ACA Changes the Way Employers Shop for Health

Credit: Jennifer Guhl Photography

From requiring employers to provide medical coverage to spurring the creation of new models for how health insurance is structured and sold, the effect of the Affordable Care Act on small-business owners will become increasingly clear over the next two years.

In 2015, larger employers that don't provide insurance to full-time workers will have to pay a penalty for each of those employees.

The law has also affected how employers shop for insurance.

'Larger groups are more conscious of the minimum value,' required by the ACA to avoid having to pay penalties, said Ryan Petrizzi, director of sales operations and small markets for insurer AmeriHealth New Jersey. Petrizzi participated in a panel discussion updating businesses on the law yesterday at a healthcare symposium offered by the Princeton Regional Chamber of Commerce at Mercer County Community College in West Windsor.

The ACA has also prompted employers to reexamine how they offer insurance. Some midsized businesses are switching from traditional, fully funded commercial insurance plans to self-funded plans, in which they pay employee claims directly.

Self-funded plans allow businesses to see the overall claims from their workers and tailor employee wellness plans to serve those workers, said insurance broker Bill Rue Jr., president of Rue Insurance, based in Hamilton, Mercer County. Petrizzi added that the efficiencies of self-funded plans are primarily attractive to businesses with hundreds of workers, but now are attracting firms in the 50- to 70-employee range.

But the biggest near-term effect of the law on businesses will be the start of the mandate that many employers provide insurance. The requirement was delayed for a year.

Starting on Jan. 1, 2015, employers with 100 or more workers will have to pay a penalty if they don't provide insurance to at least 70 percent of fulltime workers.

In 2016, the mandate will be expanded, so that all businesses with the equivalent of at least 50 full-time employees will have to pay the penalty if they don't provide insurance to at least 95 percent of their full-timers.

The next two years will be among the momentous in terms of how the ACA affects businesses. After 2016, the next major landmark will be the imposition in 2018 of a 40-percent excise tax on the value of insurance plans offered by employers above $10,200 for individuals and $27,500 for families.

Employers face a more immediate deadline on October 1 of this year, when they must notify workers of their right to have health insurance under the law, as well informing employees whether the employer will provide insurance next year that meets the ACA's requirements for being both adequate and affordable for workers.

Petrizzi noted that the Small Business Health Options Program, or SHOP, also will see changes this year. Originally intended to launch alongside the federally operated individual health insurance marketplace, at the healthcare.gov website, SHOP was instead managed by insurers in the first year of the marketplace. It attracted few businesses in 2014.

While the SHOP section of the federal site is expected to be ready in 2015, a key feature of the program is being delayed another year: a provision allowing employees of businesses that bought SHOP insurance to choose their own plans through the website. This would allow workers to pay higher monthly premiums in order to have lower out-of-pocket costs, and vice-versa. With the delay, businesses that buy SHOP insurance will also be deciding on specifics of workers' health plans.

Rue said the ACA's focus on having consumers choose their own plans through an insurance exchange or marketplace has had a broader impact.

'The exchange may have one carrier with eight or nine different plan designs, or it could have two or three carriers with three or plans each,' he noted.

The ACA's consumer-oriented approach is making insurance more like other retail businesses. This presents a challenge to insurers, since consumers expect fast customer service and instant answers, Petrizzi said.

'They're used to the Amazon way of doing business, so I click on something and the next day or two days later, it's brought to my front door,' Petrizzi said, adding that insurers have traditionally worked within longer time frames.

Panel moderator Christine Stearns, vice president of health and legal affairs for the New Jersey Business & Industry Association, said she has heard from smaller businesses that they are increasingly seeing plans that require workers to pay a larger deductible - which is an amount that a worker must pay for healthcare services before insurance kicks in.

Petrizzi said many individuals who bought high-deductible plans through the marketplace didn't know what they bought.

'When they actually go into the doctor's office and they actually have to pay the full amount, that causes some folks to be upset because they didn't fully understand,' Petrizzi said.

Rue noted that businesses can use insurance plans with deductibles as an incentive -- reimbursing workers for out-of-pocket costs if they participate in wellness programs.

Petrizzi pointed out another model encouraged by the ACA that is affecting insurance-plan designs: Accountable Care Organizations (ACOs). These organizations, which are often built around a hospital system, can include lower out-of-pocket costs if they use providers in the ACO. The ACOs also offer financial incentives for providers if they meet goals for providing high-quality health outcomes while maintaining lower costs.

An audience member asked if the increase in out-of-pocket costs is leading consumers to put off medical care. Petrizzi and Rue said it's too early to tell, but Rue noted that an ACA provision that provides free preventive care should encourage consumers to continue to visit the doctor to at least assess their health.