Health insurance, wellness and workers’ compensation have long been their own spheres of influence. Managers who have been involved in worker’s compensation management have never crossed the line from worker’s compensation to health insurance and vice-versa. In many companies they are and remain separate realms of management with the risk manager handling worker’s compensation and the HR director handling health insurance.

It has long been my view that the two have a strong correlation. More than 10 years ago I was consulting companies on the migration of workers compensation claims that arose because of poor health care coverage, or poorly managed health issues that prolonged and complicated the workers compensation claims for my clients.

It is a known fact that an unhealthy workforce cannot sustain basic business activities, in addition they cannot mobilize and contribute to the types of strategic growth, quality improvement, and innovative scheduling and demands that are required of today’s businesses to succeed in the face of increasing competitive markets.

Recent research evidence is growing that cites the direct cost savings of integrated workplace health programs to health premiums and other employer-covered health care costs. The trend is currently showing how this integration supports savings, indirect productivity-related, and bottom-line risk cost.

Recent relevant data is just emerging and is expansive in both Health and Workers Compensation. In 2009, U.S. healthcare spending reached 2.5 trillion dollars. This represents 17.6% of the nation’s Gross Domestic Product, up from 16.6% in 2008.

It is estimated that 50% of Americans report living with at least one chronic disease. Many of these chronic diseases are related to smoking, physical inactivity, and unhealthy diets, all health related issues. It is also estimated that between 2006 and 2016, the number of workers;

55 to 64 years of age will increase by 36.5%,

65 and 74 years of age and 75 and older will increase by 80%

Older workers typically suffer from chronic health conditions and have multiple health risks. The conditions of older age groups require more care and are more difficult and costly to treat than the chronic conditions that are more common in younger age groups. In one analysis, a company’s 2003 annual aggregate medical claims costs for employees and their dependents rose according to age:

25 to 29 had an aggregate cost of about $2,148

40 to 44 years the cost rose to $4,130

60 and 64 the aggregate cost was to $7,622

The figures highlight the importance of keeping all workers, and especially older workers, healthy and managing chronic illnesses that do exist so that they do not worsen over time

Worksites also have characteristics that can and may contribute to chronic diseases. These chronic diseases will not show up as the initial workers compensation claim but will impact the disposition of the claim and treatment of the claimant if they do occur. Therefore, chronic and acute diseases and injuries significantly impact workplaces and workers.

It’s reported in 2009, more than 4,500 fatal and over 1.2 million nonfatal work-related injuries and illnesses were reported in private industry workplaces. The data revealed that;

Just over half of the non-fatal injuries resulted in time away from work due to recuperation, job transfer, or job restriction

Musculoskeletal disorders constitute about 28% of all nonfatal work-related injuries. Some workplace risk factors for musculoskeletal disorders include;

Repetitive motions

Forceful exertions

Awkward postures


Temperature extremes

According to the 2010 Liberty Mutual Workplace Safety Index, occupational injuries and illnesses in 2008 amounted to over $53 billion in direct workers’ compensation costs.

The top five injury causes (overexertion, fall on same level, bodily reaction, struck by object, and fall to lower level) accounted for 71% of this cost burden.

Overexertion (i.e., injuries related to lifting, pushing, pulling, holding, carrying, or throwing) has maintained its top rank for years. According to Liberty Mutual, overexertion accounts for $13.40 billion in direct costs–more than a quarter of the overall national burden.

(In the healthcare industry, inflation-adjusted direct and indirect costs associated with back injuries are estimated to be $7.4 billion annually, in 2008 dollars).

Additionally, the workplace has health risk factors that can exacerbate or turn into workers compensation claims such as; cardiovascular disease, including exposure to chemicals in tobacco smoke; organizational factors such as work schedules (e.g., long work hours and shift work) psychosocial stressors such as high demand-low control work, high efforts on the job combined with low rewards and organizational injustice

Estimates of the proportion of cardiovascular disease that is attributable to, and caused by workplace factors range from 15% to 35%

The critical component is that these are modifiable individual risk factors and they are largely responsible for upward trends in chronic diseases and corresponding mortality trends in the United States. Data from 2005 showed:

Tobacco use and high blood pressure to be responsible for approximately one in five and one in six deaths in the United States respectively. In addition, overweight-obesity, lack of physical activity and high blood glucose were responsible for nearly one in 10 deaths each.

