With open enrollment in full swing at most companies, your employees may be wondering how your company's health plan compares to those available on the exchange.
Premiums for health plans on the federal exchange will jump an average of 25% for benchmark plans (tied to premium tax credits) next year. This increase is substantially higher than the 2% increases in 2015 and 7% this year.
Compared to plans found on the public exchanges, large employers’ health plan costs are much more stable on average with employers projecting that they’ll be able to keep health care cost increases down to 5% in 2017 (for the third consecutive year) after plan design changes, according to the National Business Group on Health® Large Employers' 2017 Health Plan Design Survey.
• Employers subsidize 60%-70% of the cost of coverage for employees while federal subsidies on the exchange are only available to people who qualify based on their incomes. Employees who are offered affordable and comprehensive employer coverage may be ineligible for premium tax credits.
• The employee contribution for employer coverage is in pre-tax dollars while premiums for exchange coverage must be paid using after-tax dollars. Thus, for a true dollar for dollar comparison, employees must multiply the premium exchange amount by a percentage to reflect their income tax bracket. For example, if they are in the 25% tax bracket, they would need to multiply the exchange premium amount by 1.25 to compare with the cost of your company’s plan.
• If they are in an HSA plan, they may be receiving an employer contribution to their account whereas HSA plans on the state exchanges do not have employer contributions.
• Deductibles and coinsurance/copayments are also increasing for plans on the exchanges. Employees should compare their out-of-pocket costs and limits on your plan with those available to them on the exchanges in addition to comparing premiums.
An analysis of 2016 cost-sharing arrangements found for silver plans on the public exchanges found that the average in-network deductible for single coverage was $3,000 and that the in-network out-of-pocket maximum was $6,500. In 2017, the average in-network deductible for single coverage is $3,500 for individual coverage and the in-network out-of-pocket maximum is $6,600. Both deductibles and out-of-pocket maximums are lower for employees of large employers – especially when accounting for health account contributions made by the employer.
If you have populations relying on the exchanges, encourage them to shop around for lower cost options and to apply for tax credits and help with their out-of-pocket expenses if they have household incomes that are at or below 400% of the federal poverty level ($47,520 for individual and $97,200 for a household of 4 in 2016; 2017 levels will be available around January 20, 2017).