For 75 million Americans who get their insurance through large companies, the Affordable Care Act is a mixed bag. Experts tell NBC News the new healthcare law is only slightly increasing premiums next year, but causing some companies with the most generous plans to reduce their employees’ benefits.
Aaron Baker, 36, his wife Billie and their two young children are covered under a generous health insurance plan offered by the private Midwestern university where he’s worked for 10 years. When they opened their benefits notice this year, they were pleased to see their $385 premium is only up by four dollars next year. However, they were shocked to discover that instead of covering the first dollar they spend with no deductible, the Baker’s plan now includes a $1,000 deductible and a $2,500 out of pocket maximum. They also will still have small co-pays for services.
According to the enrollment notice, the changes are “to relieve future health plan trend pressure and to put the university in a position to avoid the excise tax that becomes effective in 2018.” The 40 percent excise tax—often called the “Cadillac tax”— is part of Obamacare and is levied on the most generous health plans. It’s designed to bring down overall health costs by making companies and workers more cost-conscious. The thinking is that if consumers have to pay more expenses themselves, through higher deductibles and out-of-pocket expenses, they’ll avoid unnecessary or overly costly procedures. And that is supposed to make care more affordable for everyone.
Billie Baker doesn’t think much of that concept. “I think that saying that your insurance is too good so we're going to give you a penalty,” she said, “is sort of outrageous to me.”
Said Aaron, “You would think the government would want employers to offer good health care packages to their employees. It seems like that is not the case.”
A survey by the International Foundation of Employees Benefits Plans (IFEBP) released in August found that 16.8 percent of respondents had already started to redesign their health plans to avoid the “Cadillac” tax and 40 percent said they are considering action. A survey of Fortune 1000 companies by Towers Watson, a top benefits consulting firm, found a much higher number. Sixty percent of the these major companies, which employ about 20 million American workers, say the looming excise tax is already having a “moderate” or “significant” influence on benefits decisions for 2014 and 2015. Though the tax doesn’t take effect for years, some companies are starting to make gradual changes now so as not to make dramatic changes at the last minute.
The tax will require a company to pay a 40 percent levy, starting in 2018, on the amount by which the total costs of health plans exceeds an annual limit of $10,200 for an individual and $27,500 for a family.
“There are many factors that result in health care costs going up at certain levels,” said Ron Fontanetta, a director at Towers Watson, “but there's no question that we've seen some action on the part of employers in part because of the concern of a looming excise tax.”
“We've had employers shifting costs to employees for some time. But this is really very different,” said Robert Laszewski, president of Health Policy and Strategy Associates, a consultant who works for health industry firms.
“This is more of a seismic change, because most employers are looking forward to this Cadillac tax in 2018 and realizing they're going to have to get ready for it now. And you can't just shift costs to avoid it; you have to cut benefits.”
The President’s top economic adviser, Jason Furman, says only a small percentage of plans will be hit by the tax once it takes effect four years from now. He disputes claims that the Affordable Care Act is causing employers to put more financial burden on employees.
“There is nothing in the law that tells you you need to raise copayments or deductibles.” Furman told NBC News. “In fact, the law limits your ability to shift costs to your workers.”
Furman told NBC News that “for the most part, very little will change for people getting their insurance through large employers.”
The new healthcare law is having much less impact on health care premiums than on benefits. Towers Watson estimates it’s adding an average of 1 to 2 percent to what premiums otherwise would be next year. The administration claims the impact is “negligible.”
But that has not kept some companies from instituting double-digit premium increases. Andrea Caulfield of Alexandria, Va., who says she’s had great health benefits for the past five years, was so stunned when she opened this year’s notice that she says she thought it was a misprint. She now pays $313 a month for herself, her husband Rick and their 13-year-old son Patrick. Next year, it would be $825 a month. That includes a new premium “surcharge” because her husband could get coverage through his own employer.
She says that’s not remotely affordable. “Neither one of us is getting pay increases or even cost of living increases, so there's no way we could budget for this additional cost,” Caulfield said.
Her employer cited multiple factors that led to the change – the rising cost of healthcare and “significant” costs under the healthcare law, including a temporary $63 fee that must be paid for each covered employee, spouse or child starting in 2014. The fee is intended to fund a program to help spread risk for insurers participating in the exchanges.
Other companies also are charging more for spouses. Xerox has had a surcharge for spouses for the past three years. It’s rising to $1,500 in 2014. Earlier this fall, UPS told employees it will exclude spouses who have access to coverage elsewhere altogether in 2014.
Caulfield credits the Affordable Care Act for added benefits like guaranteed coverage for people with pre-existing conditions, but she wishes she didn’t have to pay for it.
“I know we all have to work together to help each other, but sometimes they have these big ideas but they really don't think about the little person, working really hard and each spouse working one job and we still can't quite make it.”
The family will now purchase coverage through Rick’s employer. It will cost $70 more per month than her current plan. It is not their preference, but Andrea says they don’t have a choice.
“I'm part of that percentage that was told, you're gonna be able to keep your coverage, but that's really not what happened.”
Robert Laszewski says the bar for employer-based healthcare plans has moved.
“In the past, employers compared their benefits to each other,” said Laszewski. “And they had very rich benefits. Now we see a real phenomenon where employers are comparing their benefits to Obamacare and that's the new reference point. So it's really about, ‘I have better benefits than Obamacare.’ And of course many of the Obamacare deductibles are 2000 dollars.”
Jason Furman says the real story is how much the growth in health care costs and cost sharing have slowed in the last few years.
“This past year, adjusted for inflation, premiums rose 2.3 percent. That's one-third the rate that they were growing a decade ago,” Furman said.
“You just can't blame everything in the health system on this law. It had a lot of problems before it, and it's actually helping to make them better.”
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First published November 25 2013, 3:18 PM