Workers expect their defined contribution plans to play a greater role in their retirement income than annuities.
Jan. 31--Company number crunchers are stressed. Workers twist in limbo. But health insurance advisers predict that when employers master the new math and consequences of Obamacare, most will opt to keep providing coverage.
The online insurance exchange, the marketplace that is a cornerstone of federal health care reform, starts Jan. 1. So does the mandate that all California companies with at least 50 full-time equivalent employees face penalties if they don't provide insurance that pays for at least 60 percent of their workers health care costs.
The fear, pushed by premium prices expected to rise higher and faster, is that employers will decide they can save money by dropping their insurance and absorbing the $2,000 per full-time employee penalty. Their workers would be pushed toward the new exchange, maybe with a salary hike aimed at defraying their burden, maybe not.
At Clean Diesel Technologies Inc. in Ventura, no decisions have been made. Company leaders say they need to know more about how the insurance exchange would work and how any decision they do make would affect their workers.
But they are intrigued by a provision of the law that means they would be exempt from penalties for their first 30 employees. If they dropped their insurance and sent employees to the new insurance market -- the health benefit exchange -- they would have to pay fines for only 50 of their workers.
"We do have to take a look at different options," said the company's human resources director, Alex Rivera, adding that decisions are driven by not only by the cost of the premiums but the cost of coordinating the coverage. "It may be in the future because perhaps it would alleviate some of the administrative burden for a company like ours."
There will be sticker shock come Jan. 1, said Chuck Rosen, of Simi Valley, president of the California Association of Health Underwriters. Some employers will also have to pay more to increase their benefits. Plans not only have to pay for at least 60 percent of health costs, but an employee's share of coverage can't exceed 9.5 percent of his or hers household income.
But if employers drop coverage, they'll have to pay the fines. They'll lose the tax write-off that comes with providing insurance. An employee who doesn't qualify for subsidies could end up paying more because their premiums won't be sheltered from taxes.
It means workers will expect more money to cover the dropped benefit.
"He's going to go back to his employer and say I need a raise. I can't afford my premium," Rosen said. "It's very, very shortsighted for an employer to drop that coverage. It very well may cost them more money in the long run. Number two, it's just going to alienate their employees."
Some companies are considering other options. Callan Carter, a San Francisco employment benefits lawyer, said one of her clients has decided to restructure a mid-sized company into four small businesses with fewer than 50 full-time equivalent employees. That means the firms will be exempt from the mandate to provide coverage.
Other employers are limiting their work weeks to 29 hours so workers will be defined as part time. Some companies are considering offering increased pay to help their employees shoulder the burden of insurance.
"I have heard some employers say 'Can I just drop my health insurance and just give them $200 a month?' " Carter said. "The answer is, 'Sure, but you still have to pay the fine.' "
Carter thinks that cost calculations may show many employers that they could save money by not offering insurance.
But she also thinks the vast majority of employers will decide to keep their coverage, partly because they compete for workers with other businesses. Providing insurance allows them to protect and retain their employees.
"Employers are wary of just dumping their employees on the exchange for fear it will be a mess," she said.
Other advisers cite tax advantages and penalties that include a fine of $3,000 for each employee who leaves a company plan that doesn't meet government standards and ends up in a subsidized plan on the exchange.
"I'm sure that some employers will decide to drop coverage this year," said Marian Mulkey of the California HealthCare Foundation. "I really think if they're thinking through all their options, most might look at it ... but they probably wouldn't do it."
If large companies save money by dropping insurance, it won't be much, said John J. Nelson, co-CEO of the Warner Pacific Insurance Services in Westlake Village that employs about 100 people. Providing insurance is about more than the bottom line, he said.
"You can't measure it in strict monetary terms," he said, noting that opting out is not an option at his company. "Morale is important. Security is important. How do you put a price on that?"
California Retail Systems in Ventura pays about $8,000 a month to cover its 11 employees. Because of its size, the company is exempt from the Obamacare mandate to cover insurance. And if prices continue to rise, the decision of whether to provide coverage may be made for them.
"It all depends on cost," said Lorraine Lisle, the company's assistant general manager, noting that a decision on next year's coverage hasn't been made. "We are taking this month by month."
The exchange includes an arm aimed at small businesses. As of Jan. 1, businesses with fewer than 50 employees can buy group insurance through the exchange. Some will qualify for a 50 percent federal tax credit.
If employers are confused about the options, so are their employees. Debbi Thompson, of Simi Valley, works for a manufacturer that may be small enough to be exempt from health care reform. She's not sure because she knows little about Obamacare and less about the online insurance marketplace.
What she does know is that she was paying $40 a month for insurance. Now she pays $88 a month.
"If it doubles again, I'm probably not going to be able to afford health care. It's ridiculous," she said, offering an option other than the Affordable Care Act. "Just don't get sick."
Paying the penalty
Businesses with 50 or more full-time equivalent employees will face fines for not providing coverage.
Those fines kick in if one full-time employee receives government subsidized care on the exchange. Subsidies start for people who make up to 400 percent of the federal poverty level, meaning $92,200 for a family of four.
Penalties include a $2,000 fine for every full-time employee in a company. A business is exempt for its first 30 full-time employees.
If a company offers a plan that doesn't meet government standards, it faces a $3,000 fine for every full-time employee that goes to the exchange and receives subsidized coverage.
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