Employer Penalty for Sending Employees to Exchange

[Yagents]

They are out of the business when it comes to taking on risk of inflating premiums by changing to a fixed stipend.

Also eliminate risk of choosing wrong plan and carrier for the employee through menu of options.

 

[Happy Texan]

So what fiduciary liability does the employer have?
If they merely pay premiums and they do not endorse the policies and are not involved in the selection, how is this an employer sponsored plan

Are the policies portable at the same terms when the employee leaves, other than not being able to get the stipend ?
Don Levit

 

[Ann H]

So what fiduciary liability does the employer have?
If they merely pay premiums and they do not endorse the policies and are not involved in the selection, how is this an employer sponsored plan

Are the policies portable at the same terms when the employee leaves, other than not being able to get the stipend ?
Don Levit

Nothing changes with the employer responsibility, nor the employee's portability (COBRA) rights. This is nothing but a group plan with multiple benefit options. It changes from "Defined Benefit" where the employer dictates the benefit plan & network choice, to "Defined Contribution" where the employer offers multiple benefit plans and networks for employee choice, but dictates a fixed dollar amount that the employer will contribute toward the cost, no matter which benefit plan the employee chooses.

 

[Happy Texan]

Thanks, Ann.
I am not familiar with the nuances of the private exchanges.
So the value added for the employee is they get more insurers from which to select.
The net cost may be more for them now than before, or maybe not.
If employees can switch plans and/or insurers every year, the employees may come out ahead over time, but what about the adverse selection for the insurers?
If the insurers have no minimum participation rates from the employees (while the employer overall meets the minimum participation requirements), I can foresee potential trouble ahead for the insurers.
Don Levit

 

[Ann H]

Thanks, Ann.
I am not familiar with the nuances of the private exchanges.
So the value added for the employee is they get more insurers from which to select.
The net cost may be more for them now than before, or maybe not.
If employees can switch plans and/or insurers every year, the employees may come out ahead over time, but what about the adverse selection for the insurers?
If the insurers have no minimum participation rates from the employees (while the employer overall meets the minimum participation requirements), I can foresee potential trouble ahead for the insurers.
Don Levit

Private exchanges are usually only available for mega-size groups, so the insurance companies are okay with it.

Actually, in dual choice situations, we have had a manageable adverse selection situation for years. The young and healthy pick the plan with the lowest net premium, older and financially stable employees picked an HSA, and sicker employees picked the highest benefit plan no matter how high the premium was. Spread out over thousands of enrollees in the private exchanges, a semblance of balance emerges.

Private exchange is just a sexy way of saying "multi-choice" with an employer's fixed dollar contribution to whatever plan the employee chooses. Its popularity is in competing with the govt's "exchange" idea, and in moving to a defined contribution model instead of defined benefit. Otherwise, it is just group insurance with multiple choices.

 

[somarco]

Carriers were forced to adapt participation requirements several years ago when HMO's moved into the area. They were granted authority to solicit a group and carve out as many or as few employees as they could get.

Didn't take long for the carriers to see the HMO's were cherry picking with their (then) low rates and rich benefits.

Carriers got wise and started offering "HMO mirror" plans but with broader networks. In doing so they were able to draw back in some of those who left for the HMO plan.

As Ann mentioned, multiple option plans have existed for years but mostly in the mega groups. Carriers have modified that somewhat and some will allow dual choice in groups as small as 50.

 

[AllenChicago]

Many employers had thought they could shift health costs to the government by sending their employees to a health insurance exchange with a tax-free contribution of cash to help pay premiums, but the Obama administration has squelched the idea in a new ruling. Such arrangements do not satisfy the health care law, the administration said, and employers may be subject to a tax penalty of $100 a day — or $36,500 a year — for each employee who goes into the individual marketplace.

http://www.nytimes.com/2014/05/26/u...mping-workers-into-health-exchanges.html?_r=0

June 14, 2015

FYI...Government enforcement of this ACA Rule begins on June 30th.

"Small employers who are paying for individual policies for their employees on a pre-tax basis have until June 30th to make changes. If they do not, they may face stiff penalties.

Some small employers have found that group insurance costs were too high for their budgets. Individual policy premiums have historically been lower than group. As a result, small employers would agree to pay the employees' individual/family policy premiums on a pre-tax basis for the employees. This was often accomplished through a special account call HRA (Health Reimbursement Account) or a FSA (Flexible Spending Account).

The ACA (Affordable Care Act, aka Obamacare) contains a provision that prohibits this practice. Non-compliance could subject the employers to fines of up to $100 per day, per employee!"

Article: June 30 Small Employer Deadline Is Closing in | anewscafe.com

 

[Sherota1]

Health benefit administrators still looking for legal alternatives for employers to replace group health plans with individual plans. Interesting article.

Administrators: Employers CAN still help workers buy individual policies.

 

[RayNY]

Sherota,

That's the same tactic we know has been allowed since day 1.

Drop coverage, send them to the individual market, and give them a raise to compensate. Totally fine as long as the raise isn't 1. dependent on obtaining insurance, 2. Revoked for not having insurance.