered.
A study by Guardian Life, Benefits and Behavior 2012 surveyed employers about the anticipated impacts of health care reform on non-medical benefit sponsorship.
- 80% of employers are likely to maintain the status quo on employee benefits.
- 69% would continue to offer non-medical benefits even if they discontinue medical.
- 83% who will continue offering non-medical benefits would make no coverage changes.
- 56% are highly interested in being better educated on the ACA in the next 12 months.
- Only 10% were not interested.
Generally, larger companies with more resources are more likely to research the ACA on their own. Companies with under 500 employees are more likely to rely on their broker for information.
- 25% of companies employing 500 – 4,999 would reach out to their brokers for information.
- Only 8% of companies employing over 5,000 would.
The Guardian presented 3 different post-health care reform scenarios, and polled employers about what they would be inclined to do under each scenario
Scenario 1: Employers drop group coverage and allow employees to purchase all benefits through an exchange:
- Over 57% of employers would still contribute to funding of non-medical benefits.
- Only 28% would stop contributing to funding of non-medical benefits altogether.
Scenario 2: Employees purchase medical benefits through an exchange, while non-medical benefits are not available through an exchange:
- 77% would continue to offer non-medical benefits even through the exchange.
- Only 28% would drop non-medical benefits.
Scenario 3: Employees buy their medical benefits through an exchange, while non-medical benefits are not available through an exchange:
- 69% would continue to offer non-medical benefits through the same channel.
Scenario 4: No changes to current benefits:
- 79% are likely to continue offering group benefits through their current channel.
- Firms above the 100 employee threshold for exchanges (100 – 499) are least likely to continue offering group benefits through their current channel.
- 68% of firms with above 500 employees, and 65% with over 5,000 are likely to continue offering group benefits through their current channel.
- Employers of all sizes are looking for guidance and information. Providers and brokers who provide the best information are more likely to forge stronger customer alliances.
You can read more of Guardian’s health care reform information at their microsite.