What if employers started giving workers a chunk of cash to buy health insurance on their own instead of offering them a chance to buy into the company plan? Are workers ready to manage their own health insurance like they do a 401(k)?Imagine that.
The idea that employers might drop their health plans and replace them with a "defined contribution" for employees has been around for years. It's one way for employers to control their expenses in the face of the relentlessly rising costs of health care.
Now that the Affordable Care Act has made non-company plans more accessible and affordable by creating online marketplaces where people can shop for coverage, the idea is gaining traction.
"The technology has caught up to the concept," says Paul Fronstin, director of the health research and education program at the Employee Benefit Research Institute.
Some analysts anticipate a major shift to these plans in coming years. A recent study by S&P Capital IQ predicted that 90 percent of workers who now get their health insurance through a job will be moved to health insurance exchanges by 2020.
But a wholesale shift away from employer-sponsored coverage is unlikely. For one thing, under the health law employers with 50 or more workers that don't offer health insurance will likely face a penalty of $2,000 per worker (minus the first 30 workers), beginning in 2015.
If employees do drop coverage, it could be a huge change from the way things are now. The employer-paid subsidies to monthly premiums that employees get for employer-sponsored group coverage currently aren't taxed as income to the worker.
If an employer dropped group coverage and instead offered employees $5,000 to buy an individual plan on an exchange, workers would owe income tax on that amount. Employees earning less than 400 percent of the federal poverty level (right now that's $45,960 for an individual or $94,200 for a family of four) could qualify for tax credits to reduce the cost of their monthly insurance premium, but workers who earn more than that wouldn't benefit.
Tuesday, August 30, 2016
Posted by Steve Bartin at 8:14 AM