Will your employer terminate their health insurance as a benefit for employees now the ACA is up and running. My guest blogger is Carolyn McClanahan, MD, CFP, financial advisor that operates Life Planning Partners, Inc in Jacksonville, Florida who comments on this very question.
A popular belief I encounter in my travels is that Obamacare will be a government takeover of medicine. During a recent guest spot on talk radio, a caller asked me how all the doctors will like working for the government. Somehow, she was under the impression that the system will be totally government run. Too much talk radio maybe? I set the record straight – doctors will still be employed in the same way they are now – in their own groups, through hospitals, and through the government. I also shared with listeners that we will purchase insurance in the same way we do now – through large groups, small groups, and individual coverage. This gets to the point I want to make today – will we really continue to purchase insurance through our employers under health care reform in 2014?
It seems clear from the construction of the law that the government wants employers to offer health insurance. To ensure this outcome, employers with more than 50 employees will pay fines if they do not offer health insurance or if the health insurance they offer is too expensive. If an employer does not offer health insurance, they will pay a $2,000 fine for each employee over 30 employees. So if you have 100 employees, your fine will be $140,000. Which is more expensive – paying for insurance for 100 employees or paying a $140,000 fine? According to Kaiser Family Foundation, the average premium for employer based coverage is $5,429 for a single person and the employer pays $4,508 of that premium. The insurance by far is more expensive than the fine.
Multiple consultancies have studied employer attitudes toward providing health insurance coverage in the wake of reform and the results are mixed. McKinsey & Company found that 30% of employers will probably stop offering coverage and the number is even higher for employers with a high awareness of health care reform. In a study released today by Oliver Wyman, only eight percent of employers said they plan to discontinue coverage and 42 percent would like to maintain status quo. However, two-thirds of the employers are not satisfied with their current insurance arrangement and 90 percent would accept major change to save money. The interesting point in the Oliver Wyman study is the large percent of employers actively looking for new alternatives to traditional health insurance. They realize the status quo is unsustainable, and they want to keep their workforce healthy and happy.
If employees are not offered health insurance coverage, they will have to purchase their health insurance on the health insurance exchange. This is basically an open market (pay attention free market advocates) where a person can compare policies and easily make a purchase. And it will be simple – you can go to HealthCare.gov right now and see the start of the exchange of the future.
So will employers dump health insurance coverage? The conspiracy theorist in me thinks the crafters of the ACA are complete geniuses on this topic. Instead of saying outright, “We think employers should be out of the business of offering health insurance coverage and individuals should buy insurance on the open market,” which would have killed passage of the ACA, they took another route that was much smarter. They said, “We want you to keep your current coverage, and we want employers to provide that coverage to you.” People don’t like change, so this made the law more palatable and it passed. BUT, the crafters know if the health insurance exchange is successful, it will be ludicrous for employers to continue offering coverage for their employees. And the absolute genius part? We know if employers punt health insurance coverage to the exchange, they will not be altruistic and give the entire savings to the employees to make the purchase, so the crafters of the ACA guaranteed the employers will foot part of the cost for the law in some way. Employers have to pay the fine for not offering coverage. This is a great way to reduce the taxpayer burden of premium tax credits and cost sharing subsidies! End result – everyone is moved to the open market of the exchange, and employers help defray some of the cost of that move. I feel brilliant figuring this out.
So will employers totally disregard taking care of their employee’s health? My eternal optimism is continually being uplifted in this regard. Instead of being in the business of providing health insurance for treating illness after the fact, employers are moving toward the business of providing wellness and prevention of illness for their employees. This improves productivity and provides much better return on their health care dollar. Great examples –Goodyear Tires, General Electric, and IBM to name a few.
So is removing employers from the health insurance formula a good thing? Yes it is. And I’m grateful the crafters of the ACA found a way to make it happen.
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