The Solution

My experience has taught me that an integrated workplace with  “health-safety” programs present a unique opportunity to intervene in these behavioral risk factors and, in turn, to have an impact on the prevalence and activity of both health and workers compensation claims.

Studies are validating that workplace health programs have been found to reduce health care costs. Literature on costs and savings associated with worksite health promotion programs reported that medical cost reductions of about $3.27 are observed for every dollar invested in these programs

A critical review of 16 studies published during 2004-2008 reported favorable clinical and cost outcomes of comprehensive health promotion and disease management programs.And a recent evaluation of Johnson & Johnson’s worksite health programs from 2002 to 2008 found that the company had experienced average annual growth in total medical spending that was 3.7 percentage points lower compared to similar large companies.

Research has also shown that healthier workers are less likely to be injured or absent from work, and that absenteeism costs fell by $2.73 to every dollar spent on workplace wellness programming.

Job performance has been shown to be better among healthy workers, and the phenomenon of presenteeism (wherein workers are present but exhibit diminished performance) to be significantly reduced.

The indirect costs such as absenteeism and presenteeism are considerable and have been found to be up to three times as large as direct medical costs for some companies.

What approach are large companies taking? World-class organizations are transitioning to integrated systems already. Johnson and Johnson have been supporting an integrated system for worker health since the late 1970s. Goetzel (Goetzel, R.Z., et al., Health, absence, disability, and presenteeism cost estimates of certain physical and mental health conditions affecting U.S. employer) describes a number of other world-class organizations that have also instituted integrated health, safety, and productivity management programs.

These include such diverse organizations as Caterpillar, CIGNA Corporation, Daimler-Chrysler/United Auto Workers, Union Pacific Railroad, and Citibank. The National Aeronautics and Space Administration is also implementing an integrated program for worker health.

What do these programs look like? They take the wellness plan and focus it on key areas beginning with biometrics, Health Risk Assessment’s, and finishing with programs to address key and significant areas that impact Worker’s Compensation claims. For example obesity, diabetes, high blood pressure and cholesterol issues all relate to extended and delayed treatment and ongoing Worker’s Compensation claims. When wellness initially takes on these issues it helps the employee manage the organizational stress and work environment. This reduces the health risk affecting absenteeism, presenteeism and Worker’s Compensation claims.

The program should also focus in on connecting those individuals responsible for the health plan and it’s activity with the risk management and supervisors involved in Worker’s Compensation claims. These individuals should be involved in the claim reviews and dialogue on the loss data.  This cross-pollinating of risk and intervention leads to better dialogue and communication around which issues to focus on an address first.

The cost of implementation will depend on the size of the worksite as well as on the comprehensiveness of the integrated program. Goetzel et al. in their study analyzed data from 43 worksites consisting of approximately about one million employees. They found that the 1998 median health and productivity management costs these organizations paid equaled $9,992 per employee. These costs included such elements as group health, turnover, unscheduled absence, non-occupational disability, and workers’ compensation costs. When expenses related to employee assistance, health promotion, occupational medicine, safety, and work/life services also were added into the equation, the combined total cost per employee reached $10,365.

With costs of $9,992 per employee, the researchers determined that the cost savings for implementing a comprehensive program could be about $2,562 per employee per year, a savings of about 26%.

It is clear that if your current program could cut 26% of its total cost out by integration it is critical to make sure that you are,or will be, moving your program towards this goal.

My practice is constantly working in conjunction with the research emerging, on creation and management of health insurance and worker’s compensation integration for my clients. As valid data is reported my models will reflect and realign with that data so that a 26% savings becomes a sustainable part of thier risk program.

While we continue to see a steady stream of rules and proposed rules flow in from HHS, recently on January 30, 2013, the Department of Health and Human Services (HHS) and the (IRS) issued two sets of proposed regulations related to the individual mandate provision of the Patient Protection and Affordable Care Act (PPACA).

The individual mandate requires most individuals to have minimum essential coverage or pay a penalty beginning in 2014. The penalty is now called a “shared responsibility payment.” There are exemptions to the mandate, which are outlined below. If you would like PDF’s of the complete proposed regulations please email me and let me know and I will forward them to you.

