No matter who wins on Nov. 6, it’s wise to assume that health care reform will stand and plan accordingly. There are 3 things health benefit managers can do for the 2013 renewal and set a smooth transition to the post-reform world.
1. Look at employee premium contributions as a percentage of salary. If your plan has employees paying too much, you will have to jump through new hoops.
Specifically, the law says that employees who earn less than $92,200 (for a family of four) can pay up to $752 per month to be in your plan. That is 400% of the federal poverty limit, with the maximum 9.8% health plan contribution. The $752 compares favorably to real-world averages: According to the 2012 Kaiser Family Foundation Employer Health Benefits Survey, the average employee pays $79 per month to cover him or her, and $360 to cover family members.
However, employees earning less can contribute markedly less. An employee earning the federal minimum wage ($7.25/hour) could pay only $123 per month to be on an employer’s health plan. It’s not clear how employers can take into account a spouse’s earnings to calculate where on the federal poverty limit chart an employee’s household is.
2. Prepare for possible rate changes. If employees pay more than what is allowed, you have to give them a “free choice voucher” and let them shop for coverage in the exchanges. In other words, you will have to pave the way for employees to leave your plan, which could significantly affect your plan’s rates. Until insurers know more about who leaves your plan, they will lean toward increasing your rates.
3. Calculate different financial scenarios. While we wait for clarity in the form of rulemaking, benefit managers should calculate two different scenarios: What are the maximum contributions, assuming that the employee is the only earner in the household? How do the current and 2013 contributions compare? And second, if you assume that a spouse earns a salary similar to the employee’s, how many employees would still fall under the 400% federal poverty limit?
Knowing this information, you can make an informed decision about where to set your plan’s 2013 contributions. If, by some twist of legislative fate, health care reform does change drastically before 2014, then your planning will only affect your 2013 contributions. If health care reform stays on track, you will have a smaller bump going into the 2014 plan year.
Guest blogger Linda K. Riddell is a principal at Health Economy, LLC, where she works with clients on gaining practical tools to comply with health care reform and to maximize the new opportunities that reform offers. She can be contacted at LRiddell@HealthEconomy.net. This blog originally ran on Employee Benefit News' Benefit Employee Views blog.
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