Whatever your thoughts are on health reform (positive, negative, neutral), many aspects of health reform greatly benefit employees and the individual health insurance market.
For example, in 2014 health reform introduces guaranteed-issue individual plans, discounts for eligible employees on individual health insurance through the new marketplaces, and expands Medicaid for low-income employees.
Here's a break-down of the top four reasons why health reform is great for employees.
Reason #1: Guaranteed-Issue Individual Policies
If employees' have had a difficult time finding affordable coverage because of a pre-existing condition (or cannot secure coverage at all), health reform's guaranteed-issue provision will be a huge benefit, and relief.
Beginning January 1, 2014, insurance carriers must accept all applicants for individual health plans regardless of health status.
This provision of health reform evens the playing field between group health plans and individual health plans. It minimizes the moral obligation of employers to offer group health insurance to employees with pre-existing conditions. As a result, the decision to offer health benefits will become purely an economic business decision (the cost of group health insurance vs. a defined contribution health plan paired with individual health insurance).
Reason #2: Health Insurance Subsidies for Individual Policies
Beginning January 1, 2014, if the employer does not offer an “affordable,” “qualified” group health plan, employees may qualify for federal health insurance subsidies (based on income) through their state’s Health Insurance Marketplace.
Here is what employees need to know about the health insurance subsidies:
Q: What are the health insurance subsidies? The subsidies are free discounts applied to individual health insurance premiums for eligible individuals and families.
Q: Who is eligible? If an employee meets certain income requirements, and does not have access to affordable health insurance through an employer or another government program, they are likely eligible for a discount. Eligibility is based on a standard called the "federal poverty level" (FPL). The subsidy will cap the cost of health insurance between 2% and 9.5% of an employee's annual income. Employees who earn up to 400% of FPL may be eligible. This translates to an individual earning up to $45,960 in 2013 and a family of four earning up to $94,200 in 2013.
Q: How much are the subsidies? The discounts will cap the cost of an employee's health insurance at 2% - 9.5% of their household income, if their household income is up to 400% above the federal poverty line (FPL). Here is an example of the maximum amount an employee would pay for individual coverage. (Look up specific amounts by income level with these tax subsidy charts.)
Q: Where do I access the health insurance subsidies? The health insurance subsidies will only be available when employees purchase health insurance through their state's health insurance marketplace. Each state will have a website to view and compare policies, enroll in a plan, and receive the discount. Look up your state marketplace here.
Q: How can employers allow employees to access the health insurance subsidies? Employers can help employees have access to the health insurance subsidies by not offering a group health insurance plan, which disqualifies employees from the subsidies. Instead, employers can offer health benefits with a defined contribution health plan. With defined contribution, employers give employees a healthcare allowance to use on health insurance and medical expenses. Employees can work with a broker to enroll in individual health insurance coverage through the public health insurance marketplaces, and receive a discount via a health insurance subsidy (if eligible). Employers can reimburse employees tax-free for the unsubsidized portion of their health insurance premium (up to the amount of their defined contribution allowance). Defined contribution works best for employers with less than 50 employees, who are not subject to the employer mandate in 2015. However, businesses of all sizes are switching to this type of benefit (see this article on defined contribution and ACA).
Reason #3: Essential Health Benefits
Health reform requires that health plans offered in both the individual and small group markets provide a core package of items and services, known as "essential health benefits". This applies to insurers both inside and outside of Health Insurance Marketplaces. Essential health benefits must include items and services within at least the following 10 categories:
- Ambulatory patient services
- Emergency services
- Maternity and newborn care
- Mental health and substance use disorder services, including behavioral health treatment
- Prescription drugs
- Rehabilitative and habilitative services and devices
- Laboratory services
- Preventive and wellness services and chronic disease management
- Pediatric services, including oral and vision care
This is great for employees because in most states (pre-2014), coverage for items such as maternity and mental health are difficult to find on individual health insurance without an additional rider (and additional expense). It is also intended to make it easier for employees to compare and make informed choices about health plans.
Reason #4: Medicaid Expansion
Health reform called for a nationwide expansion of Medicaid eligibility, set to begin in 2014. However, a Supreme Court ruling in 2012 made Medicaid expansion optional for states. If a state chooses to participate, nearly all residents under 65 with family incomes up to 138% of the federal poverty level (FPL) ($15,415 for an individual or $26,344 for a family of three in 2012) will qualify for Medicaid in 2014. See this overview of Medicaid expansion, including which states are planning on expanding Medicaid coverage.
The Congressional Budget Office (CBO) predicts that 11 million Americans will gain coverage by 2022 through Medicaid expansion alone. Lower-income employees may be newly covered under Medicaid.
If a state does not participate in Medicaid expansion (and the employee's income is between 100% - 138% of FPL), then the health insurance subsidies will cap the cost of their premium at 2% of household income.
What are other benefits (or drawbacks) of health reform for employees? Leave a comment below.