The proposed regulations confirm the individual mandate requirements and outline the process for requesting an exemption. They cover:

  • What qualifies as minimum essential coverage
  • How penalties will be determined and paid
  • Who is exempt from paying the penalty
  • When individuals can apply for an exemption

1. What Qualifies as Minimum Essential Coverage

An individual is considered to have minimum essential coverage for any month in which he or she is enrolled in one of the following types of coverage for at least one day:

  • An employer group health plan
  • An individual health insurance policy
  • A government plan such as Medicare, Medicaid, Children’s Health Insurance Program (CHIP), TRICARE or veterans coverage
  • Student health coverage
  • Medicare Advantage plan
  • State high risk pool coverage
  • Coverage for non-U.S. citizens provided by another country
  • Refugee medical assistance provided by the Administration for Children and Families
  • Coverage for AmeriCorp volunteers

All these types of plans qualify as minimum essential coverage, and there are no additional coverage requirements that must be met.

2. How Penalties will be Determined and Paid

The first penalties will be due when individuals file their 2014 tax returns in 2015. A penalty is determined by calculating the greater amount of either a flat dollar amount or set percentage of income. The annual penalties for 2014 through 2016 are noted below. Beginning in 2017, penalties will increase based on the cost of living.

  • 2014: Greater of $95 per adult and $47.50 per child under age 18 (maximum of $285 per family) or 1% of income over the tax-filing threshold
  • 2015: Greater of $325 per adult and $162.50 per child under age 18 (maximum of $975 per family) or 2% over the tax-filing threshold
  • 2016: Greater of $695 per adult and $347.50 per child under age 18 (maximum of $2,085 per family) or 2.5% over the tax-filing threshold

If the penalty applies for less than a full calendar year, the penalty will be 1/12 of the annual amount per month without coverage.

3. Who is Exempt from Paying the Penalty for Not Having Coverage

Individuals who meet the following criteria will not pay a penalty if they do not have minimum essential coverage:

  • Individuals who cannot afford coverage. Coverage is considered unaffordable if an individual’s contribution toward minimum essential coverage is more than 8% of the annual household income. The monthly contributions are calculated at 1/12 the annual household income to determine if they exceed the 8%.
  • Taxpayers with income below the tax filing threshold, which is the amount required to file a federal tax return
  • Individuals who qualify for a hardship exemption. This exemption is available to individuals who are not eligible for Medicaid because their state chose not to expand Medicaid, or to individuals who have a personal or financial hardship that keeps them from being able to afford coverage.
  • Individuals who have a gap in minimum essential coverage of less than three consecutive months in a calendar year
  • Members of religious groups that object to coverage on religious principles
  • Members of health care sharing ministries. These are non-profit religious organizations where members share medical costs.
  • Individuals in prison
  • Individuals who are not U.S. citizens
  • Members of Native American tribes

U.S. citizens residing in a foreign country are typically exempt from having minimum essential coverage if they meet certain requirements, such as residing abroad for an entire calendar year. And, residents of U.S. territories (Guam, American Samoa, Northern Mariana Islands, Puerto Rico, and Virgin Islands) are automatically deemed to have minimum essential coverage. 

4. When Individuals Can Apply for an Exemption

There are times when a person may request exemption. The Exchange will review the application, issue a certificate of exemption and notify the IRS. Other types of exemptions are claimed when individuals file their federal income tax returns.

  • Religious and hardship exemptions are only available when applying through an Exchange.
  • Individuals who cannot afford coverage, who experience short coverage gaps, who are not U.S. citizens and who have household incomes below the filing threshold may apply for an exemption through the IRS.
  • Members of a health care sharing ministry, individuals in prison and members of Native American tribes may apply for an exemption through either an Exchange or through the IRS when filing a federal tax return.

Comments regarding the HHS regulations are due by March 18, 2013. Comments regarding the IRS regulations are due by May 2, 2013 and a public hearing is scheduled for May 29, 2013.

The CBO recently projected there will be 7 million fewer people on employer based healthcare by 2022. This number varied from the CBO’s estimate of  4 million just last August. The CBO says the largest factor for the change is the reduction in “tax benefits associated with health insurance provided by employers” due to the Patient Protection and Affordable Care Act.

Benefit News reports “that a recent CBO release says About 27 million people are expected to gain coverage by 2017.  The CBO had projected when the law passed in 2010 that 32 million uninsured people would be on a health plan within a decade, and a year later raised its estimate to 34 million”.

