So here's an insurance broker's take on it.
One of the signature lines of the health care debate came from President Barack Obama when he promised every American, "If you like your plan, you can keep your plan."
Small problem though. Almost no American controls their plan today, and will likely not be in control of it in the future. About 90% of private insurance plans are delivered via the employer, with 10% purchased on the individual market.
As a broker, I have been putting together the pieces of the puzzle for my employer clients, giving them an executive briefing on "Obamacare." Here is how it usually goes:
First, I explain how this law will cause rates to soar and how even CMS now predicts that the cost of health insurance is going up due to the new law. The 2,700-page law will put major upward pressure on insurance companies as they seek to comply. My employer clients are not happy about this since they already believe that insurance is too costly.
Next, I explain how the new government exchanges will probably become the new center of gravity in the health care economy.
If employees purchase coverage through an exchange, they will have access to government subsidies that employers will not be able to access. In an exchange, any person making up to 400% of the federal poverty level will be able to buy subsidized coverage. As a result, more than 85% of all employees may be able to get subsidized health insurance - but only if they purchase through an exchange.
I show my clients how most employer plans require about $12,000 a year to cover a family of four. In an exchange, a family of four making an income of $55,000 will receive taxpayer subsidies totalling about $8,000, making their actual cost around $4,000 annually. Quite a bargain!
Many employers respond by saying, "Then why wouldn't I just give my employee the $4,000, rather than pay $12,000 to an insurance company?"
I also explain to them how guaranteed issue coverage mandates take away the reason to purchase insurance prior to a major loss. Ask yourself, "If I can get coverage after I have a major accident, or condition, then why would I ever pay for it before?"
Then I explain how the penalties (for groups with more than 50 employees) are so low that they provide almost zero punishment for employers with no plan. The law states that employers who do not offer a plan will need to pay a monthly penalty that will total $2,000/FTE per year. Compare that with the average cost per year- more than $12,000 - and you can see that this is a proverbial no-brainer.
For the most part, my clients quickly understand that employers that do not offer insurance plans will have huge cost savings and limited financial penalties. This is especially attractive to employers in today's sagging, zero-growth economy.
We then move on to discuss the law's extensive new reporting mandates, which will essentially require employers to become census takers for the IRS. It becomes obvious that employers who have plans will either need to hire more staff or pay an outside administrator to conform to all of these new reporting requiredments. On the other hand, the reporting requirements are very minimal for employers who do not have plans.
My executive briefing with my employer client usually lasts about an hour, and by the end of it, virtually all of my clients thank me for putting together the pieces, but then conclude with a common theme: "So if this all stays the same, it is obvious that we won't have a company-sponsored plan after 2014."
They often follow this up by asking me, "So when all employers cancel their plans, what are you going to do to make a living?" (Good question.)
So what happened to President Obama's promise, "If you like your plan, you can keep your plan"?
The promise endures, but it has no substance behind it. In most cases, the employer controls the plan. If your employer elects to cancel your plan, and steers you to the government exchange, then I guess you won't get to keep your plan. Too bad!
Petno is an employee benefit adviser with Accelerated Benefits Consultants in Cleveland.