Monday, February 22, 2016
In the debate over the ACA’s future, you seldom see much discussion about how employers are responding to the health law. Yet without the employer mandate, ObamaCare is a toothless tiger.
Employers now cover more than 160 million Americans, more than half of America’s 320 million people. The health law makes provision of health benefits mandatory for employers with over 50 employees. In 2015 employers with more than 100 employees must meet federal standards, and in 2020 employers will be subject to a 40% excise tax (the so-called Cadillac tax)for coverage over a certain value.
How are employers responding? Those with less than 50 employers are reducing part-time workers to less than 30 yours to avoid exceeding the rule defining full-time workers.
They have also sought to end eligibility for coverage and ended coverage for spouses and dependents.
By and large, however, employers are continuing to offer coverage for two reasons: the great tax incentives for providing coverage, and the positive incentives for recruiting and retaining workers. In addition, employers are turning to self-insurance, managed care, competitive bidding from insurers, wellness programs, and increasing employee cost-shared through defined contribution and consumer-drected higher deductible plans (CDHPs).
The idea behind CDHPs is to switch costs to employees, to decrease utilization by avoiding unnecessary coverage, and to encourage tax-deductible savings for future retirement. The principle vehicle for CDHPs are health savings accounts. About 45% of employees now offer HSAs, and the number is growing, It reasoned that if workers have “skin-in-the game” they will shop for care. Among the principle providers of services (hospitals and physicians), CDHPs and HSAs have two negative effects – decreased use of services and costs of collecting the deductibles (which average about $2500).
A final option for employers is to move employees to the ObamaCare sponsored health exchanges to prevent them from becoming uninsured. This co-called “play or pay” option has not been adopted to any extent.
According to Robert Galvin MD, former director of health services at G.E, and now operating partnes of Equity Health at the Blackstone Group, a New York- based hedge fund, most employers will continue to sponsor health benefits because of tax advantages as a recruiting and retention tool rather than move to health exchanges.
(Robert Galvin, ND, “How Employers Are Responding to the ACA,” NEJM, February 28, 2015).
If Republicans win the Presidency, all bets are off with promised repeal of the ACA and ending the individual and employer mandates.