A payroll management giant is jumping into the health insurance exchange world with a double-barreled option for companies looking to control costs, give their workers more choice—and possibly help those employers avoid paying the Affordable Care Act’s coming “Cadillac Tax.”
ADP said it will offer a private health exchange option to companies that want to continue providing their employees’ group health insurance coverage. Workers at those companies will be able to shop on that exchange for a range of coverage options—with different price points and benefits—in contrast to the typical one or two choices that many larger employers offer.
That exchange is being run in partnership with USI Insurance Services, a leading brokerage and consulting firm. Companies who direct their employees to that exchange will have the option of continuing to subsidize the cost of their workers’ health coverage.
At the same time, ADP has also partnered with online insurance broker GoHealth to offer companies the option of directing qualified workers to a marketplace where they can buy non-group, individual health plans.
GoHealth also has the ability to enroll workers with low or moderate incomes in subsidized plans offered on government-run health care marketplaces. Workers who buy plans outside of those markets through GoHealth also can receive help from their companies in buying coverage.
ADP’s move comes at a crucial time for companies that are dealing with multiple issues related to the Affordable Care Act, and only a few months before open enrollment in health plans for 2016 begins.
Beginning this year, the ACA requires larger employers to offer affordable health coverage to employees who work 30 hours or more per week or be subject to a fine. The ACA also imposes reporting requirements on companies related to the health coverage status of their workers.
And in 2018, the “Cadillac Tax” will go into effect, and impose a 40 percent, non-deductible excise tax on high-cost employer-provided health plans. In the first year, the threshold for the tax will be $10,200 for individual coverage and $27,500 for family coverage.
“The Affordable Care Act has led employers to fundamentally reconsider every element of workforce management and shift their focus toward what I like to call the three ‘Cs’ of cost, compliance and consumerism,” said Gerry Leonard, president of ADP Benefits Services.
“Many companies today are exploring new models for administering health benefits to their employees and looking for innovative ways to reduce the costs of their health plans in order to avoid the Cadillac excise tax.”
Will Giaconia, vice president of health care strategy at ADP, said that offering employees a range of plans, at different premium levels, can not only make those workers “become more value conscious” and apt to select “leaner plans,” but it can also make them more satisfied with their coverage. That, in turn, can make it easier for companies to control their health plan costs and keep them under the Cadillac Tax threshold, he said.
Gianconia also said that although the number of employees in companies enrolled through private insurance exchange is still relatively small—more than 2.7 million in 2014—”we think they’re here to stay.” The consulting group McKinsey has said that private exchanges could be handling up to 20 percent of the employer-based health insurance market by 2019.
GoHealth is “very excited” about its partnership with ADP, said Ryan Smolek, vice president of operations for GoHealth’s exchange business unit.
“This is our first foray into this space with this kind of benefits provider,” Smolek said. “We’re exploring other partnerships as well that are kind of along these lines.”
GoHealth has a deal with tax preparation firm H&R Block to help enroll tax filers in Affordable Care Act plans, and also has partnered with pharmacy giant Walgreen’s to do the same for its customers.
Smolek noted that in some cases, workers at companies that currently offer group health insurance for their employees would actually save money on their coverage if they instead purchased individual plans on government Affordable Care Act exchanges, where they could get subsidies.