The Patient Protection and Affordable Care Act (PPACA) created a tax penalty for individuals who do not have qualifying medical coverage as specified under the law. Many people felt the government was forcing people to buy insurance, whether they wanted it or not. The Individual Mandate was challenged and eventually upheld by the Supreme Court. However, with the 2016 elections and a shift to a Republican administration, a tax bill was passed that eliminated the penalty for those that chose not to be covered. The removal of this penalty will take effect on January 1, 2019 and employers should understand what impact this may have on their group health plans. Health Affairs details more about the end of the penalty and explains the impact of the change on employer-sponsored group health plans.
As the Individual Mandate sunsets, employers may have employees that want to now waive their group medical coverage, at least in states that have not implemented their own penalties for failure to maintain health insurance coverage.
Some employees might have chosen to purchase health insurance through their employer-sponsored plan instead of paying a tax penalty. Employers may see a reduction in their medical plan costs, if fewer people are enroll. This would be a positive impact to monthly cash flow as this reduces cost. However, this could have a long-term negative impact as those that decide to come off of the plan are likely the exact employees that help to stabilize the group rates. Demographics definitely play a role in group health plan rates and if the younger, healthier employees come off the plan, the risk may shift and push premiums higher for those staying on the plan. This could be significant for many employers. Ultimately, employers should take the time to review their medical plan and the costs that employees pay to participate.
Employees that perceive the plan to have little to no value to them or feel the plan costs are too high may decide that their best option is to waive coverage. While this may have short-term benefits, the long-term impact could end up costing employers more. As the market for talent continues to get tighter, an attractive benefits plan should be considered to recruit and retain employees. Employers need to take the time to understand both the short-term and long-term impacts of employee participation on their plans and work to communicate the value of those plans to their employees. Contact us today if you have any questions about how these changes may impact you.