Annual enrollment in the age of PPACA

Here’s a newsflash: The Patient Protection and Affordable Care Act is changing the way health insurance is bought, sold and delivered in this country. This year, major provisions take effect, and by 2014, employers must be prepared to fully participate in the new law.

Although benefits brokers already have been working with clients to help answer questions and advise them on the “pay or play” provision, they’ll be called upon to do even more in the coming weeks.  

Brokers, for example, should be prepared to help employers think through their benefits strategies more broadly and provide the tools and advice they’ll need to reassess their total benefits packages. With annual enrollments — usually held in the fall — getting closer, here are some issues that brokers might want to stay abreast of as the law continues to unfold.

Meeting the law’s requirements    

Because of the new health care exchanges, employees now will be able to choose between an employer-provided health care plan — if one is offered — or a qualified health plan they buy themselves outside of work in the individual market. Enrollment for the new marketplaces will begin this October, with coverage beginning January 2014.

Because the law requires employers to tell their employees by Oct. 1 in writing about the new exchanges and how they relate to their workplace benefits, brokers should be prepared to work with their clients to help workers understand the provisions of plans they are considering. They also should help employers ensure the health care coverage they provide is both adequate — providing essential health benefits —and affordable so they can avoid possible penalties.

Brokers play a critical role in this year’s enrollment. Getting a plan administrator or CEO’s buy-in is the first step. Because employees now have a choice of health plans, participation rates for employer-sponsored medical coverage might vary from previous years. Some employees might decide paying the penalty is less expensive than buying coverage − and might drop or decline to enroll in employer plans. Some who’ve declined employer coverage in the past might decide to sign up to comply with the mandate. Brokers need to help employers prepare for these unexpected higher or lower enrollments.

Another key objective for brokers will be helping to educate employees both before and during enrollment. Developing a script that informs employees about the new state insurance marketplaces and available subsidies will go a long way in helping workers make better-educated health care decisions. Employees also should be made aware that they might be eligible for a tax credit and cost-sharing reduction if they buy coverage through an exchange, but that they might not receive any employer contribution toward their premium, or any related tax advantage.

The biggest task for brokers, however, will be helping employers understand the impact of health care reform on the benefits plans they offer going forward. The reality is that the cost sharing trend already evident will continue to shift to employees. Today, the typical corporate medical plan pays about 80 percent of an employee’s annual costs, according to Truven Health Analytics.

In the state exchanges, however, the government will permit plans with an actuarial value of 60 percent or more to be offered. If employers begin moving their plans toward similar levels, cost-sharing will shift even more significantly. In fact, a recent survey showed that 69 percent of employers anticipate increasing employee deductibles and co-payments in the next three to five years, while 68 percent anticipate increasing employee premium contributions and 52 percent anticipate introducing high deductible/consumer-driven health plans over the same time period.

Facing the new reality

As employees shoulder an unprecedented share of health-coverage risk—and as medical insurance becomes available outside of work—other workplace benefits are becoming more important. For example, the shift in cost sharing might leave employees more vulnerable to the high costs of an unexpected injury or illness, so financial protection benefits will become more essential than ever.

In fact, more and more personal bankruptcies are due to medical bills. Statistics show that greater than 60 percent of those individuals filing for bankruptcy do so because of medical bills. Most of these people are well-educated homeowners from the middle class. What’s more troubling is that although three-quarters of the people with a medically-related bankruptcy had health insurance, they couldn’t afford the high deductibles, co-pays or out-of-pocket costs, according to the American Journal of Medicine.

Employers will now have the opportunity—and responsibility—to address the financial risks their employees face in this new environment, from life-altering events such as death, long-term disability and critical illness to significant events such as short-term disability to common events that include dental expenses. Addressing these risks means employees need to have a whole financial protection package available to them. But how can employers afford to offer a complete, well-rounded benefits package that offers protection for whatever life brings?

That’s where advisors come in—they should be out in front asking their clients what coverages they plan to offer to help protect employees, and then presenting benefits options to consider. One effective way employers can offer a full package is through worksite benefits.

Once considered optional, these coverages are now a necessary part of an employer’s offerings. These valuable benefits can be offered through several funding options: employer-paid, shared, or employee-paid, which gives employees access to additional financial protection with little to no effect on an employer’s bottom line.

Employee education

A major responsibility will be educating employees about how group and voluntary benefits such as disability, life, hospitalization, accident and critical illness insurance can help protect them and their families against the new financial responsibilities they might be asked to shoulder by filling the gaps created by high deductibles, co-pays and co-insurance.

Brokers should be prepared to help their clients offer disability and voluntary plans at enrollment. Additionally, advisors can play a key role in helping employees understand the need for coverage before enrollment.

Because coming changes in health care will require better-educated benefits consumers, employers − with the help of their brokers − must clearly and effectively communicate benefits options and their value to employees. If employees don’t understand the benefits they’re offered, they might have difficulty choosing those most relevant to their age and stage of life. But when employees understand their benefits, the payoff can be powerful. In fact, Unum research shows that employees who understand their benefits are more loyal to their employers, have higher levels of job satisfaction, and feel employers care about their well-being.

Stacey McDonald is the director of enrollment operations at Unum.

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