Perhaps the most obvious challenge in today’s health care insurance landscape is affordability. For many years now, employers have solved their health care insurance affordability challenges by shifting a bigger piece of the cost to employees. In fact, CNBC reports that the average general deductible for workers with single coverage totaled $1,077 in 2015, compared to only $303 in 2006 according to research by Kaiser. That deductible has climbed nearly seven times faster than wages, on average, over the past five years.
Furthermore, some businesses have chosen not to offer coverage, opting to shift their employees to the public exchange instead. Under the Affordable Care Act, organizations with 50 or fewer employees aren't obligated to offer insurance, though they currently do provide coverage for about 20 million people.
Meanwhile, companies that are large enough to be required to offer insurance (Applicable Large Employers), but small enough to find it difficult to pay for it, must make tough choices. Employers must choose between offering costly benefit plans and paying fines for failure to offer Minimal Essential Coverage (MEC).
Responding to the MEC dilemma
According to the IRS, employer-sponsored coverage must provide minimum value and be affordable. The website states: “In general, under the employer shared responsibility provisions, an applicable large employer (ALE) member may either offer affordable minimum essential coverage that provides minimum value to all of its full-time employees (and their dependents) or potentially owe an employer shared responsibility payment to the IRS.”
So, employers with 50+ FTEs must decide how each decision may impact the bottom line, including the following variables:
- Option 1: Provide a plan that qualifies as a minimum value plan and meets the affordability requirements under the law, thereby avoiding the risk of penalties.
- Option 2: Provide a plan that is of Minimum Essential Coverage but may not be affordable or of minimum value. This would avoid the first part of the penalties, but there may still be penalties for employees that opt for subsidized, fuller coverage from the Exchange.
- Option 3: Don’t offer Minimal Essential Coverage and instead pay the resulting penalties for failing to provide MEC which is $2,160 per employee in 2016, and possibly more, depending on the penalties received.
- Option 4: Consider self-insuring your health plan which could be a more affordable way to meet MEC requirements than traditional insurance. Since 2014, the number of self-insuring businesses sized 500-1,000 employees jumped from 59 to 66 percent, according to PwC.
Affordability, sufficiency: the tension remains
The ACA was designed to make health insurance straightforward and affordable for everyone. But the tension between employers’ and employees’ needs remains palpable: Business-owners must survive financially while individuals need to attain sufficient medical coverage.
Clearly, there’s work to be done, and we can expect the ACA to continue to evolve. In the meantime, the task of defining one’s benefits strategy comes with tough ethical and financial questions that deserve a great deal of consideration. Are you up for the challenge? We are.
You can trust Heffernan Insurance Brokers to bring the guidance you need to strike the balance between affordable coverage and sufficient healthcare when it comes to your employee benefits. Contact us for Benefit Advisory Services today!