Brokers Expect More ACA Business

The recent Supreme Court ruling has lifted some doubts for employers.

By: Anne Freedman | July 21, 2015

Now that the Supreme Court has cleared up a major question regarding federal subsidies permitted under the Affordable Care Act in its King vs. Burwell decision, some brokers and employee benefits consultants are expecting employers to seek more strategic advice.

“It provides absolute clarity that these are the federal rules we will be living under for the foreseeable future at least,” said Sean Waggoner, executive vice president, Alliant Insurance Services.

“We’ve gone from a [pre-ACA] environment where we brokered and placed insurance contracts,” he said. “Now, we are spending a lot more time consulting with clients on operational changes to their businesses based on this.”

Karin Landry, managing partner, Spring Consulting, said the ACA offers “an opportunity for the broker/consultant that wants to change and evolve and become an ACA expert, but it’s probably less business for those that don’t want to change and evolve.”

Some brokers, she said, are seeking to minimize their involvement with health care because of the law’s complexity. Others are selling their businesses or merging with another organization that offers the expertise.

As for employers, larger organizations have been prepared to comply with all of the law’s requirements, while some smaller and mid-size companies “have been taking more of a wait-and-see attitude. … I think most people feel like it’s here to stay and they have to deal with it and move forward and develop their strategies accordingly.”

“The mid-size employers who have not had a strong broker/consulting relationship,” she said, “will now need one for sure.”

Jim Winkler, chief innovation officer, Aon Health, said the “uncertainty as we awaited the Supreme Court ruling meant employers did not make significant changes to their plans for the last year or two. We now anticipate that we will see those types of changes.”

“The most immediate and pressing need, for many employers, is to come up with a more compelling strategy for their non-Medicare-eligible retirees.”
— Jim Winkler,  chief innovation officer, Aon Health

Winkler said the “most immediate and pressing need for many employers is to come up with a more compelling strategy for their non-Medicare-eligible retirees.”

For employers that provide health care benefits to retirees under the age of 65, they must account for the future value of such benefits on their balance sheet, he said. With the High Court upholding the constitutionality of subsidies available via marketplace exchanges in the states, employers may opt to change from a defined-benefit medical plan to a defined-contribution plan.

Offering a set monetary amount to be used for health care on the exchange instead of offering an employer-based plan provides more plan choices for former employees — and possibly at a lower cost than their contribution to their current employer plan, Winkler said.

It also allows employers to cap their spending at a designated amount each year, Winkler said.

“I’ve worked on several of those projects already,” Alliant’s Waggoner agreed. “It creates pretty significant bottom line results for the client.”

He said the ACA’s prohibition on pre-existing condition exclusions and flattened rating table makes it easier for older adults to purchase health care plans, especially with the help of federal subsidies.

Doug Luick, area senior vice president, health and welfare consulting, Arthur J. Gallagher & Co., said that one utility electric cooperative recently made the decision to sunset its early retiree medical provision, which was “almost a handcuff around them,” as it resulted in high claims exposure, limited benefit plans and ever-increasing costs.

As of 2016, he said, the organization will fund health reimbursement accounts (HRAs) for retirees instead, allowing them to purchase their own health care benefits via the exchanges.

Winkler noted that with the assurance that subsidies are available, employers may begin to help part-time or seasonal employees access the public exchanges to access health benefits.

“Those employees have been living outside the insurance system,” he said.

Anne Freedman is managing editor of Risk & Insurance. She can be reached at afreedman@lrp.com.

 

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