In July 2014, the Galen Institute reported that there have been over 42 significant changes made to the Affordable Care Act (ObamaCare) since it became law in 2010; at least 24 of them were made unilaterally by Mr. Obama himself. If you’re among the nearly 60% of Americans whose healthcare insurance is provided by your employer, you may not have been paying much attention. This is a wake-up call. You could very soon find yourself in the market for individual health insurance (the kind you pay for 100%). Read on.
Understanding the employer mandate and how it could impact you
Originally set to kick in in 2014, just like the ObamaCare individual mandate, the employer mandate was twice delayed by the President. Time’s up. Unless it’s changed or postponed a third time, here’s how it will roll out, beginning with 2015 plans years.
Employers with 50 or more full-time employees, or full-time equivalent (working 30 or more hours a week), must offer health insurance that is affordable and provides minimum value to all full-time employees and their dependent children up to age 26 or be subject to penalties. The mandate will be phased in as follows:
- Small employers (49 or fewer full-time employees) – No mandate applies.
- Mid-size employers (50-99 full-time employees) – There are no changes in the 2015 plan year, although employers must be able to certify that they are not reducing the size of their workforce to stay below 100 employees. But when plan year 2016 comes around and forever after, employers must offer coverage to 95% of full-time employees and their eligible dependents.
- Large employers (100 or more full-time employees) – In plan year 2015, coverage must be offered to at least 70% of full-time employees and their eligible dependent children. It bumps up to 95% in plan year 2016.
A plan is considered “affordable” if employee contributions for employee-only coverage don’t exceed 9.5% of an employee’s household income, based on either: W-2 wages (reduced for any salary reductions under a 401(k) or cafeteria plan); hourly rate x 130 hours per month; or the Federal Poverty Level for a single individual.
“Minimum value” is a plan that pays at least 60% of covered services (considering deductibles, copays and coinsurance. Thankfully, HHS has a calculator to help employers figure this out.
The penalties mentioned, and this is the important part for you employees, apply to the first plan year beginning on or after January 1, 2015 for large employers, and to the first plan year beginning on or after January 1, 2016. In 2015, the penalty is $2,000 per employee, minus the first 80 employees. In 2016, it is $2,000 per employee, minus the first 30 employees.
What remains to be seen is whether employers will decide it is cheaper to pay the penalty than to provide health insurance.
Will Your Employer Drop Your Health Insurance?
The answer depends on whom you ask. Dr. Ezekiel J. Emanuel, who helped craft the Affordable Care Act, predicts that employer-sponsored health care is destined for the junk heap of history. In his book, “Reinventing American Health Care,” released earlier this year, Emanuel writes that by 2025, “fewer than 20 percent of workers in the private sector will receive traditional employer-sponsored health insurance.” As reported by Robb Mandelbaum in a NYTimes.com blog post, Emanuel believes that within the next two or three years, “a few big, blue-chip companies will announce their intention to stop providing health insurance. Instead, they will raise salaries substantially or offer large, defined contributions to their workers. Then the floodgates will open.” Those floodgates will entail a few small businesses joining the government’s SHOP exchanges (the business version of Healthcare.gov), but most will drop coverage altogether, especially those that aren’t faced with the mandate penalty. He admits, however, that the lack of a tax assessment to workers for employer-profited premium benefits is a big obstacle to his vision.
On the other side of the argument is a 2014 survey by the National Business Group on Health, a trade association representing 400 large employers. It found that large employers have no plans to completely drop health insurance coverage, but that the quality of many benefit packages would continue to decline. According to the survey, “73% [of respondents] are adding or expanding tools to encourage employees to be better health care consumers…57% are implementing or expanding consumer-directed health plans, which involve health savings accounts and other related payment structures.” The survey also reported that by next year, 3% of large employers will provide coverage through a private exchange, and 35% are considering doing so beginning in 2016.
What is certain is that health insurance costs to employers will continue to rise and you, the employee, will eventually be asked to shoulder a larger part of the cost.
If you do find yourself without employer-provided health care, it’s a qualifying life event that allows you to shop on a government exchange at any time. You also can shop for individual health insurance quotes here.