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Mercer

A year ago, the upcoming open enrollment for 2014 looked like a major milestone on the health reform journey. Employers would have to extend coverage to more employees, and all individuals would be required to obtain coverage or face a tax penalty — potentially a formula for serious enrollment growth. Then the delay in the shared responsibility requirements was announced. While this took some of the pressure off, it was still possible that many employers would move ahead with plans to expand coverage in 2014 — and of course the individual mandate was still in place.

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One possible fix for the public exchanges? Repeal the ACA provision expanding dependent coverage.  Allowing young adults up to age 26 to be covered under their parents’ plans has been one of the law’s most popular provisions, especially since it went into effect at a time when many young people were struggling to find full-time work in the wake of the recession. But it also took these same people out of the potential pool of enrollees when the exchanges opened in 2013. While many factors have contributed to premium spikes in exchange coverage in some states, one quoted across the board has been that fewer young people than expected signed up for coverage. Had young adults not been able get coverage through their parents’ plans, it’s possible a portion of them would have signed up for exchange coverage. And having these younger, and generally healthier (i.e., lower risk) individuals in the pool might have helped to keep the premiums down. 

 

Leading up to Thursday’s vote in the House on the AHCA, the GOP’s repeal and replace bill, lowering the dependent eligibility age to 23 was on the list of possible amendments but then withdrawn. As acknowledged in thisPolitico article, repealing the provision would be political suicide for anyone that proposes it; people don’t react well to losing a benefit they’ve gotten used to having. Yet the upsides for removing this provision are, in principle, aligned with GOP repeal and replace goals, namely, removing additional costs imposed through the ACA and helping to stabilize the individual market.

 

One approach might be to phase out this provision, or grandfather individuals born before a certain date, so that families have time to prepare and plan for alternative coverage for their older children. Of course, this only works if there’s an affordable health care option for these young adults on the exchanges. If the current subsidies are reduced to the levels proposed under the AHCA (an individual under 30 would only receive $2,000 towards health coverage per year regardless of income or location beginning in 2020), then leaving these individuals to the mercy of the individual market may not be wise; it could create a “black hole” of coverage from age 26 perhaps until the age when people are starting their families and see an absolute need for care.  So while employers as well as the individual market could benefit from a rollback of this provision, adequate subsidies on the exchanges would need to be in place to help these individuals purchase and maintain continuous coverage.

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Before the ACA, many self-employed individuals found it challenging to find a health plan on the individual market that met their needs, let alone to pay for it. Post ACA, the ability to obtain affordable coverage not tied to an employer has givenentrepreneurs in the growing ‘gig’ economy the flexibility to pursue their goals without having to worry about maintaining health coverage.  These days may be coming to an end if the new GOP health care bill passes, however.  Under theAmerican Health Care Act or AHCA, subsidies are dependent on age, as opposed to income (like under the ACA), and are not adjusted for geography, even though health costs vary widely depending on where you live.  This could mean big changes in the amount of assistance an individual would receive under the AHCA compared to under the ACA.  As cited in the article, a 40 year-old in San Francisco making $30,000 a year would receive $800 less a year under the new plan, and a 40 year-old living in Santa Cruz County, CA would see a $2,490 less per year -- potentially putting coverage out of reach. 

 

A study published by the McKinsey Global Institute estimates that U.S. has between 54 million and 68 million ‘independent workers’, with some working independently full-time and others using independent/freelance work to supplement their primary income. With the proposed changes under the AHCA, some individuals may try to seek traditional employment for the purpose of healthcare coverage, or they may just choose to go without coverage completely. While critics of ACA subsidies have said they discourage people from seeking employment or advancing their careers since an increase in income would result in a decrease in subsidies, this new plan could have the same discouraging impact on the next generation of entrepreneurs.  

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The ACA requires most people to have insurance or pay a penalty. That means employees with adult children need to think twice about discontinuing health coverage for their dependent children as they get older. As long as an employee is claiming a child as a dependent for income tax purposes, they need to be sure the child has health insurance. At tax time, filers are required to show everyone in the household had health insurance (See lines 46 and 61 of Form 1040). In 2015, the penalty is the greater of 2% of household income or $325 per person. You might want to remind your employees of this in time for open enrollment.

 

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More people paid a fine on their 2014 income taxes for not having health coverage than the government expected. So far, the government has collected $1.5 billion from 7.5 million people – on average $200 per person in fines. Some of those 7.5 million, about 300,000, might be eligible for an exemption due to financial hardship or income status and the IRS is reaching out to them to see if they might want to file an amended return. Approximately 12 million did file for an exemption. Another 5.1 million failed to check the box indicating they had coverage but did not file for an exemption or pay the fine; these cases are being analyzed by the IRS. From the government’s perspective, more people paid fines and fewer filed for exemptions than anticipated. The IRS penalty for failing to have coverage in 2014 was the greater of $95 per adult or 1 percent of adjusted gross household income. The fine increases to the higher of $325 per adult or 2 percent of household income this year, and will increase again in future years. As the fine increases, employers should think about this as a potential “wake up call” for some individuals that would trigger enrollment in employer plans.

