Planning tool helps midsize, large employers prep for health coverage decisions

October 17, 2011 | Publication

The Center for Healthcare Research & Transformation (CHRT) today released a policy brief that explains the most significant effects of the Affordable Care Act (ACA) on midsize and large employers in Michigan and the United States.

Many surveys have predicted the likely actions of employers when the ACA goes into full effect in 2014—but the accuracy of those predictions depends largely on how well employers understand the relevant provisions of the ACA. In reality, it is likely that many employers do not yet have a full picture of the ACA and its effects on their particular business situations.

CHRT’s policy brief, The Affordable Care Act and its Effects on Midsize and Large Employers, is designed as an easy-to-understand analysis and planning tool for midsize (100–1,000 employees) and large (more than 1,000 employees) businesses to better inform their thinking about health care reform and its impact.

“Surveys to date have focused on whether employers intend to continue offering coverage or opt out. But to make that decision, employers need the detail—how the ACA applies to their particular workforce and coverage characteristics,” says Marianne Udow-Phillips, director of CHRT. “We’ve taken the law and distilled 1,000-plus pages into an eight-page document that highlights the most relevant provisions for midsize and large employers.”

CHRT’s policy brief outlines several business scenarios and shows the relevant ACA provisions for each. Employers can see where their companies fit into these scenarios, and identify the kinds of decisions they will need to make about employee health coverage.

“All employers want to understand the impact of health reform on their businesses,” says Udow-Phillips. “Most midsize and large employers already offer coverage that meets minimum affordability standards, so they may not be subject to penalties, but this does not mean they won’t face other changes as a result of reform. In fact, every employer will be affected, each in a unique way.”

New ACA provisions in 2014 that are likely to have the greatest impact on employers include:

  • “Play or Pay” rules
  • Insurance exchanges & affordability tests
  • Community rating rules
  • Essential health benefits tests
  • Nondiscrimination rules
  • Automatic enrollment of new employees
  • Excise tax on high cost plans

Employers will have to balance strategic and financial factors when making decisions about offering coverage, such as the ability to attract employees to their organization, and also tax implications: For example, it would cost an employer $1.38 to raise the after-tax wages of an employee by $11, versus $1 to offer another $1 in additional insurance coverage.

“In conjunction with getting advice from their health plans and consultants, this policy brief can be an important tool for businesses as well as policymakers,” says Udow-Phillips. “The effects of healthcare reform on business are substantial and require thoughtful, informed planning.”