The ACA and Legal Practices (#15) / Large employers make 2015 coverage decisions

October 27, 2014

health-care-lawThis is installment #15 in a series of blog postings on the Affordable Care Act (ACA) and legal practices.

Large employers are deciding how to respond to the ACA coverage mandate for 2015.

After a one-year postponement, companies are now facing important choices: whether to offer group health plans that provide benefits similar to those included as Essential Health Benefits (EHBs) under the Qualified Health Plans (QHPs) being sold on the Health Benefit Exchanges; whether to provide “minimum essential coverage” as now defined by federal agencies; or whether to pay a penalty for lack of coverage.

They also have to decide whether to try to reduce costs by increasing the use of part-time workers (working fewer than 30 hours per week) or by encouraging lower-income employees to sign up for expanded Medicaid (in states where available).

As described in a recent Wall Street Journal article, all of these options are being considered for 2015. (Anna Wilde Mathews and Julie Jargon, “Firms Try To Escape Health Penalties”, October 22, 2014, p. A1).

Under regulations that are now in effect, companies must provide “minimum essential coverage” under an “eligible employer-sponsored plan”, which has been defined as any “plan or coverage offered in the small or large group market within a state”.

All policies must meet the original ACA requirements of no caps on annual or lifetime benefits; coverage without consideration of pre-existing conditions; and free preventive care.

Policies must also be affordable (with employee payments of less than 9.5 percent of  income) and cover at least 60 percent of average expected costs under the plan.

During the early years of implementation, it was typically envisioned that the intent of the ACA was to extend the requirements for all plans being sold to require the QHP-like coverage of services. Everyone with insurance would have “good” coverage. However, political pressure has caused a major shift away from this concept.

More recent regulations have defined “minimum essential coverage” to basically eliminate any further requirements for the services that must be covered by all policies.

Group plans that provide broad general health care insurance have been common for decades among leading companies, and many may continue. Employers are often committed to coverage that is similar to QHP offerings.

However, under the new requirements, the least expensive coverage may be associated with “skinny” plans that cover preventive care only. Although not in keeping with the intent of the ACA, these plans may meet the stated requirements.

If companies choose to offer such limited plans, employees may choose to seek alternative QHP coverage through an Exchange, with the potential for a premium subsidy. In such cases, companies must then pay a different penalty for offering inadequate coverage.

This penalty is levied if employees decide that company coverage is inadequate and seek subsidized coverage—and indicates the desire by the original ACA designers to push companies toward QHP-like plans.

According to the article cited above, some companies are responding to this situation by reducing the number of employees that they have to cover—by employing more part-time workers and encouraging workers to sign up for expanded Medicaid. Other companies are moving toward low-cost “skinny” plans.

At the same time, many large employers continue to be committed to group coverage that is similar to QHP offerings.

It is yet to be determined how important the cost-avoidance efforts by companies will be in 2015. These efforts may be a minor or major factor in determining how large-employer coverage evolves under the ACA. Attorneys may remain alert for further trends as they develop, in order to provide current advice to both companies and employees.

More information about implementation of the Affordable Care Act and associated legal practice issues may be found in recent books on the ACA and on the health care system, other postings to this blog, and on the ACA Blog, also written by the author of this series.