What Employees Should Know About Healthcare Changes Ahead
In the future, more employers are expected to adopt defined contribution healthcare plans. Instead of providing coverage, they will throw a set amount of cash at workers and have them buy their own coverage on private employer-sponsored exchanges.
Right now only about five percent of companies are using this approach, according to Alan Cohen, chief strategy officer of Liazon, a firm that sets up private exchanges for companies. But Cohen expects that in five years, half of all companies will be offering these private-choice dollar benefit plans.
Workers at big companies probably will face few immediate changes. But those who buy their own insurance, go without coverage or work for small employers will see dramatic changes in the coverage available. Here’s an early take on what employees can expect:
This tax season matters. Employees should take a look at their 2012 tax return to see if they’re going to qualify for subsidies. People who earn 400 percent of the federal poverty level or less will have their premium costs capped and excess premium covered by tax credits. Using 2012 numbers, that means that even families earning four times the poverty level – roughly $44,680 for singles and $92,200 for that family of four – would see their health insurance costs capped. At that income level, premiums couldn’t cost more than 9.5 percent of family income. Lower incomes qualify for higher subsidies.
Those whose 2013 tax return puts them on the cusp should check to see if there’s a retirement contribution or another move that would bring their income below those key levels.
Married couples should give strong consideration to filing jointly, suggests Cheryl Fish-Parcham, deputy director of Families USA. Regulations will make it difficult for married-separate filers to claim the subsidy credits.
Get educated. Fish-Parcham and her colleague, Claire McAndrew, a senior policy analyst, worry about newcomers being misled once they are required to buy health insurance. Beginning on Oct. 1, public exchanges will feature insurance plans that meet minimum guidelines. They won’t exclude people with pre-existing conditions and they won’t have lifetime spending limits. There will also be web-based exchanges run by private companies, like ehealthinsurance.com and Netquote.com, as well as private exchanges available through employers from companies like Liazon, which runs its own Bright Choices exchange. The private exchanges might offer more coverages, such as vision and dental care. “We’re a little concerned about the confusion that might result,” McAndrew said.
Families should analyze their use of the healthcare system. Knowing these patterns will make shopping for insurance easier. Do they have lots of well-child visits? Chronic conditions? Do they want to pay higher premiums for first-dollar coverage or less for higher-deductible plans?
Save money now. Those who currently have a high deductible plan with a health savings account should max out their contribution for 2012 and 2013. It’s not clear that these programs will all survive in their current form going forward. Furthermore, health insurance costs will likely rise in 2014.
As more employees are nudged to cheaper high-deductible plans, they will want to learn more about the healthcare costs, suggests Ceci Connolly, of the PwC Health Research Institute. “When the first $3,000 to $5,000 is out of your own pocketbook, you might think differently about the different tests and screenings; the things that get ordered up quickly,” she says.