The debate over repealing or reforming the Affordable Care Act (ACA) will have immediate consequences for individual market policyholders and Medicaid beneficiaries. But large employers also are bracing for potential fallout in their own employee benefit plans. Here’s a look at six health reform issues that could impact employers and the coverage they offer to employees:
(1) Caps on employee benefits: The idea of capping employer-sponsored health benefits isn’t included in the American Health Care Act (AHCA), the House Republican proposal to replace the ACA, but it was part of an early draft. Steve Wojcik, vice president of public policy at the National Business Group on Health, says his members were happy to see the AHCA didn’t include a change in the tax-favored status of employees’ health benefits. But some employers are concerned that changes to the way employee benefits are taxed could wind up in final legislation, benefits consultants tell HPW. While in the House, HHS Sec. Tom Price, M.D. (R-Ga.) proposed capping the tax deductibility of employer-sponsored coverage at $8,000 per worker ($20,000 for families).
(2) Reporting requirements: The AHCA would eliminate penalties tied to the individual mandate and the employer mandate, and it appears employers wouldn’t need to abide by the arduous reporting requirements of the ACA. Instead, reporting would likely be limited to a box added to W-2 income tax forms.
Tracy Watts, senior partner and national leader for health reform at Mercer, says employers would be happy to see that requirement go away. “For the past seven years, employers have been jumping through hoops to comply with the ACA…just to continue to cover the same people they’ve been covering all along,” she says.
Julie Stone, a national health care practice leader at Willis Towers Watson, agrees and says the ACA’s reporting requirements are administratively burdensome and time consuming. Adam Solander, a member of the life sciences practice at the law firm Epstein Becker Green, notes that employers have spent considerable amounts of money over the years complying with the ACA’s reporting requirements. He says they want certainty about what will be required. If a Republican replacement bill is enacted, employers will probably need to report information about the coverage they offer to workers so that tax-credit eligibility can be determined. And that will require additional system changes, he says.
(3) Coverage for adult children to age 26: The ability for parents to extend health coverage to adult children up to age 26 is an ACA feature supported by Democratic and Republican lawmakers. But 22% of employers say they would lower that age limit if allowed to under an ACA replacement, according to a survey of 666 mid-sized and large employers conducted by Willis Towers Watson in January. “One of the myths out there is that adult children under 26 don’t cost anything. But there are costs associated with accidental injuries, behavioral health, substance abuse and maternity. It is not a zero-cost population,” says Stone.
(4) Age-rating bands: Allowing carriers to charge older members five times what they charge their youngest members — rather than three times as allowed under the ACA — would mean lower costs for young adults, but much bigger premiums for older participants. That could keep people from retiring early. “You don’t want benefits to be the deciding factor in how people live their lives,” says James Gelfand, senior vice president of health policy for the ERISA Industry Committee. “Unwinding the age bands is a gambit on behalf of lawmakers to stabilize the individual market. And so far, in all the time I’ve been in health policy, no effort to stabilize the individual market has ever been successful.” Watts notes there has been a decline in employers offering pre-65 retiree coverage because it was believed the ACA would create affordable insurance options in the individual market.
(5) Expanded HSAs: Several Republican proposals call for expanded health savings accounts, but HSAs have been expanding rapidly among employers without new legislation or regulatory guidance. “Employers are moving down that path on their own. It feels like [Congress] is playing catch-up to where employers are on this,” Stone says, adding that further expansion will be received favorably. But she notes that low-income people might not be willing or able to contribute to an HSA, and employers know they need to spend more time educating their workforce on how to effectively use the accounts, she adds.
While HSAs won’t work well for everyone, they are a powerful tool for some employee populations because it gives them a financial incentive to become better shoppers of health care, Gelfand says. For those people, doubling the annual contribution limit “could be a game changer” because it would let new members save enough in pre-tax dollars to cover the full deductible. He suggests legislation could go further and allow prescription drugs to be covered outside of the annual deductible. That, he says, could keep members out of the hospital. Moreover, prescription drugs considered preventive could be covered with first dollar coverage. One of the problems with HSAs, and the high-deductible health plans (HDHPs) that they must be paired with, is they limit what can be paid for outside of the deductible. Along with expanding contribution limits for HSAs, Watts says employers would like their workers to be able to use the accounts to pay for telehealth visits outside of the deductible. More than half of large employers and 70% of jumbo employers offer access to telehealth. Telehealth visits typically cost about $50. Some employers make the first visit free or charge a $20 copay, she says.
(6) Freedom to innovate: Beyond cost, employers would like more freedom to design health benefits that are better suited to the needs of their workers. Employers see the ACA as being too prescriptive about the benefits that need to be covered, Gelfand says. “You have very different groups of workers who all had to be offered very similar types of plans. Large employers,” he adds, “are at the forefront of innovation.