Employers who shift workers to exchanges might not reap financial rewards
Although some companies have stopped providing insurance coverage as they shift their employees to the health insurance exchanges, experts say such a decision doesn't make economic sense for employers, Business Insurance reported.
In almost every case, it's more expensive for companies to drop employees' health coverage than it is to continue providing coverage.
"We have run hundreds of models for employers, and when you add in all the factors, eliminating coverage will cost more for nearly all of them," Rick Kahle, president of employee benefits at Lockton Cos., told the magazine.
Karen Vines, vice president and director of employee benefits/governance and compliance with broker IMA Inc., agrees, telling Business Insurance that "eliminating coverage just does not make economic sense" for most employers.
For example, an employee with a total family income of $100,000 wouldn't be eligible for exchange policy subsidies. He or she would likely expect a raise to offset that loss of benefits. And the average company cost of employer-sponsored coverage for a family plan is $13,000.
But a bump in pay means a bigger tax bill for employees. Plus, companies would have to pay a penalty of $2,000 per employee for dropping health coverage. That's not tax-deductible for the company.
Meanwhile, the penalty could increase in future years.
There are some rare circumstances in which employers would benefit from shifting their workers to exchange plans. For example, companies that provide generous coverage to a large, lower-paid workforce could find that they would save money. In that case, workers might actually pay less through exchanges. That's exactly what Target said when it announced it's dropping coverage for part-time workers, as FierceHealthPayer previously reported.
To learn more:
- read the Business Insurance article
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