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July 07, 2011 at 08:00 PM
In less than 3 years, U.S. employers may have a chance to use much of the money now spent on group health coverage for other purposes – such as increasing the income of highly paid employees.
Paul Fronstin, a researcher at Employee Benefit Research Institute (EBRI), Washington, writes about the possibility of employers dropping coverage — and using some of the savings to increase the pay of highly paid employees — in an analysis released by EBRI.
Some of the negotiators involved in drafting the Patient Protection and Affordable Care Act of 2010 (PPACA) went to great lengths to try to tailor the act in such a way that it would not crowd out much private group health coverage when major provisions take effect in 2014.
In 2014, health insurance exchanges are supposed to give consumers a “one-stop” health insurance shopping system along with health coverage purchase subsidies delivered in the form of tax credits. Employers over a certain size will have to choose between offering group health coverage or paying a penalty.
To qualify for health insurance purchase tax subsidies, workers must have incomes below a cut-off. They also must be ineligible for employer-sponsored coverage or be eligible for group coverage that costs more than 9.5% of their income or covers less than 60% of the cost of covered care.
It’s possible that PPACA opponents could have the act repealed or declared unconstitutional, Fronstin says.
But, if PPACA takes effect and works about as expected, Congress could still throw off projections about PPACA private group health coverage by imposing a tax on all or part of employer group health benefits expenditures, Fronstin says.
Critics of the group health benefits tax exclusion argue that it will cost the government about $1.1 trillion in revenue from 2012 to 2016 while doing more to help higher-income workers than lower-income workers. About 53% of the U.S. residents who have employment-based health coverage have annual incomes over 400% of the federal poverty level, or about $88,000 for a family of 4, while only 6% have incomes under 133% of the federal poverty level — the 2014 Medicaid income cut-off, according to EBRI figures.
