Will Your Employer Drop Health Care Coverage?

Global management consulting firm McKinsey & Company released a sobering report today. After surveying over 1,300 employers of all sizes, they found that 30% of them are inclined to drop employer-provided health care coverage after 2014. That’s when key provisions of the 2010 Affordable Care Act (ACA) go into effect.

One of those provisions is a $2,000 annual penalty per employee for companies who don’t provide employer-sponsored insurance (ESI). Given that a group plan in 2010 averaged $9,500 per employee, many employers say it will be cheaper to pay the penalty.

Apparently, according to the McKinsey report, employers needn’t worry about removing the health care benefit carrot from the table. While this perk has been an attractive tool for recruiting and keeping top talent for decades, high unemployment and rising health care costs have been game changers. The report found that 85% of employees today would choose to remain in their current jobs, although the majority (60%) would expect a bump in their pay check.

Currently, employer-provided health insurance covers nearly two-thirds of our under-65 population. If the McKinsey projections hold true, the impact could send millions of citizens scrambling to secure individual health insurance coverage. If you find yourself among them, here’s what you can look forward to in the post-2014 world.

Under ACA (aka ObamaCare), most of us who can afford it will be required by law to buy basic health insurance coverage for ourselves and our dependents. Failure to comply with that mandate will result in a fine of $695 for each uninsured family member, up to a maximum of $2,085 or 2.5% of household income, whichever is more. This will be phased between 2014 and 2016, and enforced by the IRS. By the way, you are considered able to afford coverage if a minimum policy will cost no more than 8% of your monthly income and if you earn an income above the poverty line. Exempted from the mandate are anyone with religious objections, Native Americans, illegal immigrants and prison inmates.

If your employer drops your ESI, you can go shopping in the private market or purchase your individual health insurance from an Exchange. Exchanges are touted on Health.gov as “a new transparent and competitive insurance marketplace where individuals and small businesses can buy affordable and qualified health benefit plans.”

Regardless of where you ultimately obtain your mandated health care insurance, you’ll be happy to know that the Affordable Care Act has a provision that prohibits insurance companies from refusing to sell you a policy or renew an existing one because of a pre-existing condition or to charge higher rates to individuals and small group market because of gender or health status.