More employers will drop their group health insurance and send their workers to the individual market to find coverage.
That was the prediction issued by Birmingham, Ala.-based Health Partners America on Wednesday, a day after the Obama administration revealed it had decided to postpone the employer mandate in the Patient Protection and Affordable Care Act until 2015.
Health Partners, a leading brokerage training firm and operator of one the nation’s growing number of private health care insurance exchanges, noted that before the decision, many small employers not subject to the mandate were considering abandoning coverage so their employees could access the government subsidies available through the coming exchanges.
With the threat of stiff penalties removed for at least another year, large employers can now make their decision the same way small employers will – based on what’s best for the employees, it said.
“Employers offer benefits for a variety of reasons,” said Josh Hilgers, president of Health Partners America, “but the No. 1 reason is to attract and retain quality employees. The problem is that next year, group health benefits may no longer be beneficial for a large percentage of employees – in fact, some workers may actually seek out companies that do not offer group health insurance.”
That’s because offering coverage that is affordable for the employee, Health Partners said in a news release, blocks all “related individuals” – generally, the spouse and tax-dependent children – from accessing a government subsidy.
“It really doesn’t make any sense,” said Eric Johnson, director of education for Health Partners America. “The IRS has concluded that Congressional intent was to block these individuals from obtaining the tax credits.
"(But) instead of basing the affordability determination on the cost of the family premium, they’re basing it only on what the employee would pay, which means that coverage will be considered affordable for most employees and their family members will be locked into the employer’s plan, even if it’s significantly more expensive and the employer isn’t contributing to the dependent premiums.”
Nearly two-thirds of U.S. households earn less than 400 percent of the federal poverty level, the cutoff point for the subsidies, Health Partners said.
“Employers won’t be able to compete,” Johnson predicted. “The subsidies are too rich, so many employers will conclude that it’s best to let the government take care of the health insurance.