Milliman helps employers quantify the potential costs for various provisions of the Affordable Care Act and assists with identifying key plan design considerations.
The Patient Protection and Affordable Care Act (ACA) will introduce significant changes to the commercial health insurance landscape, requiring employers to quantify the shifting cost impacts for their plans. Rather than employer-sponsored insurance offering the sole source for guaranteed issue insurance, many employees may have alternative sources of coverage through expansion of Medicaid eligibility or premium subsidies through the state or federal exchanges. The new law will also offer coverage for preexisting conditions, and generally affordable coverage for all.
With healthcare reform, employers face three major categories of uncertainty with respect to costs:
- Participation rates. Some larger employers may face materially higher number of employees being covered by their health plans, given the law’s provisions such as the individual mandate, coverage of dependents to age 26, and the potential for small employer health plan termination.
- Penalties and fees. Employers will be required to meet minimum standards for plan actuarial value and plan affordability, or potentially incur penalties under the law. Additionally, there will be fees for the transitional reinsurance program, the health insurer assessment, among other provisions.
- Future cost increases. The implementation of the law may still result in significant additional costs above normal healthcare inflation.
Estimating the resulting costs
All future plan design changes must be made in the context of the law’s cost impacts. Milliman can quantify numerous aspects for each provision and identify key considerations, including:
- Weighing the cost of penalties versus providing coverage.
- Estimating employee eligibility for Medicaid or the premium subsidy tax credit.
- Quantifying the cost of fees, benefit mandates, and administrative requirements.
- Estimating the potential for covering a significantly higher number of participants a plan.
Delivering a strategy to maximize new provisions
Based on the initial results of the study, Milliman professionals can develop a long-term employee benefit plan that will optimize benefit dollars in the new environment. Potential strategies include:
- Allowing optimal employee health insurance coverage through Medicaid, usage of the premium subsidy tax credit in the exchange or under a plan.
- Calibrating the usage of wellness incentives to better align differences in employee contributions with healthcare costs.
Every employer needs a strategy to manage the complexity of the new healthcare landscape. Please contact us to learn how Milliman can help you understand and prepare for potential future benefit costs.