On the eve of the ACA, producers consider passing on costs to employees

One strategy to cut healthcare costs in the ACA era is to pass on more cost to employees, but it’s a plan with mixed benefits.

Life & Health

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It’s the dawn of a new age in healthcare. The Affordable Care Act will be in (almost) full swing come Jan. 1, and—love it or hate it—most small and midsize businesses are anticipating increased costs as a result. Producers who want to help commercial clients continue to offer affordable coverage will need some savvy strategies up their sleeves, and already, one is at the forefront: passing on those costs to employees.

Through higher worker premium contributions, high-deductible plans and spousal exemptions, producers can help clients make ends meet in 2014 as more employees join company-offered healthcare plans.

Without such cost-cutting measures, the problem could be a dire one. A Towers Watson survey confirms that about half of the usual 15% to 20% of eligible workers who skip out on employer insurance will sign up next year, accounting for an enrollment increase of 7% to 8%. That translates to a cost increase of roughly 5%, the benefits consulting firm said.

Fortunately, there are strategies to lower these costs.

Spousal carve-outs are an effective way to lessen an employer’s healthcare bill, said Helen Darling, president of the National Business Group on Health. As such, it may be one avenue producers take to lower healthcare costs for their clients.

“Having either a surcharge for someone who has a spouse, or cutting coverage for someone who has the option of another [healthcare] plan is one way to help pay for the extra cost,” Darling said. “Adults cost quite a lot. Children mostly don’t.”

High-deductible plans are also a popular cost-cutting method. Premiums fall for employees, but with higher deductibles, workers end up paying very little for healthy employees.

Or, producers can recommend introducing higher worker premium contributions, requiring workers to pay more out of their salary for health coverage.

However, producers need to be careful. An attractive benefits plan is one reason talented employees choose to join a particular company, as a quarter of all employees have less than $500 available to pay out-of-pocket health expenses, according to a 2013 Aflac report.

“More than 60% of employees are likely to accept a job with lower pay but better benefits,” said Bradley Knox of Aflac. “Another 49% of workers said improving their benefits package is the one thing their employer could do to keep them in their current job. It adds value for the employee as well as the employer.”

Darling defends the practice of passing on costs to employees, however, saying that employers “have to continue to find ways to control costs.”

“Some people think it’s fair because all the costs are added up and divided among the employees,” she said. “When costs go up, everyone pays for it. Anything that drives up costs is going to affect everybody, so this is one way to make sure everyone helps for with that.”

 

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