How Obamacare Is Changing Your Health Benefits
Ready for another "cliff'"
On the first day of 2014, the Patient Protection and Affordable Care Act, or Obamacare, starts in earnest. That's when the act's two most notable provisions, mandatory coverage and the state or federally administered health-insurance exchanges, finally take effect, nearly four years after the act was signed into law.
Long before next January, employers will begin to prepare their employees for the changes ahead. Expect your work email inbox to fill in the next few months with overviews, pdf manuals, friendly nudges, and red exclamation points about what the health-care act means to your benefit package.
"This year's open enrollment was calm before the storm," says Randall Abbott, a senior consultant at the personal services company, Towers Watson.
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Take a breath and remember that most employers aren't preparing to make wholesale changes to how or what they offer to their employees. In a survey of employers conducted by Towers Watson last summer, 71 percent said they planned to continue offering health benefits, and 63 percent thought it was less than likely that they'd substantially reduce the value of their employees' benefits.
Also remember that many changes have been sneaking into your employer's health-care offerings for years — particularly those designed to save the corporation money by shifting costs to you. Workers have become used to getting vaccinations at the office, higher co-pays and higher deductibles and other cost-saving options, even if they are not always sure what they mean.
Nor is every low-cost plan necessarily a bad deal. Some cost-conscious plans mean more convenient access to providers and better medical outcomes, and may keep you from paying for less healthy employees' medical problems.
But to negotiate the changes, it helps to keep in mind that come Jan. 1 2018, employers will be subject to an excise tax on plans that cost the company $10,200 per individual employee and $27,500 for families. That's the true "health-care cliff," and companies' efforts to avoid paying it is what will drive benefits for years to come.
Here's what to look for this year:
Expect a host of communications from Human Resources about the options many people will have under Obamacare next year. Employers are required by the health-care act to inform their employees about the new state (or federal) exchanges, and the subsidies available to low-wage workers.
Whether you need to wade through the corporate-speak to grasp just how the exchanges work depends on where you work. Many small businesses will let their workers shop for insurance in the exchanges because they allow the boss to offload the headaches and time of administering health insurance onto the employee and the exchange. And those employees may be better off in the exchanges, where they will almost certainly get more choice and may pay less than they do now for coverage.
Large companies will tend to devise their own exchanges, as companies like Sears and Darden Restaurants have already done, that offer multiple affordable options. In most cases, if you're one of these larger firms that offer an affordable health plan, you won't be eligible for your state's exchange.
Still, it's worth examining each document, and triage according to how each applies to your situation. Anything that looks irrelevant should still be retained in a separate file; you never know what might become pertinent later.
Employers will continue a push this year toward account-based health plans, also known as consumer-driven health plans. These plans come with low premiums, but high deductibles—patients are typically asked to pay the first $3,000 to $5,000 of each year's medical expenses themselves. These plans often add a health-savings account where the employee save pre-tax dollars to pay for those expenses.
Though often the employer will add money to the account as well as part of the employee's benefits, the point of these consumer-driven plans, as their name indicates, is to introduce market forces to our inefficient, price-bloated medical system.
"It's a step toward giving people more control," says Paul Fronstin, head of health-benefits research at the Employee Benefit Research Institute. "They say, 'We'll give you this pot of money and give you some exposure to the health care market.'"
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The popularity of these plans is growing. Some 10 percent of the U.S. working population was enrolled in one of these plans in 2012, up from 7 percent the year before, according to a study by EBRI.
Critics of the account-based plans complain that the account-based plans reward healthier employees while putting those who are poorer and suffer from chronic diseases at risk. This is because the emphasis in these plans tends to be on preventative medicine. "Well visits tend to be covered but not pharmaceuticals, and those who can't afford to pay out of pocket stop taking their pills," says Elise Gould, director of health policy research at the Economic Policy Institute.
(EBRI's report does show that consumer driven plans are adopted most by healthier employees.)
There are other problems with the logic behind the market-incentive plans: while you may choose to go to the doctor less often if you are paying for each visit yourself, and thereby cut the overall cost of your health care, "you can't negotiate your price," notes Fronstin.
Don't dismiss the account-based plans out-of-hand, however. Do the math—or ask your H.R. officer to do it with you-- to determine how much the plan really costs, the tax savings involved, and how your family uses health care. Fronstin says the low premium, combined with a firm's contribution, may be cheaper for a family that uses a lot of health care money, despite the high deductible.
This year, look for health care to be delivered via phone or computer, or to your desk: "telemedicine," "e-visits," and onsite clinics will be increasingly replacing traditional doctor's appointments. And "doctor's orders" — recommendations about how to improve your health — will increasingly be replaced by company incentives to quit smoking, lower your cholesterol or blood sugar.
Health plans will also begin to reward workers who take care of their diabetes, asthma or hypertension by eliminating cost-sharing for doctor's appointments and medicines related to their condition. "Benefit design is going to become more sophisticated," says Fronstin. "It may get to point that cost sharing is different depending on the quality of the provider." A worker may have a lower co-pay, for instance, for having her baby at a hospital whose maternity department has a great track record.
Some workers may bridle at letting their health-insurance plan dictate where they get their health care, much less what they put in their mouths. But improving the health of the company's workforce not only saves your company money; it will likely keep your premiums lower in the long run, and by paying you to quit smoking or join a gym, return the savings to you right away.
Most of these innovations are aimed at slowing your company's health-care costs, not lowering them outright. The cost of providing health care will rise by five to seven percent this year, with some individual companies looking at percentage increases still in the double digits.
Given the skyrocketing costs of the past decade, that's good news. The bad news is that progress for the foreseeable future is going to come at employees' expense, not employers'.