Exchanges Launch: For Employers, How Significant Was Oct. 1?

Explain the value of employer-provided health benefits versus exchange-based options

By Stephen Miller, CEBS October 1, 2013

The Oct. 1, 2013, launch of federal- and state-run health insurance exchanges (or marketplaces) was an occasion for much media ballyhoo about the Patient Protection and Affordable Care Act (ACA). For employers, however, the date’s significance was undercut by a series of postponements. These included, most significantly, a one-year delayuntil January 2015 of the "shared responsibility"—or "play or pay"—mandate that employers with 50 or more ful-time equivalent workers provide health coverage to those who work an average of 30 or more hours a week, or else pay a $2,000 penalty for each full-time worker over a 30-employee threshold.

Then, a Sept. 26 announcement by the Department of Health and Human Services (HHS) revealed that federally run exchanges are delaying the launch of the Small Business Health Options Program (SHOP) until November. The 17 state-run exchanges now may either launch or delay their SHOP exchanges.

SHOP is a separate online marketplace where small employers may purchase ACA-compliant small-group-market plans. For 2014 and 2015, states can decide whether to include businesses with 100 or fewer or 50 or fewer employees in their SHOP exchange; in 2016, all businesses with 100 or fewer employees must be able to purchase insurance through these exchanges. States will be able to add large-group-market plans to their SHOP exchanges beginning in 2017.

Eligible companies may purchase a SHOP plan on behalf of their employees or allow workers to select their own plan from the SHOP menu.

Previously, HHS had announced a one-year delay to a key component of SHOP, stating that for plan year 2014 SHOP exchanges only would be required to offer a single plan option rather than multiple competitive plans. State-run SHOP exchanges may still offer competing plansif they so choose.

Given these suspensions and interruptions, what significance does Oct. 1 still have for employers?

Actually, the exchages' launch has several important ramifications. First, organizations subject to the Fair Labor Standards Act (FLSA) are required to provide all their employees by Oct. 1 of each year (and to all new employees at the time of hiring) notices describing the government-run health care exchanges,including a description of the services provided and the manner in which employees may contact an exchange to request assistance, among other information.

Although on Sept. 11, 2013, the Department of Labor announced that no penalty will be imposed on employers that fail to provide exchange notices to workers, benefits attorneys advise that these notifications nevertheless be distributed—either via print or, when criteria is met, electronically.

The Exchanges’ Lure

Benefits advisors also recommend that employers use open enrollment communications as an opportunityto explain the value of the health benefits they provide in comparison with the exchanges. For instance, workers should be aware if they are unlikely to find a better deal through the exchanges, and whether they are unlikely to qualify for exchange-based federal subsidies being granted to low-income workers whose employers fail to provide “affordable” coverage.

Employers should make it easy for workers to compare company-offered coverage with exchange-provided insurance plans, Jennifer Benz, CEO of Benz Communications, an HR and benefits communication strategy firm, told SHRM Online. That's because there is a danger employees might enroll through exchanges and discover later that they do not qualify for an expected subsidy. And employers might face higher health care costs if young and relatively healthy employees shun their plans, leaving them with mostly older and less healthy enrollees.

The situation is different, however, regarding departing employees—including pre-Medicare retirees—as it might be in their interest, and that of their former employers, if they choose coverage through an exchange. COBRA enables former workers to keep their employer-provided coverage for up to 18 months if they pay the entire premium plus a 2 percent administrative fee. Many would likely be better off buying a plan on a public exchange, where premium tax credits are available to those with an income between 100 percent and 400 percent of the federal poverty level($11,490 to $45,960 for an individual in 2013), which often makes exchange coverage significantly more affordable than COBRA.

Businesses, in turn, would be freed from the administrative burden of having ex-employees enrolled in their plan. For self-insured organizations, the savings derived from having fewer older enrollees could be substantial.

Preparing for Jan. 1

For employers who provide health coverage, Jan. 1, 2014, may be a more noteworthy date than Oct. 1, 2013. Among the many ACA provisions that require compliance for plan year 2014:

  • The need to provide at least minimum value coverage.
  • Elimination of annual dollar limitson essential health benefits.
  • Inclusion by grandfathered plans of adult children up to age 26.
  • A limit on coverage waiting periods to no more than 90 days.
  • New wellness incentive rules that increase the maximum reward up to 30 percent of the premium cost of individual coverage, and up to 50 percent of the premium cost as an incentive tied to tobacco-reduction programs.

In addition, as of Jan. 1—for both fully insured and self-insured nongrandfathered plans—maximum limits will prohibit out-of-pocket spending that exceeds $6,350 for individual coverage and $12,700 for family coverage. And summaries of benefits and coverage (SBCs) must be prepared and distributed using an updated templatefor both grandfathered and nongrandfathered plans in the insured and self-funded market.

As important as Oct. 1 may have been, it was just one deadline among many in the long rollout of health care reform.

Stephen Miller, CEBS, is an online editor/manager for SHRM.

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