Will Employers Drop Coverage?

[Yagents]

I already have 5-6 small employers under 50 EE's lined up for the exchange, who will be dropping their current group coverage. Check out this article, the number will be much higher than people are projecting:

Health insurance in America: The insured and the unsure | The Economist

 

[taterpeeler]

in my view every single employer under 50 ee will dump coverage by 2017. if they don't they will be stupid businessmen. its a biz decision, toss a raise to the ee and hook arse to the indy market.... its just a biz move, period.

larger group, like my wife where a small, but larger than you think percentage of people are contractors(wall street) will move to more and more contractors with higher wages and no bennies by 2016 and very soon there will be no group coverage...

once the contracts expire on the munnie (local govt employees like isd's and city ee) they will bounce to no insurance as well... right now they are locked into the union contracts but when they expire its bye bye and off to indy market..... there will be upwards of 200 million or more in the indy market... just watch

 

[Ann H]

Tater was smart to answer the question with a long-term answer. Yes, by 2017 the small group market will most likely have melted into the IFP market.

In the meantime, especially in the first few months of 2014, probably not. If the exchanges are running by 10/1/2013 (LOL), I see most businesses taking the time to make a wise decision. I haven't researched this enough, but I heard a rumor that group plans will be staggered, meaning they must comply with Obamacare on the first renewal FOLLOWING 1/1/2014. If that's so, then they have time to see what kind of an opportunity (or mess) is available to them in the new markets (exchange, non-exchange IFP, exchange SHOP for small groups, and non-exchange group).

After analyzing their situation, will they drop the group plan?:

* YES if most employees will be well funded by subsidies.
* MAYBE if most employees will not be well funded by subsidies.
* YES if the employer's profit margin is very tight and they want out of the health insurance mess.
* NO if they want to hire and retain talent who expect great benefits.
* NO or MAYBE if the exchange gets the reputation of being lower-class insurance because of narrow networks and HMO type restrictions of PCP gatekeeper, pre-certs, referrals to specialists, etc. This will especially apply to groups that hire people who tend to expect good benefits on the jobs available in their career.
* YES if they just want to give their employees cash and let the employees choose.
* NO if the money they give employees to shop is taxable, and that becomes a big issue for their employees' particular situation.
* NO (probably NO) if they qualify for the small business tax credit. When combined with the fact that the group premium is tax-deductible to the employer and non-taxed to the employee, this may make the net cost lower than sending employees out to purchase their own coverage.
* NO if carriers promote the "private exchange" concept like UHC recently has, which allows the employer to keep the group concept and use tax-free dollars to give their employees a huge menu of options. That menu of options will probably have cheaper plans with narrow networks as well as richer plans. Unless the group has mostly employees who would get rich subsidies, this concept is better than HHS's new "marketplace" (i.e. exchange).
* YES if so many employees leave the group plan that it causes a participation issue.
* NO if insurance companies design options outside the exchange and/or with group products that it becomes more attractive to keep a group plan.
* NO if they are anywhere near 50 FTE's
* MAYBE if they are around 25+ employees
* MAYBE if they want to buy group insurance through the SHOP exchange. Remember, that is a part of the exchange that is for small businesses to buy group insurance yet still allow their employees to pick any of the products available to them in that market. In this way, the employer can provide a contribution (most likely still tax-deductible).​

For the 50+ FTE market:

* YES if paying $2000 per f/t employee is less costly than the premium they have been paying for health insurance (nationally, the average ER contribution for family coverage is about $15,000) in the 50+ market.
* NO if the above situation is true, but their industry standard requires good benefits to attract and maintain talent.
* NO if they have unions, govt bids, or anything that requires them to keep high level benefits.
* YES if mostly they have lower-paid employees (like restuarants, hotels, janitorial, cashiers, etc.). Or else they will move those employees to part-time so they are not eligible for the group plan and thereby escape both the $2,000 penalty and the $3,000 penalty.
* NO if there is no penalty because of the exception of the first 30 who go to the exchange.​

and on and on.....

I do both group and individual, and after a relatively brief review of the situations for most of my groups, I expect about 50% of them to either drop their group plan or make serious adjustments (like moving people to part-time). Employer-groups are just in various situations. For instance, I have a flooring company with 9 employees. Most employees will get a subsidy, except the owners the top sales person. The owners have IFP right now, and the group plan is only in effect because 2 of those employees would have been declined on IFP, and a 3rd wanted maternity benefits. So they clearly will drop the group plan. There are a lot of businesses in exactly that situation. However...... I have a civil engineering company that currently pays 85% of the premium for full-family coverage, and carriers dental, disability, life, vision, EAP, you name it. They have less than 50 employees, but there's no way they will drop the group plan, or else the best civil engineers and support staff won't work there. I have a group of 45 that is an Electrical District, and they expect union-level benefits without the union. I have a group of 27 who are high-level IT Techs, and these well-educated employees won't apply for a job without those types of benefits.

So, the next 2 years will be a roller coaster, then in year 3-4 it will implode barring any major changes in the law and the market.

Good news in all of this for those of you who do IFP is that your open enrollment from 10/1/2013 to 3/31/2014 will probably actually be extended by qualifying events if groups start making major decisions at their renewal time rather than doing all of this 1/1/2014.