 

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Kaiser Family Foundation posted an interactive quiz – just 10 questions – that you can take to test your knowledge of the implications of the ACA as it relates to the individual mandate and taxes for 2014. Employers might want to review the quiz as a primer on the individual mandate in anticipation of questions from employees as they rush to meet the April 15 filing deadline. 

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Employers saw little, if any, growth in health plan enrollment in 2014 when the individual mandate went into effect. Our next question was whether we would see a surge in enrollment in 2015 when employers must expand eligibility to all employees working 30 or more hours per week. This article suggests a higher-than-expected number of Americans -- 23 million -- will be able to qualify for an exemption from the individual mandate. The increase is driven by a list from the govenment detailing 14 ways people can avoid the fine for not obtaining coverage, ranging from specific finanical hardship situations to a canceled insurance plan. The 2014 fine for not having insurance is $95 per adult or 1% of family income, whichever is greater, increasing to $695 per adult or 2.5% of family income in 2016. Between the new exemptions and the low level of the fine, employers opening their plans to more employees in 2015 may see fewer new enrollees than originally expected.

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We probably didn’t need a researcher to tell us that shopping online for health insurance on the public exchanges is not quite as easy as buying a TV on Amazon. But a new survey of enrollment assistance programs conducted by Kaiser and discussed in this Washington Post article gathered information not only about the issues people had when trying to enroll, but the questions they had a few months down the road. This is an interesting look at the challenges for members who have never had health insurance before – and good food for thought for employers who will be expanding eligibility in 2015 to variable hour employees working 30+ hours who also may have not have previously had health insurance. Post-enrollment communications could be really helpful to new enrollees.

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While the penalties associated with the shared responsibility provisions of the Affordable Care Act (ACA) were delayed until 2015, many key elements of the new law went into effect in 2014 — most notably the opening of public health exchanges and the individual mandate requiring all individuals to obtain health coverage or face a tax penalty. Mercer’s latest Health Care Reform Survey — the seventh conducted since 2008 — assesses how employer plans and open enrollment results have been affected. The survey includes responses from 767 US employers. 

 

“With most employers waiting to expand coverage eligibility, in 2014 enrollment growth came down to whether employees who had chosen to forgo coverage in the past would respond to the individual mandate,” said Tracy Watts, Mercer’s leader for US health care reform. “That’s a small number of employees to begin with, and what we discovered is that the initial tax penalty wasn’t big enough to convince many to sign up.”

 

Learn about enrollment trends and the issues US employers are facing as reform measures take effect.

 

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This article dives into questions regarding federal subsidies for health insurance in the public marketplace that may have been set incorrectly. Why should employers be interested? For anyone receiving advanced premium tax credits in the public marketplace, the public exchange is required to send a notice to their employer. The notice will identify all employees who have qualified and received approval for premium tax credits. While employers are not at risk for shared responsibility penalties for 2014, there are several reasons employers should pay attention to the notices.

 

 

 

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Interesting findings reported from two studies. At the start of open enrollment on Healthcare.gov, the website itself was the barrier to enrollment. Closer to the end, as individuals were able to get far enough into the process to see pricing, cost became the barrier. This is not surprising. When you consider an employer-sponsored plan that meets the minimum requirements -- with a $3,000 deductible, an actuarial plan value of 60 percent, and contributions of about $90 per month for individual coverage -- it seems likely that some low-paid employees will not believe that buying coverage is a good economic decision, especially if they don't think they will need medical care during the year. In other words, it is easy to see how a newly eligible employee could choose not to buy insurance. This may be one reason why, in our most recent health care reform survey, employers reported very little increase in enrollment in January when the individual mandate went into effect.

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The White House claimed victory last week, projecting that 7.1 million enrolled in the public exchange as of the March 31 deadline - in addition to the 4 million newly enrolled in Medicaid and another 2-3 million covered by employers as a result of the expanded dependent eligibility requirement. The big question is to what extent has the ACA has reduced the number of uninsured individuals in the US, rather than simply provided a different means of accessing coverage to those already insured. The Urban Institute has been tracking the uninsurance rate since 2013 and their early estimates show 5.4 million uninsured adults have gained coverage although we can expect this early estimate to rise because it doesn’t capture the enrollment surge that occurred at the end of March. Another big question is the health risk of people enrolled in the public exchange plans and what that means for premium increases for next year. Employers are watching all of these numbers closely. Although Mercer survey data shows that the great majority of employers are committed to sponsoring coverage for their active employees for at least the next five years, they have keen interest in the public exchange as a potential source of coverage for retirees under age 65.

 

 

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