Public workers may take advantage of exchanges

With the launch of the federal and state health insurance marketplaces, public sector workers have additional insurance options – and Kaiser Health News suggests many will take advantage of the opportunity. According to Kaiser, people on employer-based plans expect to see changes to their insurance benefits next year due to healthcare reform, and this is causing many employees to shop on the exchanges. Choosing a different health plan may not be a choice for some public workers, however. According to Governing, state and local governments were already considering asking retirees and employees to seek insurance through the marketplaces before they even opened. Although the exchanges have experienced technical glitches and many Americans have seen issues completing their electronic applications, the marketplaces may become the new normal for public workers. 

Changing times

According to Kaiser, a recent study by Towers Watson found 34 percent of U.S. employers will boost employee share of spouse and dependent coverage premiums in 2014. Employers in both the public and private sectors often try to minimize costs without cutting employee benefits by choosing high-deductible plans. While many employers decide to offer workers with a health reimbursement account (HRA) to offset these additional costs, some workers may search for alternative insurance options.

Reuters reported the exchanges offer employees a way to shop for more affordable healthcare coverage. A recent study estimated approximately 37 million workers who currently have insurance through their employers will end up choosing an exchange-offered plan, according to Reuters. 

“My insurance premiums are going to double next year through my work,” Stephanie Desaulniers, a geologist, told Reuters. “Part of it is we are switching companies, but even last year, we were showing substantial increases. I was hoping I could find something that was a little cheaper [on the exchanges].”

Public workers aren’t exempt from issues resulting from healthcare reform. One aspect of the Affordable Care Act (ACA), the so-called “Cadillac” tax, may contribute to the transition to the exchanges for public sector employees, according to MedCity News. State and local government workers tend to have great benefits, and may face the 40 percent excise tax in 2018 under the Cadillac tax. According to MedCity News, plans worth more than $10,200 for one person or $27,500 for families will be subject to the tax in 2018. Although the tax doesn’t come into effect for a few years, MedCity News reported it has already been an issue of discussion within union negotiations.

Many who are opposed to the tax are fighting for its repeal, as it may cost a single school district $2.3 million in the first year alone, MedCity News reported. When public employers take into account unfunded pension systems, this can be a big financial obstacle for them to overcome. 

Some public employers have already encouraged staff to shop for insurance benefits on the exchanges. According to Governing, state and local governments are projecting retirees will receive the most advantages from marketplace-offered plans. While Governing reported officials expect the transition of retirees off of group plans will take some time, they are thinking ahead to the possibility of cost-savings for both employees and the government. 

“I think that there is real potential for public sector government entities to slowly move pre-Medicare retirees to the public exchanges,” Stuart Wohl, an expert on retiree healthcare costs at the consulting firm Segal Company, told Governing. 

Cities like Chicago and local governments like Sheboygan County in Wisconsin are just two entities currently suggesting workers enter the exchanges, according to Governing. 

While it will take time to shift workers – whether currently employed or retired – away from employer-sponsored plans, it seems to be where both public and private employers are headed.