Employer savings considered as part of plan to ease Obamacare family subsidies

An IRS proposal that would make it easier for families to get subsidies for health insurance in the Obamacare scholarships would help businesses that no longer need to pay some of those costs, according to health insurance brokers.

The proposal (RIN 1545-BQ16) published in the Federal Register on April 7 would change current regulations to allow qualified family members to obtain grants in the Affordable Care Act exchanges. Currently, family members are excluded from ACA subsidies if anyone in a household has access to an employer-sponsored plan that meets the ACA’s affordability and coverage requirements. which has been dubbed the “family problem”.

ACA supporters have long advocated allowing family members to get the subsidies, arguing that many families cannot afford coverage even if they have someone in their household who has coverage through the ACA. ’employer. But the proposal is costly, estimated at more than $45 billion from 2020 to 2030, and White House estimates show it would only lead to 200,000 uninsured people receiving coverage.

The rule, if finalized, could also be subject to legal challenges. In a May 11 letter to the IRS Commissioner Charles Retigthree Republican senators said the proposal “not only goes against the ordinary reading of the law, but would dramatically increase spending on Obamacare plans and result in a significant shift of individuals out of employer-sponsored insurance toward government-designed and subsidized Obamacare coverage.”

More than 5.1 million people fall into the “family glitch”, estimates the Kaiser Family Foundation. The White House has estimated that nearly one million people would benefit from more affordable coverage. The Urban Institute estimated that 585,000 people would leave employer coverage, reducing employer expenses by about $2 billion a year.

Companies would “absolutely” benefit

Companies would “absolutely” benefit from family members leaving company plans for subsidies in exchanges, said Adam Rochon, co-owner of Sequoia Employee Benefits & Insurance Solutions in Exeter, Calif., in a interview.

“They struggle to find that balance to be able to provide affordable care for their employees, but it’s even more difficult to provide affordable care for the family of their employees,” Rochon said. Trying to plan for health care costs is less predictable if employers commit to covering family members, he said.

Most of the roughly 100 small companies Rochon works with don’t offer family coverage for this reason, he said. If they do, they are unable to cover the costs to make it affordable for employees, Rochon said.

Allowing family members to get exchange subsidies will save money for businesses paying some family coverage costs, Rochon said. “Then they don’t have to pay the families’ insurance costs. And even if they do now to a small extent, families will still be able to get that coverage elsewhere and that will ease the burden on the employer,” he said.

In many cases, “families would benefit from having the option to go on exchange” and get subsidized coverage, Rochon said.

Rochon is part of the Small Business Majority Network, a group that released a family issue statement backing the IRS proposal.

Small businesses may see the greatest movement of family members to exchanges if the proposal is finalized. “Especially for small businesses, since it’s the family members who are most likely to be better off in the exchange, so they might see more movement” away from the company’s plans, Karen Davenport, who wrote about the issue for Georgetown University’s Center on Health Insurance Reforms, said in an interview.

Many small businesses contribute to family coverage, Davenport said. However, “just making it affordable under the ACA isn’t necessarily enough in terms of what the family pays in premiums. So companies could still save money,” she said.

“Huge” for businesses of all types

“We think this is going to be huge for businesses – small, large, white-collar, blue-collar,” Jack Hooper, founder and CEO of health insurance broker Take Command Health, said in an interview.

The companies most likely to benefit are small businesses that must offer coverage that meets ACA requirements, Hooper said. Companies with 50 or more full-time employees must offer qualified coverage or pay hefty fines. The coverage offered must meet the definition of what is affordable to the individual employee, 9.61% of their income.

However, companies are not required to provide affordable coverage for family members, which costs an average of $22,221 for a family of four in 2021, according to the Kaiser Family Foundation. Family members of employees who have access to affordable coverage are not eligible for subsidies in ACA Marketplaces, and many family members pay high fees for company coverage. Companies with less than 50 full-time employees are not required to provide coverage.

“There has been a common trend of reducing family and spousal coverage,” and more and more companies are offering employee-only coverage as insurance has become more expensive, said Hopper.

Take Command Health administers the types of health reimbursement arrangements (HRAs) that employers can use to reimburse employees for medical care expenses and Affordable Care Act plans. The IRS proposal should be clarified to ensure that employees can use these types of HRA contributions to help them purchase coverage in the markets with their families, Hooper said.

For employees with family members, it makes more sense for an employee to get a plan with their family in exchange, Hooper said. Otherwise, “they have to buy two different plans,” he said. Having different plans would mean having to navigate different plan rules with different provider networks and reimbursable fees.

Not all brokers see the savings

But not all health insurance brokers believe the rule, if finalized, would have a big impact on business. “I don’t think it will affect the employer,” Rita Rolf, director of benefits and employee life at TexCap Insurance Services in Dallas, said in an interview.

Few of the roughly 100 small businesses Rolf works with paid coverage for dependents, she said. “It’s mostly employee affect” that will take place when families get subsidized market coverage, she said.

Many family members may not like the exchange choices, Angela Theesfeld, vice president of Davidson Camp Insurance Services LLC in San Antonio, said in an interview. Davidson works with approximately 400 companies.

On many exchanges, “you really only have HMOs available to you, or you have smaller networks,” she said, referring to health maintenance organizations, which have provider networks. carefully checked. “If it’s someone who really needs a PPO or a wider network or that best benefit that their employer offers, that’s where they offer the amount to try to make this work,” she said, referring to the preferred supplier. organizations, which have wider networks.

Employers who offer family coverage would likely continue to offer it, Mitch Relfe, federal government relations manager for the National Federation of Independent Business, said in an interview. “I think the issue would be whether they offer less generous dependent coverage. I think the answer for most is probably no. We’ll have to see how things go.

There has been little government action to make employer-sponsored coverage more affordable, which is “a huge problem,” Relfe said. “We’re just continuing to subsidize people on the market side, but we’re not doing much to help employers cut costs.”

Making health care costs affordable will improve the level of benefits employers can provide, Relfe said.

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