Following the recent Supreme Court decision in King v. Burwell that upheld premium subsidies for all public exchanges, Mercer polled employers on their reaction to the ruling and how the public exchanges may or may not factor into their health benefit strategies. Nearly 600 employers responded: 24% with fewer than 500 employees, 47% with 500-4,999 employees, and 29% with 5,000 or more employees.
Thinking about your organization’s best interests over the long-term, do you believe this decision will have a positive or negative effect? More employers believe the decision will have a positive effect than a negative effect — 29% compared to 17% — although a slight majority (54%) doesn’t believe this ruling affects them one way or the other. The larger the employer, the more likely they are to see the ruling as a positive for their organization (41% of those with 5,000 or more employees). Those favoring the ruling may see advantages to having part-time employees (those averaging less than 30 hours a week) or early retirees obtain their coverage from the public exchanges. Those that believe it will have a negative impact may have concerns about cost-shifting from health care providers in low-cost exchange plans that accept lower reimbursement, or about pressure on their employees’ access to health care providers as more Americans gain insurance.
Do you have now, or do you expect to have, a strategy to steer pre-Medicare-eligible retirees to the public exchange, with or without an employer subsidy? Just under half of all respondents that currently offer coverage to early retirees — 45% — say they are considering steering retirees to the public exchange or have already begun to do so. It’s easy to see why this would be an attractive option, given that coverage for early retirees costs more, on average, than coverage for active employees. In some cases, retirees could also benefit by obtaining coverage through the public exchange. Some might qualify for a subsidy (generally, if their household income is less than about $47,000 for a single person), and the subsidized coverage might cost less than what their employer charges for coverage in the retiree plan. But even some of these who don’t qualify for a subsidy might still do better on the exchange. About a third of all retiree plan sponsors currently don’t contribute to the cost of coverage. A retiree moving from an employer-sponsored plan to the exchange would almost certainly have more options on the exchange, and be able to consider cost and level of coverage in selecting a plan.
An employer considering terminating medical coverage for early retirees would need to evaluate whether their employees might have — or claim —a legal right to continued access to an employer-sponsored plan upon retirement. In addition, employers that currently provide money in a health reimbursement account (HRA) for retirees to use to purchase coverage would want to provide an option for the retiree to refuse or delay receipt of the HRA contribution in order to seek subsidized coverage on the exchange.
Do you have now, or do you expect to have, a strategy to steer part-time employees working fewer than 30 hours per week to the public exchange? Employers are much less likely to consider the public exchange as an alternative source of coverage for currently eligible part-time employees. Just under a fourth (24%) of respondents that provide coverage to employees working fewer than 30 hours per week say they are considering this strategy or already have it in place. The largest employers are even less likely to see the public exchange as a viable alternative source of coverage for their part-timers (16% of those with 5,000 or more employees). Unlike with retiree coverage, employers may use health care benefits for part-time employees as an attraction and retention strategy and a way to drive employee engagement. And because part-time employees are still working, it might be harder for them to qualify for a subsidy than an early retiree. Employers should also consider whether making part-time employees ineligible for employer coverage raises any legal concerns — for example, practitioners have wondered whether reducing a formerly eligible employee’s hours to below 30 to make them benefit-ineligible might violate either ERISA 510’s prohibition on taking adverse employment actions to avoid attainment of a benefit, or a provision in the ACA banning discrimination against an employee in retaliation for obtaining an exchange subsidy.
Do you believe the public exchanges have made it harder for your employees to obtain needed health services in a timely manner? Relatively few respondents — 16% — believe that the increase in the number of Americans with health insurance has affected their employees’ ability to access health care — so far. Still, it is enough of a concern that some employers have begun to address access with solutions like telemedicine or on-site medical clinics.
We also asked employers whether they had been waiting on this decision before taking further action to comply with the ACA’s reporting requirements or to prepare for the excise tax coming up in 2018. Fortunately, the great majority said no. That’s a good thing, because employers need to be collecting data now to provide the detailed reporting information required in early 2016. And, the last time we checked, about a third of employers were on track to hit the excise tax cost threshold in 2018 unless they take steps to avoid it.