If your company’s employer-sponsored health care plan premiums went up this year, you’re in good company. Large employers who made changes to their plan’s carriers, deductible amounts or other plan provisions saw an average increase of 4.3 percent at the beginning of the year. Employers who didn’t make changes saw increases of 6.0 percent, according to Mercer’s Survey of Employer-Sponsored Health Plans, 2017.
Many small businesses saw even steeper price hikes this year, to the tune of 8.0 to 18.0 percent more than large firms.
There are several reasons getting health benefits for your company in the current climate is more expensive than in previous years, but increases are driven primarily by increasing medical costs and prescription drug prices.
Affordable Care Act (ACA) Changes for Individuals
Several changes to the ACA under the Trump administration impacted consumers looking for coverage for 2018 in the insurance marketplaces.
A shorter open enrollment period for the federal exchange and average premium rate increases of 37 percent for “silver” plans saw individual consumers looking more closely at expanded “bronze” plan options and “gold” plans — some of which actually had lower premiums than their “silver” counterparts.
One of the biggest changes impacting individuals looking for health insurance coverage — and their ACA-covered employers — was the repeal of the ACA’s individual mandate in December 2017. While only time will tell what impact this change will have, it is estimated that 13 million Americans will go uninsured. At the same time, prices on health plans are expected to rise because many young, healthy people will choose to forego health insurance coverage.
ACA Changes for Employer-Sponsored Health Insurance Plans
On the employer front, the ACA remains the law of the land. Under its provisions, businesses with 50 or more full-time workers must offer corporate health benefits to employees and to their dependents. Failing to comply with this requirement will subject an employer to penalties.
Change to Affordability Standard
It’s not enough to offer a health insurance plan to your employees under the ACA; plan options must be deemed “affordable” to comply. Each year, the IRS announces the shared-responsibility affordability percentage for the coming plan year.
For 2018, employers must offer corporate health benefits under which an employee’s required contribution doesn’t exceed 9.56 percent of his or her household income. This number has gone down from 2017’s affordability standard of 9.69 percent. Fortunately, there are safe harbor options employers can rely on instead of having to determine their employees’ household income amounts, including a federal poverty level (FPL) safe harbor based on the 2017 FPL. The bottom line is that employers need to ensure their required employee contributions comply with the affordability standard.
Inclusion of Preventive Care Items
Beginning in 2018, there are also several additional required preventive care items ACA-compliant health care plans must include.
Plan participants aged 50–59 with more than a 10 percent 10-year cardiovascular risk must be entitled to receive free aspirin preventive medication. Similarly, certain adults between the ages of 40 and 75 also now have coverage for statin drugs. A revised immunization schedule for children is among other changes that took effect on January 1, 2018.
Businesses that were required to comply with the ACA in 2015, 2016 or 2017 but failed to do so should expect to receive penalty notices — in some cases for violations going back to 2015 — in the coming weeks and months.
Making mistakes with ACA-mandated coverage can be costly, to the tune of $260 per filing up to a whopping $3,193,000 penalty. Intentionally choosing not to comply with the ACA can cost employers $530 per filing with no maximum.
Keeping Costs Down for Employer-Sponsored Health Plans
Health insurance costs for employee health care benefits are a significant burden for most businesses. Offering low-premium high-deductible plans is one way many employers meet the affordability standard and other ACA requirements.
Some employers are also offering care coordination benefits and adopting payment models that focus on the value of health care services provided, rather than more traditional fee-for-service reimbursements for providers.
Small Business Tax Credit
Although they are not required to offer plans to employees, small businesses with fewer than 25 employees earning average wages under $51,600 per year may also be able to take advantage of the small business health care tax credit. This incentive can reduce the impact of offering corporate health benefits to workers while making businesses more attractive to prospective and current employees. Qualified employers that choose to offer health care plans to employees may be able to take advantage of a tax credit of up to 50 percent.
Looking Ahead to the “Cadillac Tax”
Unless the provision is repealed, employers offering high-cost health plans will be subject to the so-called Cadillac Tax under the ACA starting in 2020. That 40 percent excise tax on the value of health benefits above $10,200 for individuals and $27,500 for all other plan participants (indexed for inflation) may affect as many as 31 percent of large employers.
Get Help Understanding the Corporate Health Benefits Landscape
For businesses of any size, understanding the complexities and nuances of ACA compliance can be overwhelming. Working with an insurance provider that provides corporate health benefit solutions can help your business comply with the law while buying the coverage your employees need and want.