The federal government’s decision to delay a major piece of the Affordable Care Act – the requirement that middle- to large-sized companies provide health insurance for their workers – is causing some confusion in the health insurance market.
Thomas Considine, former banking commissioner, takes it a step further, saying the delay was done deliberately in order to increase the number of individual applicants for coverage through the new health insurance marketplace.
Other insurance executives and experts disagree, saying that mandates are not what drive employers to provide health insurance. However, they do say the multistep approach has added another unknown into an already uncertain market, as companies and providers wait for ACA requirements to kick in and insurers to announce prices this fall
Considine said the combination of higher health insurance premiums as a result of the removal of annual limits in insurance benefits, along with the federal decision to delay a mandate for many employers to insure their workers, will lead to businesses dropping insurance.
Considine serves as the chief operating officer for insurance network MagnaCare.
“I think that the relaxation of the employer mandate is at its core an effort by the administration to drive more lives to the exchange,” a term for the marketplace for individuals and small businesses, Considine said.
Federal officials cited their intention to make it easier for employers to provide insurance in announcing the one-year delay in requiring employers with at least 50 employees to provide insurance.
The federal government hasn’t delayed the mandate for individuals to purchase insurance, so many residents who don’t have insurance through their employers will have to buy insurance through the marketplace. Those who don’t buy insurance will have to pay penalties of at least $95 in 2014, rising to at least $695 by 2016.
Considine said the mandate delay alone won’t push employers to no longer offer coverage, but rising costs related to the end in annual limits to benefits will have that effect.
“That becomes the more attractive solution if you’re a rational, thinking employer,” he said.
Considine served as Gov. Chris Christie’s Department of Banking and Insurance head for two yearsbefore returning to the private sector in January 2012.
Until the ACA was passed, health plans frequently included limits on how much they would pay for benefits in a year and over a lifetime.
The ACA eliminated these limits for certain essential health benefits defined by the law.
However, the federal government has now allowed companies to delay the elimination of the annual limits through the end of this year.
January 1, 2014, is a key date in the implementation of the ACA. Along with the elimination of the annual limits, the marketplace will begin then. The enrollment period for the marketplace – which will allow residents to purchase insurance and learn if they are eligible for insurance subsidies – will begin October 1.
The cost of the insurance offered through the marketplace won’t be known until after federal officials approve the plans on September 9.
The cost changes in states that are operating their own marketplaces have varied widely, with New York recently announcing large price drops in its individual market. Price drops of that scale aren’t expected in New Jersey, however, at least in part because low-cost “basic and essential” plans available in the state must increase their benefits under the ACA.
Not every expert on healthcare agrees with Considine’s prediction.
Christie Stearns, vice president of health and legal affairs for the New Jersey Business & Industry Association, said employers are under pressure from rising healthcare costs, but he noted that this is true with or without the elimination of annual limits on benefits.
“It continues to be a major challenge to employers,” she said. “NJBIA’s members have told us for 20 years, their number-one concern is the cost of health insurance.”
While employers are mindful of the cumulative changes in costs as a result of the ACA and other changes in healthcare, Stearns said no one change will push employers to end health benefitsoverage.
“Our members continue to tell us that they are working hard to maintain coverage,” she said, noting that it the non-wage benefit that employees value the most.
There is a strong case for businesses to maintain coverage, including concern that workers could leave for competitors that do offer insurance, Stearns added.
“New Jersey continues to be a competitive state when it comes to qualified workers, so particularly for companies that rely on high-skill employees, having an attractive benefits package is important,” she said.
Wardell Sanders, president of the New Jersey Association of Health Plans, also said the mandate delay won’t be decisive for employers deciding whether to drop coverage. He noted that there has been no mandate until now, but many businesses their employees medical insurance.
Sanders noted that the ACA adds many costs to insurance, including new taxes , along with mandates like the elimination of annual and lifetime limits on benefits.
“I do think that a lot of the reasons why employers offer coverage even they don’t traditionally have to will continue,” he said. “Cost will continue to be a concern and there will be some employers who are on the edge who will drop coverage due to the increase in coverage.”
But he agreed that elimination of annual limits will be a factor, along with the addition of pediatric dental and vision coverage and the inclusion of prescription drugs in employee deductibles, which are the amounts insured people must pay before the insurance kicks in.