With the passage of the Affordable Care Act (ACA), many employers are working to ensure that their health plans meet the standards for compliance. If you are considering changing your health care offerings, you’ll want to consider all the options to ensure that you are selecting the right plan for your business. There are likely some types of plans that you haven’t seriously considered before, but depending on your situation, they may be a good choice going forward. Consider these health plans in addition to the well-known PPO, HMO and POS options.
Self-funding, or self-insurance, is a method through which a business uses its own funds to provide health benefits to employees. Employers who choose self-insurance arrangements take on direct responsibility for the payment of all health benefit claims, minus employee premiums, co-pays and co-insurance payments.
Self-funded plans are protected under the Employee Retirement Income Security Act of 1974 (ERISA). This legislation allows the employer certain benefits, such as the elimination of the 1.5–3 percent state tax often applied to fully insured plans. Employers can opt out of select areas of coverage that are mandated for the majority of insurance plans. Businesses can also avoid the additional fees that they pay to insurance providers, which, according to the Self-Insurance Institute of America, can range anywhere from an additional 3–5 percent.
Self-funding does have its drawbacks, however. Your company will be directly paying for any health service costs that your employees incur. Many companies who use this type of plan contract an established insurance provider to process claims and provide stop-loss insurance. This sets a cap for the maximum amount that the company will pay for a particular health event. Even though the costs can’t spiral out unchecked, you may still find that the cost of a few large medical events is more than your budget can handle. To simplify self-funding and to allow more predictability, some insurance carriers are offering balanced funded products that have stop loss built in and allow predictable monthly payments.
Consumer-Driven Health Care Plans
A consumer-driven health care plan (CDHP) is a type of health insurance plan in which employees use a health savings account (HSA) or a health reimbursement account (HRA) to pay for medical costs. CDHPs have a benefit of reduced costs for the employer, who may fund all or part of the HSA. As health decisions are placed directly in the hands of the consumer, CDHP users are much more likely to be cost-conscious and to invest time in understanding different treatments.
In a CDHP, employees have a predetermined amount of money set into a special account created by the employer that they can use to pay for health care. In an HSA, they also have the option to fund an health savings bank account to a certain limit. If the employee doesn’t use all the money in the account by the end of the plan year, that money typically rolls over to the next plan year. If, instead, the employee uses the entire fund partway through the plan year and still has medical costs to pay, the employee will enter into a high-deductible health plan (HDHP) for the rest of the year. In the case of a major medical emergency, the HDHP guards the employee from taking on catastrophic medical expenses.
The main objective of the ACA’s newly structured government-run health insurance exchange, or marketplace, is to create a competitive environment within the health-care-plan shopping arena. The ACA’s marketplace has been instrumental in providing consumers with options that they may not have had previously. A side effect of the marketplace is the competition that it’s fueling outside of the government-run exchange itself.
Major health care brands are selling their insurance plans through private health insurance exchanges in addition to the traditional methods. Private exchanges have been a staple of the health care industry for some time, providing benefits to Medicare-eligible retirees, but the passage of the ACA has spurred newfound interest in private exchanges that provide benefits to current workers in addition to the retired. In an exchange, the employer selects a number of plans, and each employee gets a subsidy and the option to choose the plan that works best for them from the available choices, according to Bloomberg. Experts are predicting that by 2018, private exchanges will be more popular than public exchanges, as reported in Forbes.
Another reason why employers are choosing private exchanges over the public marketplace is that many private exchanges provide options that will assist employers in avoiding what’s being referred to as the “Cadillac Tax.” This tax is intended to curb insurance plans that offer coverage which some consider to be excessive or extravagant. In order to achieve this while remaining in compliance with ACA regulations, there will be a 40 percent excise tax imposed starting in 2020 on the value of health insurance benefits that exceeds $10,200 for individual coverage, $27,500 for family coverage or the future values based on inflation. So, if a family’s coverage is valued to be $30,000 for the year, the employer is taxed on the $2,500 that exceeds the limit. Employers are hoping that offering multiple plans on a private exchange will allow them to offer more cost-efficient insurance to avoid the tax.
As you get ready for upcoming ACA regulations and mandates, it’s worthwhile to consider all the types of health plans available to you. Consider the general health and age of your employees, as well as whether they prioritize flexibility or controlling their own costs. Also, consider how insurance-savvy your employees are. With an increase in options, you can make sure that your offered health plan meets all regulations and works for your bottom line and employoees.