Public Exchanges Competitive with Employer-Sponsored Plan

Originally posted January 30, 2014 by Michael Giardina on

Premiums for health plans on new state exchanges under the Affordable Care Act are comparable to – and in some cases lower than – those being offered by employers with similar levels of coverage, according to a study released Thursday by PricewaterhouseCooper’s Health Research Institute.

HRI analyzed the average premium costs for a working population nationally in the public exchanges, and calculated that the median 2014 premium for a plan with coverage similar to that of the average employer-sponsored plan was $5,844. By comparison, the average employer premium for a single worker was $6,119, a difference of 4%. The premiums do not include subsidies.

The ACA allows for consumers to shop on its 51 new state exchanges within four plan levels; these include bronze, which pays 60% of healthcare costs; silver, which covers 70%; gold, which covers 80%; and platinum, which covers 90% of the bill.

Currently, employer-sponsored health plans cover about 85% of healthcare costs, with the remaining costs being charged to employees, the PwC study states.

Across the board, at every level, average exchange premiums are lower than this year’s average premiums for employer-sponsored coverage, according to the data.

“Employers may be surprised that exchange premiums in 2014 are comparable to employer premiums and in some states significantly lower than employer-based premiums,” says the report. “Employers contemplating future limits to their health care spending could face less resistance if employees are given a wider range of options at different price points via an exchange.”

The report cautions, however, that future fluctuations in public exchange rates are possible because health plans are competing under a new set of underwriting rules which provide some protections against financial risk. “As a result of this uncertainty, the first-year exchange rates vary significantly. It may take several years for this new market to reach equilibrium,” it says.

HRI’s analysis is based  data of employer-sponsored premiums of 156 million people in 2013. The analysis compares the premiums paid by employers for single worker coverage to premiums paid for similar coverage in the state exchanges.

Commitment to employer-sponsored health plans on the rise


By Kathryn Mayer

What a difference a year can make. A new industry report finds that significantly more employers than last year say they will “definitely” continue to provide health care coverage when health exchanges come online next year.

According to preliminary survey results from the International Foundation of Employee Benefit Plans, 69 percent of employers said they will definitely continue to provide employer-sponsored health care in 2014, while another 25 percent said they are very likely to continue employer-sponsored health care.

That’s a 23 point increase from 2012, when 46 percent reported being certain that they would continue employer-sponsored health care.

Opponents of President Obama’s Patient Protection and Affordable Care Act have argued that employers are likely to drop health coverage as an unintended consequence of the law that will negatively affect employees who want to stick with the coverage they know and like.

Estimates have varied widely on just what reform will do to employer-based health coverage. A Deloitte report last summer estimated that one in 10 employers will drop coverage for their employees, while consulting firm McKinsey & Co. drew fire when it stated 30 percent of respondents will “definitely” or “probably” stop offering employer-sponsored health insurance after 2014.

The IFEBP survey found the vast majority of employers (90 percent) have moved beyond a “wait and see” mode, and more than half are developing tactics to deal with the implications of reform. Organizations maintaining a wait-and-see mode decreased from 31 percent in 2012 to less than 10 percent in 2013.

Since the foundation’s first survey regarding reform’s impact on employer-sponsored coverage in 2010, employers have most commonly said keeping compliant was their top focus. In 2013, for the first time, most employers said their top focus is developing tactics to deal with implications of the law.

Still, the survey found estimates of cost increases directly associated with the PPACA have increased from 2012 to 2013. Employers with 50 or fewer employees are reporting the largest anticipated cost increase. Conversely, larger employers are the least likely to see significant cost increases.

Reform is expected to have a bigger impact on smaller employers than larger ones. Small businesses are making more employment-based decisions with hiring, firing and reallocating hours than larger employers, and they are more likely to drop coverage due to PPACA.

Despite employers' commitment to employer-sponsored health coverage, Gallup reported earlier this year that 44.5 percent of Americans got employer-based coverage in 2012, the lowest percentage since President Obama took office.

Results are based on survey responses submitted by more than 950 employee benefit professionals and practitioners through March 26.


Financial Advice

Although employers usually aren't employees’ first source of financial information, they are regarded as valuable resources for retirement help by workers, according to a new study.

Two-thirds of adults in a recent TIAA-CREF survey said they trust the financial advice provided by their employer. Additionally, one-fifth of respondents said they have trouble finding useful financial information.