In a few days, the U.S. Supreme Court will hear oral arguments on the constitutionality of the individual mandate that requires all individuals who can afford it to buy health insurance. Employers and brokers are awaiting the Court’s decision (late June 2012) on the individual mandate and how much of the law will survive if that provision is found unconstitutional. Here’s an outline of different outcome scenarios and how it affects employers and advisers alike.
Scenario 1: The individual mandate is found constitutional and all of the ACA is upheld.
The main question would be whether employers stay in the game, rather than pay to have their employees enter the state-run exchanges - a question answered that may be answered by simple math. We believe that there is a clear advantage to stop sponsoring health care and send employees to the exchanges once they are set up. Employer penalties are so low that it looks like a no-brainer. However, if you’re in a competitive industry and your competitors are going to continue to provide health care, you’re going to need to make your employees whole with some form of additional compensation. Premiums will increase in the individual and small group market because of the change in how rates are calculated under ACA. Instead of basing an individual or group rate on age or health status, in 2014 these rate determinations narrow. So even if employers continue to offer coverage, they will need to shift costs, whether that is in the form of increased employee cost-sharing or major budget and personnel changes.