Expectations are being pulled back as the expansion relies on governors to build a network of insurance marketplaces and expand Medicaid, the joint federal-state insurance program for the poor. At least 22 Republican governors have said they’ll refuse to participate in the health exchanges and a Supreme Court decision lets them also opt out of the Medicaid expansion.

There is concern “about a combination of factors, including the readiness of exchanges to provide a broad array of new insurance options, the ability of state Medicaid programs to absorb new beneficiaries, and people’s responses to the availability of the new coverage,” the CBO says.

The cheapest health insurance plan available in 2016 for a family will cost $20,000 for the year. In a proposed regulation issued Wednesday, the Internal Revenue Service (IRS) assumed that under Obamacare  the cheapest plan for a family will cost $20,000 per year (see example number 3 in the proposed regulations). The IRS gives these examples to help people understand how to calculate the penalty they will need to pay the government if they do not buy a mandated health plan. The examples point to families of four and families of five, both of which the IRS expects in its assumptions to pay a minimum of $20,000 per year for a bronze plan. The bronze plan is the lowest plan that will be available through the exchanges.

I will continue to update and please follow to stay in touch with the ever changing world of Health Reform.

HealthCare Reform

The Affordable Care Act was passed by Congress and then signed into law by the President on March 23, 2010. 
On June 28, 2012 the Supreme Court rendered a final decision to uphold the health care law. There are several components of the law that will affect employers. We will address some of the many key components in this summary. We recommend you participate in the Health Care Reform Impact Study Alliance Insurance Group provides for a comprehensive and actuarial review of your program.

Employer Mandates

If an employer does not provide employer-sponsored coverage;

Regardless of whether or not a large employer offers coverage, it will be potentially liable for a penalty beginning in 2014 only if at least one of its full-time employees obtains coverage through an exchange and receives a premium credit (a “full-time employee” includes only those individuals working 30 hours per week or more). Part-time workers are not included in penalty calculations (even though they are included in the determination of a “large employer”). An employer will not pay a penalty for any part-time worker, even if that part-time employee receives a premium credit. Conversely, seasonal workers are not included in the determination of large employer. However, if an employer is determined to be a large employer, without counting its seasonal workers, it could still potentially face a penalty for each month that a full-time seasonal worker received a premium credit for exchange coverage.

Beginning in 2014, individuals who are not offered employer-sponsored coverage and who are not eligible for Medicaid or other programs may be eligible for premium credits for coverage through an exchange. These individuals will generally have income between 138% and 400% of the federal poverty level (FPL).

Individuals who are offered employer-sponsored coverage can only obtain premium credits for exchange coverage if, in addition to the other criteria above, they also are not enrolled in their employer’s coverage, and their employer’s coverage meets either of the following criteria: the individual’s required contribution toward the plan premium for self-only coverage exceeds 9.5% of their household income, or the plan pays for less than 60%, on average, of covered health care expenses.

Other PPACA provisions will also affect whether full-time employees obtain premium credits for exchange coverage. For example, exchanges are required to have “screen and enroll” procedures in place for all individuals who apply for premium credits. This means that individuals who apply for premium credits must be screened for Medicaid and the State Children’s Health Insurance Program (CHIP) and, if found eligible, are to be enrolled in those programs; exchange premium credits will not be an option. This could affect whether any of an employer’s full-time employees obtain premium credits in an exchange—and if so, how many.

Penalty for Large Employers Not Offering Coverage

Beginning in 2014, a large employer will be subject to a penalty if any of its full-time employees receives a premium credit toward their exchange plan. In 2014, the monthly penalty assessed to employers who do not offer coverage will be equal to the number of full-time employees minus 30 multiplied by one-twelfth of $2,000 for any applicable month. After 2014, the penalty payment amount would be indexed by the premium adjustment percentage for the calendar year.

Penalty for Large Employers Offering Coverage

Employers who do offer health coverage will not be treated as meeting the employer requirements if at least one full-time employee obtains a premium credit in an exchange plan because, in addition to meeting the other eligibility criteria for credits, the employee’s required contribution for self-only coverage exceeds 9.5% of the employee’s household income or if the plan offered by the employer pays for less than 60% of covered expenses. According to the Congressional Budget Office (CBO), about 1 million individuals per year will enroll in an exchange plan and receive a credit because their employer’s plan was unaffordable. The total penalty for an employer would be limited to the total number of the firm’s full-time employees minus 30, multiplied by one-twelfth of $2,000 for any applicable month. After 2014, the penalty amounts would be indexed by the premium adjustment percentage for the calendar year.

