Affordable Care Act Upheld - Now What?
Even the smallest employer now knows that the U.S. Supreme Court on June 28 voted 5-4 to uphold the Affordable Care Act. Now, in the wake of that decision, many employers are wondering what the impact will be on them.
John Sarno, president and general counsel of the Employers Association of New Jersey (EANJ), believes it will ultimately be a boon for many people, particularly for small business owners with 50 employees or fewer.
“Only 6 in 10 employers in this category currently offer health insurance coverage to their employees. Whether or not these small employers choose to offer coverage, they are hard hit by the current system of health insurance,” Sarno says.
Employers that do currently offer health insurance have been greatly affected in recent years by skyrocketing costs. If they do not offer insurance, they may face a greater difficulty in hiring employees.
But the affirmation of the law by the Supreme Court is “a windfall for the small employer,” says Sarno, because it breaks the link between the employer and health care insurance coverage that has existed since the post-World War II era.
Employers can choose not to offer insurance and most will pay no penalty. At the same time, the individual mandate that goes into effect January, 2014 ensures that workers will have health care coverage.
But the law “shifts the costs onto those employers who do pay healthcare benefits,” says Sarno. Every employer that feels obliged to offer health care to its employees risks being punished by the employers who cut their employees loose. Employers who do not care about employees will always pressure others to race to the bottom,” he says.
For employers that still want to leverage loyalty and productivity, EANJ offers the Affiliated Physicians & Employers Health Plan (Plan), a Multiple Employer Welfare Arrangement (MEWA) that gives EANJ members the same choice of plans and premium savings as a big corporation with thousands of employees.
Insurance executives and brokers view the employer as just another customer. The broker gets paid by the insurance company so there is an inherent conflict of interest. In contrast, the Plan is managed by Trustees that are employer-members, not insurance executives.
From June 15, 2011 to June 15, 2011, ninety-two EANJ members have enrolled in the Affiliated Physicians and Employers Health Plan. The total number of employers in the Plan is about 990.
Sarno says that some EANJ members have reported resistance from their brokers, who erroneously believe that they will not be paid a brokers fee. In fact, the Plan pays a full brokers' fee.
Others have reported that their brokers are loyal to small group insurance carriers. “Additionally, some members have reported that their broker is reluctant to spend an hour to understand the Plan” says Sarno.
But it appears that brokers will be punished for their loyalty to insurance companies. Starting in 2012 insurance companies can no longer write off brokers’ fees as health care coverage. The federal law requires insurance companies to pay out 80-85% of health care premiums in actual health care coverage. Brokers’ fees must be counted as administrative expenses. As companies must reduce administrative expenses, brokers will be squeezed out, predicts Sarno.
Most other experts who have studied the issue agree. In 2014 states must establish an “insurance exchange” where small employers and individuals can comparison shop for health coverage. To make coverage more affordable, administrative fees must be minimized. .
“Insured plans have no choice but to throw the brokers under the bus. If people had an ounce of sense, they would be looking seriously at the Affiliated Physicians and Employers Health Plan right now,” says Sarno.
To find out more about the Affiliated Physicians and Employers Health Plan, click here.