With the 2017 open enrollment for the Affordable Care Act (ACA) or “Obamacare” just around the corner, states are beginning to approve insurer rate requests. Based on the results so far, people who buy health insurance on their own via the marketplace can expect some steep premium surges. Employers, also, can expect hikes in ACA-related costs and health insurance premiums.
Cost impacts of the ACA
Costs for the lowest and second-lowest ACA silver plans are soaring faster in 2017 than in previous years, according to the Kaiser Family Foundation. For example, the cost of the second-lowest silver plan in certain major cities analyzed in the Foundation’s report is predicted to increase by a weighted average of nine percent in 2017 – a sharp jump from two percent in 2016.
Some states have already begun approving insurer rate plans, and the numbers depict some extensive premium hikes for individuals who purchase health insurance through the marketplace. Mississippi has endorsed increases of approximately 43 percent. In Tennessee, an average increase of 62 percent has been approved for one of the state’s largest marketplace plans; and California has announced an average increase of 13.2 percent.
According to Kaiser Health News, large employers expect their healthcare costs to rise by around six percent in 2017, and most employees of large businesses can expect a five-percent increase in their premiums. Based on a 2016 survey, employers are also anticipating a spike in their general administrative ACA expenses for 2017 – with reporting, disclosure and notification requirements being the primary cost drivers. There’s also the delayed 40-percent Cadillac tax on high-cost, employer-sponsored plans, which is forecast to be a significant ACA cost driver beyond 2017.
ACA penalties expected to rise
ACA penalties are expected to climb in 2017. For example, the penalty for not offering minimum essential coverage is expected to increase to $2,260 per full-time worker in 2017, compared to $2,160 in 2016. According to the Congressional Budget Office, the effect of employer penalty payments on the government’s revenue will mostly escalate in 2017 and beyond – with the biggest change being from $9 billion in 2017 to $16 billion in 2018.
Cost control measures
According to the International Foundation of Employee Benefit Plans, to contain ACA-related costs employers are increasing:
- Out-of-pocket limits
- In-network deductibles
- Employees’ portion of premium costs
- Copayment and coinsurance rates for primary care
- Employees’ share of prescription drug expenses
- Employees’ share of dependent coverage costs
Other cost-cutting strategies include:
- Adopting high-deductible health plans
- Expanding employee wellness programs
- Dropping, or attaching a surcharge to spousal coverage
- Modifying prescription drug benefits
Tax incentive for SHOP employers
Small employers who buy health insurance through the Small Business Health Options (SHOP) may qualify for the SHOP tax credit, which can help offset the cost of providing health insurance to workers. To qualify for the credit, employers must have fewer than 25 full-time equivalent employees who each earn an average salary of around $50,000 or less per year, pay at least 50 percent of their full-time employees’ premium and offer coverage to full-time employees via the SHOP marketplace. The smaller the company, the bigger the credit, which is capped at 50 percent of the employer’s contribution toward employees’ premium costs.
Businesses with fewer than 50 full-time and full-time equivalent employees are not subject to the ACA’s Employer Shared Responsibility provisions and can therefore simply choose not to offer health insurance. But, an analysis published by the New England Journal of Medicine concluded that employers competing for top talent will continue to provide health benefits and will not shift employees to an insurance marketplace – though this could change if the Cadillac tax is implemented.
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