Finally, those firms with more than 200 full-time employees that offer coverage must automatically enroll new full-time employees in a plan (and continue enrollment of current employees). Automatic enrollment programs will be required to include adequate notice and the opportunity for an employee to opt out. Although most of the provisions discussed in this report are not effective until 2014, this particular provision could be in effect as soon as the Secretary promulgates regulations.

Real Considerations employees will have to make

For some low-income employees, Medicaid or the insurance exchanges may provide cheaper and richer benefits than their current plans.

For these employees, the employer-sponsored health benefits may offer limited value because a better or equivalent plan could be purchased in the insurance exchange.

As household income rises, the premium subsidies in the exchanges are phased out. For employees qualifying for a limited or no premium subsidy, the cost of coverage in the insurance exchange may be significantly higher than the employer plan.

Further, out-of-pocket premiums in the insurance exchanges cannot be paid on a pretax basis, a significant consideration for higher-income employees. For these employees, employer-sponsored insurance is likely to remain an important part of their benefit compensation.

To optimize the value of its health insurance plan and its benefit spending, employers should consider strategies that result in covering only employees who consider employer-sponsored insurance a valuable part of their total rewards compensation. This may be achieved by educating employees on alternative sources of coverage that may be more affordable and offer richer benefit coverage and by calibrating employee health plan contributions to optimal levels.

What Should You Consider When Evaluating Whether You Should Offer Insurance To All Full-Time Employees Or Pay The Penalties?



Under Health Care Reform certain employees and dependents may leave the health plan because of eligibility for Medicaid, due to a government Subsidy to join an Exchange, or to be covered under a parent’s health plan up to age 26.


Under HCR, more employees and dependents could potentially join the health plan due to the individual mandate and auto enrollment (e.g., requirement to automatically enroll employees unless the employee chooses to disenroll) starting in 2014. Some may also join the health plan due to changes to or elimination of a spouse’s employer health plan. In addition, more children under the age of 26 could also join under a parent’s plan for financial reasons, but that risk may be limited since the plan already covers children to age 26.


Along with estimating the net migration of employees and dependents to and from the health plan, it is also important to know the impact of adverse or positive selection (e.g., any increase or decrease in higher cost individuals in the plan due to migration). The estimated impact of selection, which is calculated based on the demographic characteristics of the groups, is translated into gross savings or costs in the table below.


Several potential penalties exist for employer health plan sponsors under HCR. Employers may be assessed penalties if: The company does not sponsor a health plan, a health plan is sponsored, but it is not considered qualified and affordable (i.e., has to have a minimum actuarial value of 60% and the employee share of total premium costs cannot exceed 9.5% of household income).


The plan sponsorship penalty would not apply unless a decision was made to terminate the plan for active employees.


Under HCR, if the employee premium contribution to the health plan exceeds 9.5% of their household income, the plan is considered not affordable. In that situation, if employees eligible for Subsidies purchase coverage through an Exchange, an employer will incur a penalty. The penalty is $3,000 per employee joining the Exchange with a Subsidy, not to exceed $2,000 times all full-time employees (minus the first 30 FTEs).


Under HCR, if the actuarial value of a health plan is below 60%, and/or the plan does not meet minimum benefit standards, the plan sponsor is subject to penalties. In that situation, if employees eligible for a Subsidy to purchase coverage through an Exchange, an employer will incur a penalty. The penalty is $3,000 per employee joining the Exchange with a Subsidy, not to exceed $2,000 times all full-time employees (minus the first 30 FTEs). Another Reason Why Actuarial Values are Important is that HCR requires each state to set up an Exchange to facilitate the sale of qualified benefit plans to individuals and small groups (i.e., those with fewer than 50 employees) starting in 2014. The health plans offered, which will be fully insured, must meet certain criteria, including actuarial value standards.

