What Would ACA Changes Mean To Workplace Plans?

When the Affordable Care Act was enacted more than 10 years ago, its creators sought to reconfigure the U.S. health care system. The law aimed to lower the uninsured rate and provide consumers with a choice of plans that are both comprehensive in nature and designed to meet an individual’s or family’s budgetary needs.

President Joe Biden campaigned on “strengthening” and “improving” the ACA, so it comes as no surprise that the Biden administration furthered the ACA’s objectives by changing the law in the following ways through the American Rescue Plan:

• Making the ACA’s premium subsidies available to people with incomes above 400% of the Federal Poverty Level.
• Increasing the premium subsidy amounts by redefining “affordability” and benchmarking the subsidy amounts to the higher-costing gold plan.

The administration also wants to allow employees who may be offered an “affordable/minimum value” employer plan to access a premium subsidy if they voluntarily choose to purchase an individual market exchange plan.

There is no doubt that these ACA changes will increase enrollment in individual market plans. How these changes will impact employer plans is less clear.

Understanding ‘Risk Pool’

To better understand the potential outcomes of these policies, let’s start by addressing the insurance “risk pool,” which can lead to either lower or higher premiums for employers.

Right off the bat, we know that Biden’s changes to subsidies will be attractive to low- and middle-income employees who qualify for generous government subsidies. This would include younger employees who are typically lower income because they are just starting out in the workforce.

If these younger (and probably healthier) employees choose to opt out of their employer plan and effectively leave the employer’s risk pool, it is likely that, in most cases, only older or sicker employees would remain.

The older and less healthy population uses their health plans more often, which costs the insurance company more. This leads to higher premiums. The opposite is true as well. If the pool consists of healthier individuals with lower plan usage, the cost of premiums drop. Therefore, a balanced risk pool is ideal.

The Result? A Mixed Bag Primarily Benefiting Consumers

The shift could increase costs for employers, at least in the short term. Taking the long view, however, I fully expect that businesses will adapt and come up with innovative ways to maximize the benefits of the ACA to ensure that their employees have access to quality and affordable health coverage.

Meanwhile, the benefits and improvements to the individual market would be substantial, as it is highly likely that more individuals will purchase a subsidized individual market ACA exchange plan. If employees can opt out of their employer coverage and purchase a subsidized individual market ACA exchange plan, according to a recent KFF analysis, the individual market could grow by millions.

The bottom line is this: Some of the proposed changes could fundamentally shift the way people in our country get their health insurance. And while these changes may initially have an unfavorable impact on employer plans, ultimately, I believe that these changes would be for the betterment of U.S. public health and the American people.

Chini Krishnan is co-founder and CEO of GetInsured. He may be contacted at [email protected].

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