On the surface, it might appear that a recent extension of the deadline for large employers to comply with providing health insurance under the Patient Protection and Affordable Care Act from 2014 to 2015, is a cause for relief. But some are not so sure.
Credit Union Exchange Blueprint, a Birmingham, Ala.-based private exchange for credit unions and members that provides online access to insurance carriers, said it believes the decision to extend the compliance deadline for providing health insurance coverage to employees will cause more companies to drop their group coverage and send staffers to the individual market.
EPL, the company in Birmingham, Ala., that provides the technology behind CUEB, said large employers will also hurt many of their employees by offering coverage, but they’ve been stuck between a rock and a hard place since they faced severe penalties of $2,000 per full-time worker if they failed to provide coverage.
“With that threat removed, large employers can now make their decision the same way small employers will–based on what’s best for the employees,” EPL said.
Wayne Benson, CEO of EPL, said there is an opportunity here to educate.
“We know credit unions are looking for answers to help their employer groups and for their own staff insurance needs, too. The changes are important to understand and we can assist,” Benson offered.
On July 2, the White House posted an announcement on its website saying that it would extend the deadline from 2014 to 2015 to allow employers with 50 or more employers to test the new reporting systems and make any necessary adaptations to their health benefits.
“This delay will give all of us enough time to work through the many issues and provisions that will be in effect for 2014 and beyond,” said Sherry Campbell, benefits consultant and chief operating officer for CU Benefits Alliance, a Salem, Ore.-based CUSO owned by 18 credit unions. “This delay will give us some relief in efforts to meet all the timelines of the legislation.”
Prior to the announcement of the extension, businesses with more than 50 workers that did not provide health care coverage faced paying fines of $2,000 per employee starting next year.
Campbell said the federal government has realized the complexity of this particular provision and the reporting involved for compliance.
“So many times law makers do not understand the unintended consequences of passing new laws,” Campbell said.
“And, they heard from so many mid-size and large groups that benefits are made available to most of their employees now, why place this requirement in front of them in 2014, when employers in this market already see the value of providing a robust benefit package,” she questioned.
Another issue that has come up from the new PPACA deadline is the use of federal subsidies. Under the new law, low-income individuals and families above 100% and up to 400% of the federal poverty level will receive federal subsidies on a sliding scale if they choose to purchase insurance via an exchange. Those from 133% to 150% of the poverty level would be subsidized such that their premium cost would be 3% to 4% of income.
Offering coverage that is affordable for employees blocks all related individuals, generally, the spouse and tax dependent children, from accessing a government subsidy, said Josh Hilgers, president of Health Partners America, a Birmingham, Ala.-based provider of coverage tools to insurance brokers that is working with CUEB. As it turns out, nearly two-thirds of U.S. households earn less than 400% of the federal poverty level, the cutoff point for the subsidies, according to the firm.
“And the bar hasn’t been set very high,” he offered. “If the employee would not have to pay more than 9.5% of his household income for his portion of the single (employee-only) premium on the employer’s plan, his entire family is firewalled off from getting the subsidy.”
Eric Johnson, director of education for Health Partners America said the IRS has concluded that congressional intent was to block these individuals from obtaining the tax credits. Instead of basing the affordability determination on the cost of the family premium, he said they’re basing it only on what the employee would pay, which means that coverage will be considered affordable for most employees and their family members will be locked into the employer’s plan, even if it’s significantly more expensive and the employer isn’t contributing to the dependent premiums.”
“It really doesn’t make any sense,” Johnson said.
Some experts believe that, as employees learn how the tax credits work, they may ask their employers to stop offering health insurance altogether so that they can afford coverage for their families, according to EPL.
“When you look at the numbers, it’s clear that most employees will do better with a subsidized plan,” Hilgers said. “That’s because the amount a family would pay is limited to a percentage of its income. The less people make, or the more children they have, the more affordable the subsidized coverage becomes.”