Employer-sponsored coverage not as valuable as it used to be

Ever since the Affordable Care Act was signed into law, we’ve talked about how the health reform law makes employer-sponsored coverage less beneficial for employees. There are three reasons for this position:

1. All plans are now guaranteed-issue, so employees and dependents with pre-existing medical conditions have other options; they no longer have to rely on an employer-plan to get coverage.

2. The essential benefits are the same for group and individual coverage. Now services like maternity coverage and mental health and substance abuse are covered on individual policies; in the past they were only covered on employer-sponsored plans. In fact, because large employers and self-insured plans are not required to cover all essential benefits, individual plans are now more comprehensive than many employer-sponsored plans.

3. The biggie, of course, is that the employer contribution that was always so beneficial for employees may no longer be a benefit; instead, if the cost of employee-only coverage is considered “affordable,” the entire family is blocked from getting a government subsidy, regardless of what the family premium is.

Well now we can add another reason to the list. It seems that this less-valuable-than-before employer-sponsored coverage that blocks families from receiving a premium tax credit will now be more expensive for employees than in the past. A new survey of 213 executives found two developing trends:

1. First, employers are increasingly offering high-deductible plans paired with a health savings account to their employees. HSAs can be a great way for people to take charge of their health care expenses and can help modify consumer behavior, but they also expose families to higher out-of-pocket costs, especially for services like doctor visits and prescriptions that were previously covered by a copayment.

2. Second, although HSA-qualified plans normally come with a lower premium since the member is taking on more risk, employers are also shifting more of the premiums to employees. So the net effect is that employees are paying more money for less-comprehensive coverage.

The survey found that 73% of companies had switched or were planning to switch employees to high-deductible health plans while 71% were asking employees to pay a greater share of the premium.

If one of the primary reasons for offering group health insurance coverage is to attract and retain quality employees, asking them to pay more money for watered-down plans, especially when they could have saved money and covered the entire family in the individual market if the employer didn’t offer coverage, probably isn’t the way to do it. With 7.3 million individuals already covered by ACA-compliant plans and millions more expected to sign up during this year’s annual enrollment period, this may very well be the time that employees start pushing back on employers. At the very least, we can confidently predict that employer coverage will become less popular and the individual market will continue to grow.

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