(Sept. 27, 2013) Even though the Obamacare mandate for larger companies has been pushed back until 2015, the insurance landscape will undergo a drastic change next week when subsidized health insurance exchanges open in most states, including Maryland.
At a Greater Ocean City Chamber of Commerce seminar last week, local insurer Chris Carroll of Atlantic/Smith, Cropper & Deeley told local business owners that federally regulated health insurance exchanges will likely present a better option for lower-earning resort workers.
“The bottom line is that it’s going to be very hard to keep people under 200 percent of the poverty line in your group plan,” Carroll said.
This prediction mimics recent national news. Large chain employers such as Home Depot and Trader Joe’s have announced in the past weeks that part-time and temporary employees – those for which they are not federally required to provide insurance– will have their company-sponsored policies eliminated and will instead be given a stipend to purchase insurance through the exchange.
Under the Affordable Care Act, popularly known as Obamacare, each state is mandated to set up a group health exchange whereby subscribers can pool their purchasing power and acquire reasonable rates from insurance providers.
The cost to subscribers is subsidized by the federal government at different tiers, depending on income, with those making up to 400 percent of the current poverty level receiving some assistance. Past that, exchange insurance rates are unsubsidized.
Those making only the poverty line, or slightly above, will be enrolled in Medicare. In Maryland, this ceiling is 138 percent of poverty.
Under the ACA, only employers with 50 or more employees must have an insurance plan for their workers. Even then, large employers are only required to actually insure those who work an average of 30 hours per week or more.
However, many companies offer insurance programs to part-time or temporary workers, especially given the tax favorability of such contributions as part of the employee’s overall compensation package. This is especially common in seasonal businesses, such as in the resort area.
But, with the strong subsidies on the exchanges, which will open up for 2014 enrollment next week, it may be more attractive for many of these employees to purchase their insurance off the exchange.
This could present a problem for the viability of the employer’s health plan, Carroll noted, as most insurers require a certain level of plan participation.
“As an employer, you’re going to have to budget much more effectively,” he said.
In an attempt to level the playing field, the ACA restricts individual variances in health care costs. Insurers can no longer assign individual rates to employees based on their health or risk.
“They’re not going to allow you to give variability down to the employee,” Carroll said. “It’s why a lot of you are getting pressure to early renew, because your insurance provider is trying to delay the impact by calculating next year’s rates before the law goes into effect.”
Employers will also not be allowed to contribute a flat rate toward an employee’s insurance regardless of the total premium. Instead, they must pay a percentage.
These factors, generally speaking, put employers in the position of subsidizing those with higher health costs and putting more of a burden on those with lower costs.
“We’re going to see more averaging of the rates,” Carroll said. “If you were on the lower end before, you’re not going to like it. If you were on the higher rend, it’s going to help you.”
Given that many of the resort’s employees are young and single, and thus have low premiums, they may be further driven to take insurance off the exchange rather than from their employer. Even on the exchange, however, the differential between age groups is capped at 300 percent.
“That means if a 22 year old is paying $100 for his insurance plan, an 85 year old with the same income can’t pay more than $300,” Carroll said.
The ACA mandates that state health exchanges offer “metal level” plans, with “platinum” coverage being the most expensive and best, and “bronze” coverage being the cheapest.
However, the federal government, fearing that young people would be unsatisfied with the offerings, introduced a “catastrophic coverage” option for anyone under 30. This is an extremely high-deductible plan with an extremely low premium.
“This is how they’re planning to draw the ‘young and invincible’ over to the exchanges,” Carroll said.