Making sense of the exchange
by David Bottoms
June 03, 2013 12:00 AM | 676 views | 0 0 comments | 14 14 recommendations | email to a friend | print
David Bottoms (Staff)
David Bottoms (Staff)
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As full implementation of the Affordable Care Act, a.k.a. Health Care Reform, is set to occur in 2014, many employers and certainly most employees have questions regarding how the Exchange in Georgia will function. This month’s article was crafted in the interest of providing perspective on the Exchange and to ensure that employers are aware of their recently clarified responsibility to properly notify their employees of the Exchange availability no later than October 1, 2013.

During the Fall of 2013, citizens will be able to view options and enroll in health coverage effective January 1, 2014, and later, through an online health insurance portal commonly referred to as an Exchange, or as the federal government is now calling it, a “Marketplace.”

For the first time in the state of Georgia, individual medical coverage will be offered regardless of an applicant’s health status, and insurance carriers will be prohibited from imposing any pre-existing condition limitations. While this will certainly come as wonderful news to those who have struggled to find health coverage in the past due to strict underwriting requirements, the mandate that underwriting standards be relaxed has many insurance carriers concerned about a tsunami of “bad risk” entering the insurance pools in 2014. Accordingly, many carriers are publically stating their expectation that rates for health coverage in the individual market will be significantly increased beginning January 1, 2014. Of note, the most drastic impact is likely to be felt by younger enrollees due to some very specific and complex nuances of the new “community rating” requirements.

To the extent that an employer provides coverage that meets the minimum essential benefit requirements under the law and the premium required for the employee’s coverage election is less than 9.5 percent of that employee’s household income, it is unlikely that the Exchange will be of much value to employees as government premium subsidies will not be available to offset the cost of coverage. As such, it is unlikely that the Exchange options will be of much benefit to individuals with access to employer-provided and subsidized health insurance options. Additionally, the fact that coverage purchased through the Exchange must be purchased with after-tax dollars will further reduce the competitiveness of Exchange purchased relative to coverage available through an employer which can be purchased pre-tax through the employer’s Section 125 cafeteria plan.

As such, health coverage available to an employee through their employer will likely become more attractive than ever before as the premium increases in the individual market are expected to outpace premium increases in the mid and large employer market.

Nonetheless, per guidance released May 8, 2013, by the Department of Labor, virtually all employers must provide all employees specific notice of the Exchange no later than October 1, 2013. Importantly, notice must be provided regardless of whether the employer offers health coverage and it must be provided to all employees, regardless of their specific employment status (full-time, part-time, seasonal, etc.). The notice must be delivered via first-class mail, or electronically under the DOL’s electronic disclosure safe harbor rules which, for the most part, permit email and electronic communication to employees who have computer access as a regular function of their job. Additionally, all new hires after October 1, 2013, must be provided notice within 14 days of hire.

Model notices and specific details of the employee notification requirements are available at the following address: http://www.dol.gov/ebsa/healthreform/.

In short, the provision of the notices to employees is sure to arouse questions related to the Exchange, how it will work, and whether it will be of benefit to employees. While in many cases, the Exchange options will be of little value to those with access to employer provided coverage, employers would be wise to familiarize themselves with the general structure of the Exchange and the required notices so that they can be prepared to address the employee questions that are sure to come.

David Bottoms is senior vice president of The Bottoms Group and a principal of TBX Benefit Partners.

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