Five health plans could be offered through an Exchange. Each has a separate actuarial value so that participants can have choice with respect to how much the plan will cost and what level of benefits will be provided. The Exchange plans are as follows:

Platinum Plan – Actuarial value of 90%

Gold Plan – Actuarial value of 80%

Silver Plan – Actuarial value of 70%

Bronze Plan – Actuarial value of 60%

Catastrophic Plan – Currently undefined, but focused on those under age 30

Employers who have health plan option(s) with high actuarial values may become more attractive relative to the Exchange plans and/or relative to other employers that may reduce the actuarial value of their plans over time. Reducing the actuarial value of your plan(s) will help reduce the costs related to adverse selection and in-migration that might otherwise occur if plan changes are not made.


Under HCR a company may avoid or delay certain provisions of the law by maintaining Grandfathered Status. To do so, the company must be willing to accept prescribed limits on the nature and extent of changes that may be made to the plan on an annual basis. These limits include prohibition against certain plan changes listed below:

Elimination of benefits for a specific condition or illness, which includes the elimination of benefits necessary to diagnose or treat a particular condition

Increasing a participant’s cost sharing requirement (i.e., the deductible or out-of-pocket amount) by more than medical CPI plus 15%

Decreasing employer contribution for any tier of coverage by more than 5% (using COBRA rates as basis of calculation)

Implementation of the annual limit on the dollar value of benefits


Health Insurer Assessment – Beginning in 2014, Section 9010 of PPACA imposes an assessment on health insurers. In 2014, the total assessment is $8.0 billion, increasing to $14.3 billion in 2018. Each insurer is assessed based on its premium market share. However, self-funded / ASO business is not included in the premium market share calculation, and therefore exempt.

Tax on Pharmaceutical Manufacturers- Imposes a non-deductible fee on brand drug manufacturers based on market share from 2011 through 2019. Manufacturers with annual sales under $5 million are excluded.

Tax on Medical Device Manufacturers - 2.3% excise tax on sale price of devices for device manufacturers. Does not apply to eyeglasses, contact lenses, hearing aids, and other items as defined by Secretary of HHS.

Comparative Effectiveness Research Fee - Insurers and sponsors of self-funded health plans pay annual comparative effectiveness fee of $1 per participant beginning in 2013; rising to $2 in 2014 through 2019 for the Outcomes Research Trust Fund.

Transitional Reinsurance Program - The transitional reinsurance program will assess fees on the individual and group (including self-funded) health insurance markets. The funds will be used to make reinsurance payments to the individual insurance market during calendar year 2014 through 2016. A portion of the funds will go directly to the Department of Treasury.


HCR imposes an excise tax on employers starting in 2018, if their total health benefit costs (i.e. including medical, HSA contributions, etc.) exceed prescribed amounts. This tax equals 40% of the cost in excess of those amounts, which are currently defined as $10,200 for individual coverage and $27,500 for family coverage.


Provider Cost Shifting. With the expansion of Medicaid, the growing number of baby boomers becoming eligible for Medicare, along with potential reductions in Medicare reimbursement levels, providers will be under pressure to increase their reimbursement per service unless significant changes are made to the delivery of health care.


 Some employers, particularly those in the small employer market where play-or-pay penalties are not in effect, may eliminate employer-sponsored health plans. A majority of other employers maintaining coverage may reduce benefit levels to offset the impact of HCR. The combination of these issues will result in more exposure for employer plan sponsors that do not make similar changes to their own plans because more employees and/or dependents will migrate to such subsidized employer plans. Employers will consider many of the following questions,

What is the estimated household income distribution of an employee population?

As discussed above, employee household income is fundamental in evaluating the value of offering employer-sponsored health insurance. The Alliance employer model estimates household income using a formula based on an employee’s salary, gender, marital status, and number of children, education level, and cost of living area.

How many employees may qualify for Medicaid or significant premium subsidies in the state or federal exchange?

Estimate the number and demographic characteristics of employees that will qualify for either Medicaid or a premium subsidy.

How many employees will elect to enroll in Medicaid or purchase an individual policy in the exchange using a premium subsidy?

Because an employee qualifies for Medicaid or a premium subsidy does not necessarily mean that the employee will opt out of an employer’s plan.

Consider the relative costs (including tax differences) between employer-sponsored and alternative sources of health insurance coverage.

This allows an employer to observe the estimated impact of modifications to required employee contribution rates on enrollment and costs.

Should employers incentivize or make eligible a portion of their employee populations for the premium subsidies in the state or federal insurance exchanges?

For low-income employees, many may have lower premiums and richer benefit plans in the exchange rather than on an employer’s plan. For employees with household income under 250% FPL, exchange coverage may be significantly less expensive.


