Employers May Find Future Health Plan Savings On The Marketplace

It may surprise employers to learn that premiums in the 2014 marketplace are comparable to premiums in employer plans, and that in some states they are significantly lower, according to research from PricewaterhouseCooper’s Health Research Institute (HRI). According to HRI, the actuarial value of employer sponsored plans typically falls between Gold and Platinum plans found on the state exchanges, since employer-sponsored health plans usually pay about 85 percent of health care costs, including deductibles and other cost-sharing. As dictated by the Patient Protection and Affordable Care Act (ACA), gold plans in the marketplace pay 80 percent of costs and platinum plans pay 90 percent of costs.

Substantial savings in marketplace. The report found that the average 2014 premium cost, not including subsidies, for a plan with coverage falling between that of gold and platinum Marketplace plans was 4 percent (or $275) cheaper, than the average employer premium for a single worker. The marketplace coverage was $5,844, while the average employer premium for a single worker was $6,119.

There is an even greater difference, of course, if a worker chooses the lowest priced plan in his or her state, which would produce an average exchange premium of $4,885, which would be 20 percent lower than comparable employer-sponsored coverage. Furthermore, individuals buying coverage through the marketplace usually have a wider variety of plans to choose from than employers tend to offer. One negative aspect of purchasing coverage in the marketplace that the HRI points to is that plans on the marketplace tend to offer narrower provider networks, with more limited choices of doctors and hospitals.

Cost-sharing increases appeal. What might make the marketplace even more appealing, especially for low-wage workers, is the fact that cost-sharing subsidies are generally available for enrollees earning less than 250 percent of the Federal Poverty Level, (or about $28,725), if they purchase silver plans. Because this reduces out-of-pocket costs, says the HRI, it has the effect of giving enrollees in silver plans benefits similar to those of employer-provided health plans without having to purchase a gold or platinum plan.

Large employers contemplating private exchanges may want to take another look at prices on the marketplace in their areas, especially if the marketplace becomes available to large employers in 2017 and prices remain stable over the next few years, after the removal of the ACA’s temporary risk sharing and risk corridor programs.

For more information, visit http://www.pwc.com/en_US/us/health-industries/health-insurance-exchanges/assets/pwc-hri-health-insurance-premium.pdf.

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