 

[taterpeeler]

ann did bill tell you I received some info as it pertains to a pilot hcr compliant plan just introduced... if not call me

 

[VolAgent]

Here is my question. Why is everyone so certain employers will be giving raises to the employees when they drop group coverage?

I really only see two groups that might. Small businesses where the employer interacts daily with rank and file employees and has some level of connection to them and businesses that have highly trained employees they need to retain. The second group is probably also more likely to keep group coverage anyway. The rest of the employers that drop group coverage, I see all that money flowing up to the C-level and to shareholders.

But please, prove me wrong.

 

[Ann H]

Here is my question. Why is everyone so certain employers will be giving raises to the employees when they drop group coverage?

I really only see two groups that might. Small businesses where the employer interacts daily with rank and file employees and has some level of connection to them and businesses that have highly trained employees they need to retain. The second group is probably also more likely to keep group coverage anyway. The rest of the employers that drop group coverage, I see all that money flowing up to the C-level and to shareholders.

But please, prove me wrong.

You are probably right. Most of my groups fall into one of those 2 categories, though.

Arizona is a Mom & Pop state with the huge majority of our businesses employing 20 or less. Actually 10 employees is very common. And then, I have some groups that need to attract & maintain talent. I don't have many groups in the middle.

Even though those with 10 employees often have a personal or social connection with employees (including hiring family members), they still might not give their employees a raise when they dump the group health insurance!

 

[ABC]

The small groups that I see dropping coverage are the low wage category. The lower the wage the higher the claims and higher rates.

A company with 15 employee with an avg wage of $35k will drop. The owner will be doing his employees a favor by allowing the to apply for subsidies. These will end up being your blue collar industries that have struggled with benefits to the point they have very high deductibles.

Now a company with 15 employees and the avg wage is $75k. Is a different story. These employers are trying to keep their talent. These groups will weigh all the options and if their industry continues to provide benefits, I think they will keep a plan in place. This would be white collar or some type of highly skilled labor.

To be honest, I could see some larger manufacturing groups dropping coverage. They have 200 employee and the group is laying out close to $2 million a year on a self funded health plan, why not drop and pay the $400k and call it a day. Most of the rank in file will qualify for subsidies. $1.6 million in saving is going to look very good to most of these companies owners.

Once community rates are established on fully insured plans, then owners will have more information to make a decision.

 

[VolAgent]

Here is the other question I haven't seen answered.

Is it a tax, a fine or a penalty to the employer for not having coverage? If it is a tax, it will be deductible and you can be sure they will be dropping plans left and right. If it is a fine or penalty I don't believe they can deduct it, but the savings may be so big the company still comes out ahead by dropping the plan.

 

[Ann H]

Here is the other question I haven't seen answered.

Is it a tax, a fine or a penalty to the employer for not having coverage? If it is a tax, it will be deductible and you can be sure they will be dropping plans left and right. If it is a fine or penalty I don't believe they can deduct it, but the savings may be so big the company still comes out ahead by dropping the plan.

It's my understanding that it is a penalty and not tax-deductible.

The small groups that I see dropping coverage are the low wage category. The lower the wage the higher the claims and higher rates.

A company with 15 employee with an avg wage of $35k will drop. The owner will be doing his employees a favor by allowing the to apply for subsidies. These will end up being your blue collar industries that have struggled with benefits to the point they have very high deductibles.

Agreed. When an employer in that type of situation sees the price to upgrade to at least the Bronze level, plus added premium for GI & Community Rating, they will drop the plan. Even the small business tax credit and premium tax-deduction isn't big enough to make a difference for this type of group.

To be honest, I could see some larger manufacturing groups dropping coverage. They have 200 employee and the group is laying out close to $2 million a year on a self funded health plan, why not drop and pay the $400k and call it a day. Most of the rank in file will qualify for subsidies. $1.6 million in saving is going to look very good to most of these companies owners.

I think this may be the big shocker nationally. There's a reason why big employers are already dropping retiree coverage, and going to private exchanges, and calculating the cost of penalties vs the cost of insurance. It's business. I expect some very large businesses to drop coverage. Retailers employ mostly cashiers and inventory stockers - I think they may drop the group plan. As you said, manufacturers probably will.

 

[insurehound]

I am on the fence about the 'keeping group coverage to hire and keep good employees'. Maybe, maybe not. Just depends on how the plans outside of the Exchange will look. If there's enough reason to go in that direction (like larger networks) then I can see it. Also some employees who are more educated and are highly paid may prefer to shop on their own. They know what they want and find that a Group plan (and that broker) is in the way of that. It all depends I guess.

I totally agree that IFP market will be where's it at. That potentially means more work and less $. How in the world will a broker be able to consult with hundreds of single purchasers and earn enough money to make it worthwhile? Especially in a short OE period? Perhaps Tater is right, think more on the lines with Med Supps which I know some agents do very well with.

Lastly, big picture. What happens now in regards to Groups keeping their coverage and agents receiving fair compensation is a short term view. I believe ObamaCare is just the beginning to Single Payer. In 5 to 7 years, then what? You see the two major players (insurance Companies & The Government) are willing to work together. The insurance companies would much rather administrate the risk then take the risk and the Government wants control.