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Affordable Care Act: How Employers Change Coverage

By Randy Dotinga
WebMD Health News

Reviewed by Lisa Zamosky

Sept. 24, 2013 -- The Affordable Care Act takes full effect on Jan. 1, 2014, and the questions are coming fast and furious: Do I need to buy new health insurance? How much will coverage cost?

And then there's this humdinger: My company is doing what?

If you find yourself asking this question, join the club. Employers as diverse as UPS, Walgreens, and Trader Joe's are making major adjustments to how they offer health insurance to their workers.

Most Americans get their insurance through employers. In 2012, the Economic Policy Institute estimated that 59% of Americans under age 65 were covered by employer-sponsored health insurance. That number has fallen for 10 years in a row, though, as companies search for ways to trim costs.

Here are five things that might change for you:

1. Your Working Spouse Might Lose Coverage

UPS has been in the news over eliminating health insurance benefits for thousands of working spouses of employees. Why? Because of rising medical costs and because the spouses have access to policies through their own workplaces.

Cutting benefits for working spouses isn't a new idea. "It's part of a long-running trend of employers looking more carefully at who's eligible for coverage," says Thomas Buchmueller, a professor of business economics at the University of Michigan.

So why is UPS making its decision now? The company is pointing a finger at the Affordable Care Act, also known as Obamacare, saying the law is partially responsible for its decision.

2. You Might Have to Buy a Policy if You Work Part-Time

Unlike many companies, the Trader Joe's grocery chain has long offered coverage to part-time workers for a price. As a result, Trader Joe's has become a popular place to work for people like actors who want insurance but don't want a full-time job.

The company is changing things in January. Part-time employees will get $500 checks to spend on coverage through the online Marketplaces, also known as "Exchanges," created by the Affordable Care Act.

Is it a good deal? It depends. Some workers could find themselves with higher bills overall. But part-time Trader Joe's employees already pay part of the cost of their coverage, and many will get subsidies (financial aid) from the federal government to help them afford new policies.

"Their move is driven by a calculation that their part-time employees will face lower insurance costs -- and therefore higher take-home pay -- if they go to the Exchange," Buchmueller says. "The math does not work out that way for full-time employees, so Trader Joe's is keeping those benefits in place."

3. You Might Have to Buy a Policy From a Private Exchange

Other companies are trying a similar approach to Trader Joe's, but without sending employees to the new Marketplaces. Instead, their employees will get insurance through a similar system that's not managed by the government.

One example: The Walgreens drugstore chain is moving its workers to a private Exchange, a kind of shopping mall of insurance options. Walgreens will still provide financial help, and it says the system will give most employees a chance to save money in the long run.

Is this a positive trend? It depends on how well the health care reform law succeeds at controlling health care costs, says Wendell Potter, senior analyst at The Center for Public Integrity. Still, he says, the path forward is clear: "You'll see more employers giving their employees a certain amount of money and sending them to Exchanges that are public or private. They'll save money by capping their contributions, and they'll be more in control of their health care spending."

4. You Might Get Downgraded to Part-Time

Employers might try shifting workers to fewer than 30 hours a week so they won't get health coverage, Buchmueller says. "Some will look hard at this. However, some of them will conclude that the productivity cost of reconfiguring their workforce outweighs any savings from not offering those workers insurance."

5. You Might Lose Coverage Entirely

Could your employer decide to simply stop providing health insurance benefits? It's possible, although it's not a new phenomenon.

"Over the past decade, probably longer, fewer people who have insurance have gotten it through the workplace," Potter says. "And more smaller employers have gotten out of offering coverage. More are saying, 'I just can't afford that.'"

The good news: Buchmueller says large employers aren't likely to cut off coverage if they haven't already. "Most workers in the U.S. work for large firms, and they're mostly voluntarily providing coverage," he says. "Starting in 2015, there will be a penalty for not offering coverage. If they haven't dropped it at this point, there will be less reason to do so going forward."

For many companies, good health care coverage remains an important recruiting tool for finding and keeping top employees.

SOURCES: Economic Policy Institute: "A decade of declines in employer-sponsored health insurance coverage." USA Today: "UPS won't insure spouses of many employees." Thomas Buchmueller, professor of business economics, University of Michigan. Time: "Trader Joe's Explains Why It's Cutting Health Benefits For Part Timers." Wendell Potter, senior analyst, The Center for Public Integrity. Kaiser Family Foundation: "2013 Employer Health Benefits Survey."

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