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Obamacare has employers considering higher deductibles

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Employers required to comply with the Affordable Care Act are increasingly looking at making a transition to high-deductible health plans to cushion the impact of the rising health insurance premiums confronting both employers and their workers, according to insurance broker Vaughan Reale, vice president of CBIZ.

In 2015, employer with more than 50 workers will have to offer health insurance or pay penalties under the ACA, and many are using 2014 to a transition year to begin introducing workers to high deductible health plans that provide a base of coverage, with employees having the option to pay more to get richer benefits.

"What we are seeing most of our clients do is use 2014 as a planning year for 2015," Reale said. The employers are offering high deductible plans equivalent to the ACA's bronze plan, which provides the minimum 60 percent coverage of medical expenses that the ACA requires.

Reale said many employers are facing higher health care costs as a result of the ACA. He said a plan that might normally see a 10 percent annual premium increase is facing an extra 5 percent increase as a result of the higher costs imposed by the ACA's new rules.
For example, the ACA requires firms with more than 50 employees to offer health insurance to all full time workers, defined as those working more than 30 hours a week, and they can't require new hires to wait more than 90 days before coverage kicks in.

Reale said many employers had previously considered 35 or 40 hours a week to be full timer who was eligible for benefits, and had a 180 waiting period before new hires could get covered.

"I have one client who is expecting to have to add 180 more people to their health plan, and that's a lot," Vaughan said. Since the employer mandate and the penalties don't kick in until 2015, many employers "are using 2014 as a transitional year to figure out where all the pieces are and figure out how to best put them together."

The high deductible plans being considered by employers would have a deductible of $1,250 for an individual and $2,500 for a family, Reale said. The ACA requires that the employer health plan be affordable, meaning the employee doesn't have to contribute more than 9.5 percent of their income for their individual health plan.

But with the cost of health insurance rising, in some cases as a result of the ACA, the employers are shifting more of the premiums to the employees. Vaughn said employees on average are contributing 28 percent of the total premium, and he sees that rising to 33 or 35 percent on average. Vaughan said both the employer's share of the premiums and the share paid by the workers are rising.

Vaughan said one option for employers is to drop health insurance, pay the penalty, and give employees money to purchase coverage on the new exchange Marketplace, whose Oct. 1 rollout has been a major debacle for President Obama.

But Reale said right now, steering employees to the Marketplace "is being talked about but it's not being implemented, because of the poor performance of the exchanges." Some employers would save money by dropping coverage and paying the penalty, but the employer is saying "I'm still not doing it because right now the exchange is not functioning well and I can't just throw my employees on the exchange—because I will have a lot of angry employees." Reale said "If the exchanges start to function well and I can say to my employee 'here is my contribution, go to the exchange' and then I pay my penalty and I'm still saving money, yeah, a lot of employer are thinking about it and talking about it and genuinely going to consider it. I don't see why the wouldn't."

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