In 2014, when many of the provisions of the Affordable Care Act actually take effect, business owners will have serious decisions to make about their employee benefit policies. The choice will be to continue with employer-sponsored insurance (ESI) policies or eliminate ESIs which may force some employees to take subsidized-exchange policies. Both options have drawbacks, but what’s best for each company will vary.
The Congressional Budget office suggests that only 7% of Americans will end up having to switch to a subsidized-exchange policy because an employer eliminates an ESI. In reality, however, that number will be closer to 30%. In fact, the McKinsey Quarterly’s recent report predicts that the number could reach as high as 50 or 60% for employers with a “high awareness” of the reform.
- 45-50% of employers expect to purse ESI alternatives
Employers may have to pay higher salaries should they decide to get rid of an ESI, but there may be upsides to not offering benefits:
- 30% of employers will see economic gains from eliminating their ESI
- Employers will retain 85% of employees even if they eliminate their ESI
There will also be demands:
- Lower-income employees will qualify for exchange subsidies if not provided affordable coverage, and so ESIs may gear toward higher-income employees who may demand more services and benefits
Employers will still be paying for employee benefits whether it is through an ESI or through salaries for employees to pay for their own plan. There are many issues that CEOs need to learn about before 2014 so that they can make the best decision for their company. And this is just the beginning.