Employers Shift Health Care Burden to Employees

moneyburdenEmployer-based healthcare plans are in a state of flux following this year’s implementation of the Affordable Care Act (ACA). Since health care costs in retirement have long been considered a major source of financial stress, changes to coverage are affecting how Americans tackle retirement planning, according to an analysis by Mike Flower and Brad Bofford, managing partners of Financial Principles, LLC in Fairfield, NJ. Until recently, most of the focus of the ACA has been on coverage for the previously uninsured or of those covered through individual health plans. But the conversation is shifting toward how insurance exchanges are affecting employer-based group plans. While information on enrollment and coverage changes will not be available for some time. Principles, LLC has worked with several small businesses that have switched their healthcare coverage this year from group pricing to individual pricing. Traditionally, employees would choose from price-fixed categories such as, married with children, married couple, single parent with children, and single person. By moving to individual pricing, coverage is based on the age of the employee, spouse, and each child — maxing out at three children. What is surprising is the time and effort that are now going into collecting the data needed to administer these plans before and after enrollment since every employee is paying a different price.

Some insurance companies are increasing their premiums in order to move employees out of the top-of-the-line Cadillac plans. It forces employers to accept lesser service plans for the same price as what was paid for the Cadillac just two years ago. Increased deductibles, higher co-pays, and more restricted pharmacy benefits are just a few examples of how these changes to employer-base plans are shifting more and more costs to employees. Employees are forced to allocate more of their own money on health and less on retirement vehicles. The authors says that the market trend is moving toward more consumer responsibility and less employer control. The analysis advises employees to ask their employers following:

1. Will there be bigger paycheck deductions for employee and/or dependent coverage?
2. Are there plans to move employees into a private insurance exchange? If so, will it be within a defined contribution framework?
3. Will part-time workers continue to receive coverage?

Employees are also advised to do the following:

1. Consider a high deductible health plan with an HSA, and research the federal or state exchanges.
2. While it’s tempting to reallocate money otherwise put into retirement accounts to pay for increasing healthcare costs, don’t do it. Look for other ways to cut back on spending and keep saving to ensure you have enough money to last through your entire retirement years.
3. Work with an independent financial advisor.

For more information, visit www.financialprinciples.com.

Last Updated 11/18/2020

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