Open enrollment season for employee benefits is here. Over the next two months, employers will circulate employee benefit program information for the following year. In general, employees should expect to see higher costs for health coverage, such as higher deductibles, copayments and higher monthly premiums for the employee portion of health insurance coverage. Employees may also see other changes – employers are likely to encourage the use of high deductible health plans combined with tax-favored health reimbursement or health savings accounts. Health plans may also reduce the number of providers in their health network in order to reduce costs or significantly increase fees for out-of-network services. Health plans and employers will encourage healthy behaviors and there may be financial penalties for unhealthy lifestyle choices. Employees should always carefully review their health coverage options when making these choices. In the coming years, choices are likely to be less appealing.
Under provisions of the Patient Protection and Affordable Care Act (the “Affordable Care Act”), beginning in 2014, many employers that currently offer health insurance may no longer do so. The Affordable Care Act does not require employers to offer health insurance coverage. Instead, it penalizes large employers that do not offer minimum essential coverage or coverage that is not considered affordable. In general, a large employer is defined as one having at least 50 full-time employees during the preceding calendar year, where a full-time employee is one working 30 hours or more a week.
A large employer that does not offer any coverage will be subject to a monthly penalty equal to the number of full-time employees minus 30 multiplied by 1/12 of $2,000. The penalty will apply if any full-time employee receives a credit to purchase health insurance through an insurance exchange. Such credits will be offered to relatively low wage workers. If health coverage is offered and at least one full-time employee obtains a premium credit, the penalty is the lesser of the amount calculated as if no coverage is offered or the number of full-time employees who actually receive credits for exchange coverage multiplied by $3,000 (again prorated monthly).
With the average annual cost of family coverage approaching $15,000, many employers are reviewing these provisions and coming to the conclusion that they will benefit financially by paying the penalties and reducing or eliminating current employee insurance coverage. As a result, many individuals currently receiving employer sponsored health insurance coverage will move to government mandated market exchange insurance coverage. Individuals are required to purchase health insurance under the Affordable Care Act. Is this the change you want?