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Smart Benefits: 5 Reasons Why Healthcare Reform Hurts Workers

Monday, February 25, 2013

 

As a benefit advisor, I spend most of my time lately interpreting for executives how the next stages of healthcare reform will impact their business and employees. And the biggest question they have following these conversations is whether they’ll continue to offer health coverage to their employees.

Stopping coverage is a life-altering decision for employees, and no employer wants to have to make it. Unfortunately, many employers stand to gain if they do: a large employer who pays the $2,000 per employee fine for not offering coverage will likely come out way ahead (despite losing tax deductions) compared to one who contributes much more than this for coverage.

Since the law creates an incentive for many employers to drop coverage, many employees will be on the losing side of healthcare reform. Here’s why:

Not all employees will receive subsidies for purchasing through the Exchange. Employees who don’t have qualifying household income (between 133-400% of Federal Poverty Table Guidelines) will not receive premium assistance. Nor will they have an employer helping them with costs any longer. They will now have to pay their share plus the employer’s share toward coverage –likely thousands more in out-of-pocket costs per year.

There’s no guarantee employers will give pay raises to bridge the difference. Once employees realize how much more will come out of their pockets without the employer’s contribution, they may expect the employer to make up the difference by providing a raise in pay. But that won’t necessarily be the case since the employer is not obligated to provide an increase to help employees cover their costs.

Employees will lose employer deductible contributions. Employers often offer employees high deductible plans to bring down premium costs, but reimburse or pay for a portion or all of the deductible expenses. But health plans offered through public Exchanges will not reimburse deductibles, so employees could be on the hook for higher premium expenses and higher deductible expenses.

Employees will be on their own to make coverage decisions. Employers who stop offering coverage will no longer provide employees health plan information through open enrollment meetings, benefit booklets and/or other support. These employees will need to get educated about their options and purchase a plan on their own through the public Exchanges.

Healthcare costs will still increase. Instead of employers negotiating costs and plan designs with insurers for employees, employees will purchase pre-determined plans available for sale through the Exchange, giving them less protection against cost increases.

The bottom line? Working employees who make more than federal poverty guidelines and whose employers stop offering coverage will lose – through no fault of their own.  

Amy Gallagher has over 19 years of healthcare industry experience. As Vice President at Cornerstone Group, she advises large employers on long-term cost-containment strategies, consumer-driven solutions and results-driven wellness programs. Amy speaks regularly on a variety of healthcare-related topics, is a member of local organizations like the Rhode Island Business Group on Health, HRM-RI, SHRM, WELCOA, and the Rhode Island Business Healthcare Advisory Council, and participates in the Lieutenant Governor’s Health Benefits Exchange work group of the Health Care Reform Commission.

 

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