Health Care Reform Is Transforming Employer Benefits

The ACA and potential changes to it are driving employers to reconsider the design and role of health care benefits.

As provisions of the Patient Protection and Affordable Care Act (ACA) have rolled out over the past couple of years, many companies are making substantial changes to their health benefit offerings, according to Paul Goldbeck, senior consultant at Towers Watson.

Goldbeck told attendees of the 44th Annual Retirement & Benefits Management Seminar, hosted by the Darla Moore School of Business at the University of South Carolina, and co-sponsored by PLANSPONSOR, that the individual mandate and provision for adult children has resulted in additional employees signing up for employer plans, and new taxes and fees have also increased costs for employers. In addition, the ACA added administrative complexity with new eligibility and reporting requirements as well as rules to coordinate out of pocket maximums among pharmacy benefit and health plans.

“All of this leads employers to consider whether they want to take a different approach to health benefits,” Goldbeck said. Many have increased employee cost-sharing and/or moved to private exchanges. He added that the pace of change may accelerate as the 2018 excise tax on high-cost health plans approaches. Towers Watson estimates that about 48% of large companies will incur the excise tax in 2018.

If employers exceed the excise tax thresholds in 2018 or 2019, benefit reductions are likely, Goldbeck contended. Then, the question is, does the company get a windfall, or should there be a redistribution of the savings to other benefits?

By 2020, health care benefits may become less of a differentiator as more employers gravitate towards similar offerings. If companies have used health benefits to attract employees, they’ll have to think about new ways to stay ahead of their competition, Goldbeck said.

He acknowledged that the law is still subject to change and ongoing guidance. The Supreme Court will make a decision in King v. Burwell that could throw a wrench in the employer mandate if it is determined that individuals in federally run exchanges are not entitled to subsidies. And, Goldbeck said he thinks there is a reasonable possibility the definition of full-time employee will be changed to those who work 40 hours a week.

He added that likely discussions among lawmakers include repealing the employer and/or individual mandate, repealing the medical device excise tax and repealing the automatic enrollment mandate. However, coverage for children up to age 26 and protection for pre-existing conditions will not go away.

Goldbeck said there are potential obstacles to ACA changes. “Even though the Senate switched to Republican control, they still don’t have enough votes to veto anything, and they disagree among themselves on an approach to changing the law,” he stated. “In addition, they have other big legislation to worry about, such as immigration.”

Health care reform is a transformational moment leading employers to consider whether to build or buy health benefits and how it affects total rewards and workforce planning, Goldbeck concluded.