New York Tri-State Area Companies Weigh Self-Insurance Rather Than Cut Health Coverage
Recent Legislation Makes Stop Loss Protections More Challenging for NY Small Businesses
Even with the employer mandate from the Affordable Care Act delayed until 2015, the Affordable Care Act continues to influence businesses. HealthPocket, in collaboration with HealthCareReformCentral.com, polled business owners, human resource professionals, and other decision makers regarding group health insurance primarily from the New York tri-state area to determine how they were responding to various aspects of health reform.
The survey results demonstrated that businesses in the New York tri-state area are more open to exploring self-insurance options than dropping health insurance for their employees in response to health reform. Those companies that would consider self insurance for healthcare coverage outnumbered those that wouldn’t by a ratio of two-to-one (66% to 34%). The ratio doubled to over four-to-one when comparing those who would consider self insurance to those who were considering discontinuing health insurance.
Self insurance is a health coverage strategy where the employer assumes the responsibility for healthcare costs instead of an insurance company. In this model, the employer pays medical costs as they occur for employees instead of paying premiums to an insurance company monthly that, in turn, would be financially responsible for employee medical costs. The employer typically supports the self insurance model with a "stop-loss" policy from an insurance company that protects the company from medical costs exceeding a predetermined amount.
As a non-traditional health benefits model, self insurance is increasingly positioned to businesses as means to offer less expensive health benefits than Affordable Care Act plans. Companies that self insure are not required to meet the broad coverage requirements of the Affordable Care Act’s Essential Health Benefits standard, thus allowing them to offer less expensive coverage that has fewer benefits.
A key point to note with respect to the survey results is that businesses were open to self insurance if the below criteria were met:
- Current health benefit levels from pre-Obamacare health plans were maintained
- Expenses for self insurance were below expenses for Obamacare health coverage
- Tax penalties pertaining to the Obamacare employer mandate were avoided
While the above criteria are achievable goals for many self insurance strategies, the medical claims history of an employee group that was very sickly could make the expenses of self insurance equivalent to an Affordable Care Act qualified health plan or higher. Additionally, some states have regulatory restrictions pertaining to stop loss insurance policies. According to HealthCareReformCentral.com, states may have different rules regarding stop loss insurance purchases by business. In some cases, small employers band together through an "association plan" where a stop loss plan is shared by multiple small companies belonging to the same association.
One third of respondents still would not consider self insurance even if it satisfied goals of maintaining current benefit levels, avoiding the employer mandate penalty, and providing employee healthcare at an expense lower than would be the case for an Obamacare qualified health plan. It is reasonable to assume the number of respondents who would not consider self insurance would increase if expenses were comparable between self insurance and Affordable Care Act health plans.
Obamacare Effect upon Health Benefit Continuation & Hiring Plans
The results of 150 respondents indicated that businesses had little appetite for dropping health insurance coverage. Only 15% of respondents were considering eliminating all health insurance coverage in response to the Affordable Care Act. However, 86% of these respondents listed their company size as 49 or fewer employees, a company size exempt from the mandate to provide health insurance. Within the tri-state area of New York, New Jersey, and Pennsylvania, the discontinuation of health benefits had even less appeal. Only 10% of tri-state area respondents are considering eliminating health insurance in response to the Affordable Care Act.
When compared to other national surveys, the results from the tri-state area indicate a greater willingness to consider eliminating health insurance for workers. A 2013 survey by International Foundation of Employee Benefit Plans found that only 1% of companies surveyed were planning to discontinue health coverage to full time workers with another 2% indicating it was somewhat unlikely that healthcare coverage would be continued.1 A 2012 Towers Watson survey found only 3% of employers were "somewhat or very likely to discontinue health care plans for active employees with no financial subsidy in 2014 or 2015."2 However, with respect to these survey comparisons it should be noted that there is a difference between plans to discontinuing health benefits and consideration of health benefits cessation.
The overwhelming majority of survey respondents indicated that health reform would not affect their 2014 hiring plans. 87% answered that health reform "will not affect hiring at my company." 11% expected to decrease hiring due to health reform and 1% expected health reform to increase hiring due to health reform.3 The lack of effect on 2014 hiring plans for surveyed tri-state area businesses stands in stark contrast to the results of a May 2013 Gallup poll of small businesses that found 41% of respondents had "held off on plans to hire new employees" due to the Affordable Care Act.4
HealthPocket and HealthCare Reform Central collaborated on the survey design. HealthCare Reform Central conducted the survey from June 13, 2013 through June 25, 2013 and obtained results from 150 respondents. The survey targeted business owners, human resource professionals, and other decision makers regarding group health insurance. Respondents were asked the following questions. "Number of full time employees?" (options: 1 - 49, 50 -100, 101 - 500, 500+), "How do you expect changes to health insurance from Obamacare to affect your hiring plans for 2014?" (options: It will not affect hiring at my company, It will increase hiring at my company, It will decrease my hiring at my company), "Would you consider self-insurance health coverage options with benefits similar to your current plan if the options capped your exposure to costs, were less expensive than a new Obamacare plan, and avoided tax penalties regarding employer health insurance?" (options: Yes I would consider this option, No I would not consider this option), and "Have you thought about the possibility of dropping insurance altogether in conjunction with Obamacare?" (options: Yes, I would consider dropping insurance, No, I am not thinking of dropping insurance).
47% of respondents were located in New York, 21% in New Jersey, 15% in Pennsylvania, and the remainder of respondents were from other states across the U.S.
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This survey analysis was completed by Kev Coleman, Head of Research & Data at HealthPocket.com. Correspondence regarding this study can be directed to Mr. Coleman at firstname.lastname@example.org.
Feedback and questions are welcome but, given the volume of email, personal responses may not be feasible.Google+
HealthCareReformCentral.com provides an inside look at the latest news and views on Health Care Reform. HealthCareReformCentral.com offers the latest updates, announcements, articles, legislative briefs and whitepapers relating to Health Care Reform, and will feature tools and other useful resources to help employers and employees reduce costs in a variety of different ways.
1 "2013 Employer-Sponsored Health Care: ACA’s Impact" (International Foundation of Employee Benefit Plans 2013). p.24. http://www.ifebp.org/pdf/research/2103ACAImpactSurvey.pdf. Accessed July 23, 2013.
2 "Performance in an Era of Uncertainty." 17th Annual Towers Watson/National Business Group on Health Employer Survey on Purchasing Value in Health Care (Towers Watson 2012). p.3. http://www.healthreformgps.org/wp-content/uploads/Towers-Watson-NBGH-2012.pdf. Accessed July 23, 2013.
3 Due to rounding issues, the three options combine to 99%.
4 Dennis Jacobe. "Half of U.S. Small Businesses Think Health Law Bad for Them." Gallup.com. May 10, 2013. http://www.gallup.com/poll/162386/half-small-businesses-think-health-law-bad.aspx. Accessed Jul 23, 2013.