Predictions on the Affordable Care Act’s effect on producers range from dire to positive, but most all agree that a lot remains to be seen. For producers in some states, however, the added variable of minimum participation regulations make the matter much more complicated.
At issue are state requirements that businesses must have a certain percentage of employees participate in its health insurance plan in order to offer coverage. Some health carriers also impose such requirements.
For businesses with more than 50 people, the requirements are a non-issue. Under the ACA, they must offer coverage to employees or face a penalty.For small employers and the producers who advise them, however, the consequences of these regulations are more extreme: if too many employees opt for coverage under the ACA's individual marketplace rather than through their employer, that business will be out of a health plan and its producer out of a job.
Matthew Roy, president of employee-benefits broker Blue Ocean Benefits, is worried that the 75% minimum participation rate required by his home state of New Jersey could produce just such an outcome if federal subsidies under the ACA prove too tempting for small business employees to resist.
“There is a concern among brokers with smaller groups that if they’ve got one or two people going on the exchange, it could blow up a whole group plan,” Roy said. “[The ACA] has a lot of unintended consequences, and this is one of them.”
Generally, federal government subsidies aren't available to an individual who has the option of affordable coverage through their employer, but Roy said people find "gray areas" that allow them to slip between the cracks.
"You're going to have people who fall into gray areas," he said. "People who have quit a job and just started a new one, people who qualify for the subsidies anyway...even fraud. Eventually, someone might get caught [on lying about their income], but that will be one or two years down the road."
Employers that can’t meet participation requirements do have some options that might keep producers in demand. In states like Pennsylvania, the government is granting a waiver to employees who enroll individually through the ACA. That means that employee’s enrollment will count towards the employer’s minimum participation rate.
Additionally, HHS regulations on SHOP—the ACA’s exchange for small businesses of between two and 49 employees—may help. Carriers participating in SHOP are required to issue group policies without regard to state law “minimum participation” requirements during annual open enrollment periods from Nov. 15 to Dec. 15. This would allow producers to enroll small group employers in ACA plans without regard to the default 70% minimum participation rate agreed upon by HHS.
However, Roy points out that outside of the enrollment period, SHOP will withhold coverage until the employer meets the 70% requirement. Additionally, if the employer falls below the threshold during a plan year, the coverage will discontinue at the renewal period.
All this leaves producers without long-term solutions for clients.
“My understanding is that you’d be able to offer [coverage] for a year, but if the employer doesn’t require minimum participation at the end of the year, you’ll fall off again,” Roy said.
What’s more, some industry officials believe most small businesses will choose to drop health coverage altogether—a decision that would totally cut out producers.
“It’s a game changer for brokers, I think. [Small businesses] don’t have to offer insurance. They’re not penalized for not offering it,” said John Sarno, president of the Employers Association of New Jersey. “The problem for small businesses that want to continue to offer insurance is that it will become too expensive.”
Sarno also said he believes most small businesses will not qualify for the tax subsidies offered through SHOP—yet another reason to stop offering coverage.
Despite this disheartening outlook, Roy said he’s not counting himself and other producers out of the game yet.
“We’ll have to wait and see,” he said. “It still remains to be seen whether it’s going to be a problem.”