Employer Group Tours State on Health Care
Nov 2011
The Employers Association of New Jersey (EANJ) recently completed a six meeting tour of the state to discuss health care reform and its likely impact on the workplace.
Under the Affordable Care Act, employers would need to offer employees “affordable” health care insurance in 2014 but the definition of “affordable” is still being worked out. Originally, the Act provided that an “affordable” offer of insurance can only be as much as 9.5 percent of household income. But in a proposed rule, the U.S. Department of Health and Human Services suggests only taking into account individual, not family premiums, which exceed the 9.5 percent trigger.
But anyone offered “unaffordable” insurance, coverage that costs more than 9.5 percent of household income for premiums alone, can receive a federal premium subsidy to purchase insurance. The premium subsidy is part of the employer penalty.
Health plans must cover these “essential benefits” which includes:
- Ambulatory patient services
- Emergency services
- Hospitalization
- Laboratory services
- Maternity and newborn care
- Pediatric services, including oral and vision care
- Preventative and wellness services, and chronic disease management
- Rehabilitative and habilitative services and devices
- Prescription drugs
- Mental health and substance abuse services
According to John Sarno, president of EANJ, New Jersey passed similar reforms in the small employer market in 1993. “The small employer health care market is reaching an unsustainable point. The recession and raising premiums have taken a toll on employer-sponsored health care in the state,” he says.
In 2010 the small employer group market had about 775,000 covered lives, down 16.5% from 2000, as small employers have dropped coverage. The result of a diminishing purchasing pool has dramatically increased premiums for employers.
The average premium for employer-sponsored health insurance rose to $13,375 annually for family coverage in 2010, according to the benchmark Employer Health Benefits Survey released by the Kaiser Family Foundation and the Health Research & Educational Trust. On average, employers paid $9,860 towards the family premium (74 percent), while employees paid $3,515.
Since 1999, premiums for family plans have risen 131 percent, while inflation has risen only 28 percent.
Sarno believes that most New Jersey employers already meet federal affordability and essential benefits standards.
A recent study funded by the Princeton-based Robert Wood Johnson Foundation suggests that most employers will continue to provide health insurance benefits for employees in 2014 but a report issued by the consulting firm McKinsey found that at least 30% of employers would gain economically from dropping coverage.
Behind the expected shift is the fact that the law will give Americans new insurance options outside the workplace, and carriers will no longer be allowed to deny people coverage because they have been sick. McKinsey found that reduced the moral obligation employers may feel to provide coverage.
"History has shown that reform motivates more businesses to offer insurance in the short term" When New Jersey enacted small group health reform, the number of individuals with employer-sponsored insurance increased. But unrestrained premium increases and a long recession has gotten us near a crisis point.”
The nonpartisan Congressional Budget Office, in a March 2010 report, found that by 2019, about six million to seven million people who otherwise would have had access to coverage through their job won't have it owing to the new law. That estimate represents about 4% of the roughly 160 million people projected to have employment-based coverage in 2019.
At the meetings, Sarno explained that eligible EANJ members can provide health care coverage to their employees at a substantial savings by purchasing directly from a Multiple Employer Welfare Arrangement (MEWA). Through the MEWA, small and mid-sized employers will have the same choice of health care plans, plan design flexibility and the same cost savings as a big corporation with thousands of employees.
