Play or Pay? . . . Employers say more like "Play AND Pay"

Wednesday, June 11 - Word on Benefits
International Foundation of Employee Benefit Plans (IFEBP)

By Neil Mrkvicka

The employer penalty is coming. Is everybody ready?

Beginning in 2015, many employers will face penalties if they do not offer minimum essential coverage to their employees and any of their employees receive a subsidy to obtain coverage through a health insurance exchange. These employer requirements lead to a choice, commonly referred to as "play or pay." The International Foundation's 2014 Employer-Sponsored Health Care: ACA's Impact Survey gives plenty of insight on how employers intend to respond to this choice.

Survey results indicate a steady increase in confidence in employer-sponsored coverage. Those reporting they will definitely continue to provide health care coverage for all full-time employees in 2015 rose from less than one-half to nearly three-quarters - Very few employers have plans to discontinue coverage in 2015.

There is some uncertainty regarding employer-sponsored coverage five years from now; however, most organizations say they likely will continue coverage. If discontinuing coverage in the future, most organizations say they likely or definitely would provide a subsidy. The most common reason given for potentially discontinuing coverage was cost.

Just because organizations intend to continue to provide coverage doesn't mean everything is fine and dandy in employer-sponsored-coverage land. Among all organizations, nearly nine in ten expect ACA will increase their organizations' health care costs this year.

The median cost increase is 4% among organizations that know their exact 2014 cost change due to ACA. The top three ACA cost drivers for 2014:

The excise tax on high-cost group health plans (a.k.a. "Cadillac tax") is anticipated to be the top ACA cost driver beyond 2014\u2014One-quarter of organizations have already started redesigning their primary health plan to avoid triggering the 2018 tax, and more than one-third are considering action.

More than two in five employers expect next year (2015) to be the year that will produce the greatest cost increases due to ACA. About one in five expects 2018\u2014the year of the excise tax on high-cost group health plans\u2014to be the year producing the greatest cost increases. One in six expects costs to increase the most this year (2014).

Among employers with 50 or fewer employees, nearly one in six has reduced its workforce due to ACA costs, more than one in ten has adjusted hours so fewer employees qualify as full-time, more than one in ten froze/reduced pay raises/compensation, and one in ten has reduced hiring in order to stay under the 50-employee ACA threshold for small employers.

Compared with last year, organizations are implementing cost-containment measures at a much higher rate. Nearly one-third of organizations have increased out-of-pocket limits, increased participants' share of premium costs and/or increased in-network deductibles in response to ACA. More than one in five organizations have increased copayments or coinsurance for primary care and\u002for increased employee proportions of dependent coverage costs. A small number of organizations have added or expanded their use of a "bare bones" mini-medical plan and\u002for dropped spousal coverage because of ACA.

Respondents submitted a wide range of responses when asked to share their organization's experience with ACA-related health care cost changes for 2014. On the one hand, several respondents expressed maddening frustration with cost increases, describing how it "made my stomach turn" or how the impact is akin to "a sharp stick in the eye." On the other hand, some related a different experience, saying "everything has been very positive - we welcome the changes.

Most were somewhere in the middle, describing an absorbable impact this year but expressing concern for anticipated future costs. Several also mentioned how their organization passes costs to employees.  A large number of respondents mentioned the tangible cost burden associated with the transitional reinsurance and PCORI fees; a similar number described the significant time and effort they have devoted to keeping compliant with constantly changing provisions, saying the "soft costs" of administration and communication have been substantial. Lastly, one quote seemed to cleverly and concisely summarize responses: "Everyone says 'play or pay,'\u2026 well we are 'playing AND paying.' "