It’s annual enrollment time, the autumn period when many people with job-based health insurance ante up for another year.
Although news reports have fixated on the problems with the online health marketplaces that launched Oct. 1, for the vast majority of people that’s a nonissue. If they get insurance through a job at a company that has at least 50 employees, they probably won’t be using the marketplaces, also called exchanges.
That doesn’t mean people with employer-based plans are unaffected by the health law. As employers adjust plans to meet new requirements and try to reduce their costs, people can expect to see changes next year.
Overall, premium increases will be moderate in 2014, averaging 5.2 percent,according to a 2013 employer survey about planned health care changes by the human resources consultant Towers Watson. Last year, the increase was projected to be 5.9 percent in 2013.
But employers may raise rates disproportionately for spouses and dependents, the survey found. The health law requires plans to cover dependent children up to age 26, and most plans cover spouses too. But employers continue to try to minimize those costs by making it financially less attractive to employees to cover their family members. They may charge separately for each child on a plan, for example, or add a surcharge for covering a spouse who is also offered insurance through his or her own job. Some, such as UPS,have moved to cut off coverage entirely to spouses that have access to insurance through their own jobs.
In the Towers Watson survey, 34 percent of employers said they planned to increase the employee share of the premium for spouse and dependent coverage by 5 percentage points or more in 2014. Last year, 21 percent planned such big increases. In contrast, 22 percent of employers said they would increase the worker’s share for employee-only coverage by 5 percentage points or more.
“Everyone wants to make sure they’re not picking up the cost of covering other dependents,” says Julie Stone, a senior consultant at Towers Watson.
Another change deals with the so-called Cadillac plans—those that cost more than $10,200 for an individual or $27,500 for a family. In 2018, these policies will incur an excise tax of 40 percent on the amount that premiums exceed those totals. Stone says 60 percent of employers surveyed expect to trigger the tax if they don’t adjust their plans, and some are beginning to make incremental changes in 2014 to ratchet back on generous coverage.
For employees that will generally mean higher deductibles and copayments or coinsurance, not to mention a continued shift to account-based plans—high deductible plans paired with a health savings account or health reimbursement arrangement from the employer that the worker can use to cover out-of-pocket costs.
More than half of employers offer such plans in 2013, according to Aon Hewitt’s annual employer survey, and another 30 percent are considering doing so in the next five years. [ A growing number of employers are offering these plans as the only option, say experts.
To encourage employees to select them, “the high-deductible plan is often subsidized to a greater degree than other types of plan,” says Craig Rosenberg, Aon Hewitt’s practice leader for health and welfare benefits administration.
Employees should also expect to see a continued emphasis on wellness and health management activities, including financial incentives for completing health risk assessments, keeping blood pressure, cholesterol and weight within recommended ranges, and working with health coaches to manage chronic conditions.
Increasingly, employers are incorporating the financial rewards into the premium itself rather than giving employees a cash payment for completing a health risk questionnaire, for example, says Chris Renz, a partner at human resources consultant Mercer.
“It puts a lot more dollars at stake,” says Renz. “Instead of a one-time $100 reward you might see an annual $500 difference in premiums.”
Workers who don’t like what their employer is offering can shop for coverage on the state exchanges. But they won’t be eligible for subsidies to bring down the cost unless their employer plan is considered unaffordable or inadequate under the health law. A plan is deemed unaffordable if employee-only coverage costs more than 9.5 percent of household income, and inadequate if it pays less than 60 percent on average of allowed medical expenses.
Since employers typically subsidize about 80 percent of the cost of coverage, most employer plans are going to be a better deal for employees than unsubsidized coverage on an exchange, says Rosenberg. In addition, by paying the premium with pre-tax dollars, employees reduce their taxable income, he says.
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