2015 is forecasted to be a turbulent year for employer-sponsored health insurance. The opening of the SHOP marketplace coupled with many new employer taxes coming into effect January 1st has got many US employers preparing changes or implementing new protocols to avoid any hard hits to their bottom line. More importantly, their employees must ultimately be protected from loosing coverage or paying more for insurance.
Impact on Employees
While both employer-paid and employee-paid premiums will both see an increase of 5.5% and 7% respectively in 2015, employees will also face an additional increase to their out-of-pocket costs. Employer contributions have been forecasted to rise from $10,717 to $11,304. Equally, employee responsibility has risen from $2,487 to $2,664 – or almost 23% of the total premium.
“With employment rates stabilizing, individuals are feeling more secure about their financial situation and have been willing to re-engage in using the healthcare system. As these utilization rates increase, we expect to see healthcare cost increases to follow.” said Tim Nimmer, chief health care actuary at AON Hewitt.
In addition to premiums, workers will still be responsible for almost $2,500 in out-of-pocket costs, an increase of 8% from 2014.
Taxes for 2015
Many employers see the new taxes coming into effect in 2015 as the main reason to adjust pricing or implement changes to their plan options. Aside from the employer mandate – effective Jan. 1 for employers with more than 100 FTE’s, the ACA will tax employers and their insurers to recoup much of the federal spending introduced under the new health law. These taxes are expected to account for as much as half of the 2015 health insurance premium increases being introduced by employers.
The three major taxes to take effect in 2015 include:
The annual health insurance tax on insurers which is projected to raise $11.3 billion in 2015
Transitional reinsurance tax - $44 per covered person - will be used to stabilize premiums in the health insurance exchanges.
Patient Centered Outcomes Research Fee in 2015 is set at $2.08 per covered person and will help generate funds for healthcare improvement research.
Furthermore, insurance must also be affordable to satisfy the law. It’s not considered affordable if an employee has to spend more than 9.5% of income to pay their share of the premium. If an employer’s health insurance fails the affordability test, the employer will be penalized $3,000 for each employee who opts to buy subsidized coverage on the state health insurance exchange.
How Will Employers React?
A recent survey form the Society of Human Resource Management and the Employee Benefit Research Institute has found that most organizations will not be eliminating healthcare coverage for their employees in 2015, despite the expected increase to costs. In fact, only 1% of organizations reported planning to eliminate healthcare coverage.
Many human resource professionals are instead looking ahead to 2018, when the Cadillac tax – an excise tax on high-cost health plans – goes into effect. The excise tax of 40% will apply to the value of healthcare benefits that exceeds certain thresholds.
Though 85% of respondents do not expect their organizations to trigger the excise tax in 2018, large organizations remain more likely to expect to trigger the tax and may implement plan changes like adding a spouse surcharge, eliminating coverage for part-time workers, creating tiered networks, and adding wellness rewards or penalties in 2015.
PayerFusion has recently helped a number of employers navigate the new health law and mitigate new costs associated with the new taxes or provisions. For more information on how the health law may affect employers in 2015 or how you can begin to prepare as an employer, contact one of our Benefits Advisors here or subscribe to our Health Insights newsletter.