The Young and the Employer Mandate
The Affordable Care Act’s individual mandate kicks off in January, but the question remains: who will opt-in for coverage among your employees? Experts predict that the cost of individual insurance premiums will largely depend on what younger employees (those below 30) do or don’t do. Insurance premiums are priced based on the relevant risk pool’s propensity for risk to materialize. In other words, the more likely an insured group is to become sick, the higher the premiums will be. Younger people tend to get sick less than older people. Insurance companies want young people in the risk pool to even out the risk that the older people otherwise cause the insurance company to undertake. The perfect employee, from an insurance company’s perspective, is someone who pays premiums every month but never gets sick (and therefore never files any claims). In such a situation, money is only coming in to the insurance company (via premiums), but no money is going out (via satisfied claims). If young people do not opt-in to insurance coverage, the only people left to insure are older people that are more likely to get sick. This means higher premiums for employees and employers.
The response to the situation above depends on politics. Enroll America is a non-profit organization that hopes the Affordable Care Act succeeds as envisioned. Enroll America and other groups have hired canvassers to enlist at least 2.7 million young people to sign up for insurance coverage on an exchange. Conversely, Freedom Works is an organization trying to recruit as many elderly, sick people as possible to drive up the costs of insurance coverage under the Affordable Care Act to unravel the entire Act.
Politics aside, this battle should crystallize something to employers that I have been saying for months: every response to the Affordable Care Act is different. Your ACA response should be tailored to your specific workforce. As the political battle above shows, if you have a workforce that has younger employees, your response should not mimic a workforce that has older employees.
Let’s work through just one example to show you how employee age affects your responsibilities under the employer mandate. After browsing the Internet for a bit, going to a few seminars, and watching the news, you know enough to know that you have to offer coverage to your full-time employees. You survey your payroll records and discover that of your 250 employees, 150 are full-time employees. Let me be emphatic: it is a mistake to assume that all 150 full-time employees will accept the coverage you offer them. There are many reasons why any of those 150 full-time employees will not accept an offer of coverage. One such category is employee age.
One of the changes that the Affordable Care Act made to coverage was to make young adults eligible for coverage under their parents’ coverage until the age of 26. So let’s say that the business I identified at the start of the last paragraph is a restaurant across the street from a major university. Most of the employees are likely to be servers, hosts, bussers, etc., who also happen to be college students at the university across the street. If they are still on their parents’ insurance coverage, they are likely to stay there even after 2014 and 2015. So of those 150 full-time employees you thought you had to cover, you may actually have to cover far less. It depends on your specific situation. Give us a call so we can help you navigate the ACA waters based on your specific vessel.
Mario K. Castillo