Factors that may increase enrollment include:

• Auto enrollment

• Individual mandate

• Dependent coverage to age26


• Eligibility for Medicaid

• Eligibility for premium subsidies in the state or federal exchange

• Dependent coverage to age 26

Allowing some employees to qualify for the premium subsidy and purchase coverage in the exchange mitigates a portion of this cost increase.


While the vast majority of employer-sponsored health plans are likely to meet the minimum requirements under PPACA, it is important to understand how the actuarial values of employer plans compare to the tier-level plans (platinum, gold, silver, and bronze) offered in the insurance exchanges. Employers may reevaluate why they are offering plans comparable to gold or platinum plans in the insurance exchanges, when silver-level coverage is the benchmark in the individual health insurance market.

How will employer penalties, affordability requirements, individual mandate penalties, and premium tax credit percentages change over time?

For example, the employer penalty for not offering health insurance coverage is estimated to increase from $2,000 in 2014 to approximately $2,500 by 2018.


The PPACA Supreme Court ruling indicated that states can retain existing Medicaid funding even if they do not expand Medicaid eligibility to 138% FPL in 2014. For employers, this may have a potential cost impact, as employees that may have been Medicaid-eligible may now be eligible for the premium subsidy tax credit, which may result in higher penalties for employers.


Often individuals or groups are resistant to changing historical patterns or policies, even if a new policy is in their best interest. For many employers and employees, employer-sponsored coverage is ingrained as a fundamental value provided to employees. Therefore, even if an exchange plan was a better value to an employee, the employee may maintain their employer coverage. Likewise, employers may be reluctant to drop their employer-sponsored coverage, viewing it as an important component of the compensation program and/or a competitive advantage.


PPACA defines the small group insurance market as employers up to 100 employees. However, a state has the option of limiting the small group market to employers up to 50 employees in 2014 and 2015. Although small employers (50 or fewer employees only) are exempted from the employer play-or-pay provisions, there are additional impacts affecting only small employers, including:

• Maximum deductible of $2,000 (single coverage) and $4,000 (family coverage) in 2014

• Adjusted community rating (elimination of health status, gender, industry, and group size ratings; age rating limited to a 3:1 age ratio; 1.5:1 rate adjustment allowed for tobacco usage)

• The availability of coverage through a state or federal Small Business Health Options Program (SHOP) exchange

• Small employer tax credit available to employers meeting certain income requirements

Small employers may be significantly impacted by the adjusted community rating requirement, resulting in significant premium increases or decreases to certain groups.


HHS continues to publish and update the current laws. Here are the latest.

The Departments of Labor (DOL), Health and Human Services (HHS), and Treasury have announced that employer notification to employees about the Affordable Care Act (ACA) health insurance exchanges will be postponed beyond the March 1, 2013, statutory deadline. Although the announcement does not specify a new date, it states that the timing for distribution of the notices will be in the late summer or fall of 2013, which will coordinate with the open enrollment period that begins in October 2013 for purchasing health insurance through the new exchanges. While there is no action for employers at this time, they should anticipate questions from employees as increasing attention is paid to this topic.

The ACA requires employers to provide all new hires and current employees a written notice about the exchanges. The notice must:

  • inform employees about the existence of the exchanges and give a description of the services provided;
  • explain that employees may be eligible for a federal premium tax credit or a cost-sharing reduction if they purchase health insurance through the exchange if their employers plan does not meet the 60% minimum value standard; and
  • specify that employees purchasing coverage through the exchanges may lose any employer contributions toward the cost of employer-provided coverage, and that all or a portion of the employer contributions may be excludable for federal income tax purposes.

The DOL is considering providing model, generic language that could be used to satisfy the notice requirement or, alternatively, language based on information from the employer coverage template under the Jan. 22, 2013, proposed rule on Medicaid, Children’s Health Insurance Programs, and Exchanges.

The delayed notification announcement appears in the federal agencies FAQs about Affordable Care Act Implementation (Part XI), dated Jan. 24, 2013. The document also provides guidance on: health reimbursement arrangements and other account-based arrangements; the DOL’s plan not to bring enforcement action against certain self-insured group health plans that are Employer Group Waiver Plans; fixed indemnity insurance policies that are not excepted benefits; and payment of the Patient-Centered Outcomes Research Institute fee by multiemployer plans.



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