Individual Mandate Update & Potential Impact on Employers

As a recap- the individual mandate went into effect in 2012 when the Affordable Care Act (ACA) first launched, requiring all individuals to carry some form of health insurance, or, pay a penalty fine when filing taxes for the prior year with no coverage. The penalty started at $95 or 1% of household income (greater of the two) and increased each year, leaping to the 2017 penalty of $695 or 2.5% of household income.

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Proactive employers prepared for a certain percentage of uninsured employees to join their health plan over the last 5 years as the penalty increased and ensured they budgeted appropriately for the spike in employee enrollment. With the recent announcement of the elimination of the individual mandate for the 2018 tax year and beyond, should employers plan to have that same percentage who joined their health plan drop off? It’s possible. This is something employers should remain aware of, as they could see a decrease in enrollment as a result of this change in the law. So, if fewer employees enroll in the health plan it would likely mean a smaller employer spend. This would be a good thing for employers, right? Wrong.

Those individuals who choose to go uninsured are likely the ones who do not need, or use, the health insurance system, i.e. the healthiest of your employee population. Who will choose to remain covered on your employer sponsored health insurance plan? You guessed it, it’s likely those who are unhealthy who will remain on the plan and incur claims. The change in the Individual mandate could lead to a decrease in employee enrollment, less premium dollars, and increased claims, causing medical loss ratios to sky rocket due to this unbalanced ratio and overall employer premiums to rise. As the Employer Mandate is not going away, the affordability portion of ACA will continue to limit the amount of employee dollars that can be received towards the overall plan premium.

Although you may not anticipate huge fluctuation in enrollment as a result of this change in law, consider shifting to a more consumer driven plan such as a Health Savings Account tied to a High Deductible Health Plan (HSA/HDHP), or a Health Reimbursement Account (HRA), if you don’t already have this plan structure in place. This may be a way to shift some responsibility to your employees and allow them the opportunity to be better consumers of the healthcare system. Always good to plan for the future!


ABOUT THE AUTHOR

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Candace Conforte is a Sales Executive at Bouchard Insurance. Candace specializes in Property & Casualty, Workers’ Compensation, and Health Benefits for large commercial accounts | Connect on LinkedIn