Problems with the launch of the federal health insurance exchange website are removing it as an option for many employers and employees this year.
“How can I advise someone whether to enroll in an employer plan or buy from the exchange when I can’t get on the exchange to make a comparison before the employer’s open enrollment period is up? For the 33 states with a federal hand in operating the exchange, it’s nearly impossible to get any data,” says Paul J. Baranowski, CLU, ChFC, team leader in Account Management at Benefitdecisions, Inc.
Smart Business spoke with Baranowski about strategies to consider in the wake of the problematic launch of the exchange.
How are health plans changing as a result of the exchange?
On the employer side, there’s a stronger move toward defined contributions, providing a set dollar amount and letting employees chose their plan. In the past, there was concern this approach might be too hard on employees with families. It’s easier now for companies to make this transition because the Affordable Care Act (ACA) can be cited as a reason for change.
For larger-sized employee groups, cost increases are still primarily driven by the group’s own claims experience. However, many small to midsize, fully insured employer groups are facing sizable premium increases due to insurers’ expectations of an influx of less healthy people coming on the books, pass-through ACA fees and less flexibility in underwriting methodology. These employers may have little choice financially but to move to something like defined contribution plans.
From a regulation standpoint, a defined contribution plan potentially sets up a method for allowing family members to get subsidies to purchase coverage through an exchange, once ACA is revised to accommodate this. Clients in the hospitality, restaurant and retail businesses are moving toward plans that are purposefully unaffordable — the plan meets minimum coverage requirements but is too expensive, so employees go to the exchange and get a subsidy. Because these industries have a high degree of turnover, the business risk of paying $167 for every month an employee is on the exchange is a fairly low liability.
Exchanges are also giving an extended life to employers putting in a health reimbursement account (HRA) underneath a high-deductible health plan. While employers need to be careful about some new restrictions, and the HRA has to be integrated with the medical plan, this can mitigate employees’ costs while reducing total employer fixed premium costs.
In addition, there’s a strategy that involves offering a plan with minimum essential coverage, which can mean providing unlimited preventive-care-only coverage. This would push employees to get coverage through exchanges and qualifies them for the subsidy.
When do you expect the problems with the exchange will be worked out?
It will take several years to bring stability and less complexity to the market. With all of the uncertainty, plus ACA medical loss ratio rules, carriers won’t take the risk of selling underpriced plans since they’re no longer allowed to recoup losses.
Unfortunately, this means no real price advantages just yet to employers purchasing health coverage, whether in or out of exchanges. There still isn’t any serious movement on affecting the cost of health services and changing behavior at the individual level, but at least there will be more plan choices to give to employees.
On the flip side, reform has several positive advantages. It’s a huge plus for people with preexisting conditions who had been denied coverage, particularly the many small business owners or sole proprietors who previously had to make tough life decisions, such as putting off retirement, because they couldn’t get a decent health plan. This also has closed the door on what once was a possible problem when switching employers.
Although some positives exist, nothing in health care is free — that’s being clearly demonstrated. As a result, even small employers need to explore all possible strategies, keep up on the continuous regulatory changes and be ready to consider doing something unconventional. ●
Paul J. Baranowski, CLU, ChFC, is team leader in Account Management at Benefitdecisions, Inc. Reach him at (312) 376-0436 or [email protected].
Insights Employee Benefits is brought to you by Benefitdecisions, Inc.
