Minimal Disruption Expected As Health Exchanges Come On-Line

April 04, 2013

By David Dankwa

InsuranceNewsNet

Traditional employers, particularly those with more than 50 workers, are unlikely to make any major changes to health insurance benefits as we go into 2014 and the viability of health insurance exchanges under the Affordable Care Act is tested.

That is the assessment of Stephen Zaharuk, health care industry analyst at Moody's, in an interview with InsuranceNewsNet.

According to Zaharuk, traditional employers, even at the risk of a penalty, will be more hesitant to move employees to exchanges until they get a better picture of how they work. “I think that assessment will happen probably during 2014 to 2015. I don’t see a large disruption as we begin 2014 because there are so many things that are unknown,” he said.

In other words, Zaharuk does not anticipate a large number of employers cutting employee health benefits, as some people fear.

“If an employer is in a position where they feel it is important to offer insurance to their employees, either because of competitive reasons, or because it wants to retain or attract good employees, or out of peace of mind or a moral obligation, I think they are going to be hesitant to all of a sudden drop insurance until the exchanges are tested. They are going to make sure the employees can get affordable health care on the exchanges,” he said.

One of the key provisions of the Affordable Care Act, slated to take effect Jan. 1, includes the creation of state-based healthcare exchanges, the individual mandate and the increase in income eligibilities for the Medicaid program.

Companies with 50 or more employees could pay a fine if any full-time employees qualify for federal health care subsidies. The federal subsidies designed to help individuals in certain income brackets pay for insurance also go into effect Jan. 1.

The exchanges are supposed to be up and running Oct. 1 – a key date when people are expected to be able to log on to a Web site and apply for government subsidy.

There is significant uncertainty currently surrounding the exchanges and if they are going to be ready on time. “We don’t know what insurance companies are going to participate, we don’t know how viable and how strong a competitive position or option would be available for people to choose,” Zaharuk said.

Still, some groups of employees are likely to take advantage of the health exchanges much earlier than others, said Zaharuk. One obvious group is people who are in a low-income bracket but who do not earn enough to qualify for Medicaid and who don’t have employer-offered health care.

“They will get a subsidy from the government. They don’t have insurance right now or are possibly underinsured. This will be a big boom and I can see that population looking forward to the exchanges and engaging with the exchanges as early as possible,” he said.

Another potential group is individuals who do not have employer-provided health care but have a grandfathered plan, meaning their insurance is not as comprehensive as the one that could be obtained from the exchanges.

“What we are hearing is that the plan on the exchanges, because they are so comprehensive and because of the way the law restricts the pricing between ages, they might be better off keeping their old policies. We think a good deal of that population will stay put with their own grandfathered plan,” he said.

The biggest disruption is likely to occur among employer groups with less than 50 employees.

“I think there are some employers with under 50 employees that are mostly low-income and who are likely to get subsidy from the exchanges anyway. I can see those employers dropping the insurance because they know their employees are going to get better and less expensive insurance because the government is paying for a good portion of it,” he said.

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