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Pay or Play? Time to start thinking about 2014.

Everywhere you turn these days people are talking about healthcare reform and the PPACA.  Most of the talk is about the Constitutionality challenges to the mandate on coverage or other aspects of the act.  What I haven’t seen too much discussion about is preparation for one of the most impactful changes under the PPACA; the state run exchanges coming in 2014.  Sure, some or all of the PPACA might be overturned or rewritten, but it seems inevitable that public exchanges, private exchanges or both are around the corner. 

What are companies doing to prepare for this huge change and what are brokers and consultants doing to educate and prepare their clients?  Many struggling companies and those in industries that don’t need to worry about employee retention will take this as an opportunity to drop coverage.  The only formula they care about is penalties < cost of coverage.  They see this as an opportunity to reduce total compensation to their employees and book the difference.  However, most employers are not going to take this simplistic view of the decision to “Pay or Play”.  Many companies face competition to attract and retain employees even in a down market, and who knows what the job market will look like two years from now.  Other employers realize that even in the absence of intense competition for employees, a happy and healthy employee is a more productive one.  

So what can a broker or consultant do?  The first step is to educate yourself and co-workers on what is involved in the decision to Pay or Play.  You can only then start to educate your clients on the many inputs and considerations to this decision.  Cost of coverage, out of pocket costs, employer penalties, subsidies and taxes are the major considerations.  Employers will want to consider the total impact to their cost as well as their employees and the most prudent employers will seek out the option that offers the best value and lowest cost for their company and employees in aggregate.   Complicating the issue further is the fact that the effect to employees of sending them to the exchanges will vary, sometimes greatly, employee to employee.  Fairness and effect to key employees are also considerations of the prudent employer.

So when should employers start thinking about the Pay or Play decision?  As my title suggests, the best time is now.  One option available to employers will be to revise the coverage they offer employees, perhaps to utilize consumer driven health plans or to move towards a self funded platform.  These changes are often times easier to make over two plan years rather than one, allowing for a more gradual change.  The decision isn’t an easy one though; the considerations are complicated and it is difficult to get the right information to make the right decision.  Proper decision making requires good information, and in this case that means comprehensive modeling of the options available to the employer.  Benefit Innovators is one company offering this type of modeling to brokers and consultants that are looking to be that decision making partner with their clients.  Employers are going to be looking for answers, if they aren’t already.  An informed broker or consultant is one in a position to retain those clients asking questions, regardless of the coverage option they end up choosing.  I recommend insurance professionals, at the very least, be knowledgeable enough to encourage employers to consider all ramifications and options before making the decision to Pay or Play.

2 comments | Add a New Comment
1. Jennifer | July 13, 2012 at 05:00 PM EDT

This posting is nearly 10 months old, and the SOTUS' decision to pass PPACA in it's entirety has been announced. What is the status of the \"modeling\" you will do with brokers? Are you providing a decision making tool or service?


2. Benefit Innovators | January 28, 2014 at 01:55 PM EST

Jennifer, sorry we never replied to you. We have had a problem with spam comments making it difficult to filter out the relevant comments. Our Pay or Play Modeling has been available since this original post. As you can imagine, it has also been updated multiple times as the regulation changes and comes out. Our current version is now modeling the impact of healthcare reform in 2015 when the shared responsibility taxes (\\\employer penalties\\\) begin. Thank you for your question.

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