Re-imagine: to imagine again or anew; especially to form a new conception of; recreate.  –Merriam Webster Online

Partly because of widespread uncertainty about the Affordable Care Act (ACA) and partly because of rising costs, in conference rooms all across the land C-level executives and senior managers are re-imagining legacy concepts of employer-sponsored health benefits.

Like 21st Century Impressionist painters these leaders are re-inventing—breaking with tradition by creating new models of employee health benefits.

ACA drivers of this creativity include the employer “play or pay” mandate (delayed until 2015 but based on next year’s look-back hours worked); the ban on annual and lifetime dollar coverage limits; the availability of quality coverage from insurance exchanges; the new transitional reinsurance fee; burdensome reporting requirements; and, of course, the looming 40% “Cadillac Tax” on high-value health plans. Read more.

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ACA Megatrend #2: Re-imagination

Thu Aug 29, 2013

Re-imagine: to imagine again or anew; especially to form a new conception of; recreate.  –Merriam Webster Online

Partly because of widespread uncertainty about the Affordable Care Act (ACA) and partly because of rising costs, in conference rooms all across the land C-level executives and senior managers are re-imagining legacy concepts of employer-sponsored health benefits.

Like 21st Century Impressionist painters these leaders are re-inventing—breaking with tradition by creating new models of employee health benefits.

ACA drivers of this creativity include the employer “play or pay” mandate (delayed until 2015 but based on next year’s look-back hours worked); the ban on annual and lifetime dollar coverage limits; the availability of quality coverage from insurance exchanges; the new transitional reinsurance fee; burdensome reporting requirements; and, of course, the looming 40% “Cadillac Tax” on high-value health plans.

To be sure, re-creating employer-sponsored health benefits won’t happen overnight. Indeed, more than ten years passed before the Impressionists gained popular acceptance.

But the signs of new thinking about health benefits are unmistakable:

Package delivery firm UPS, citing ACA, announced that it would introduce what is known as a “spousal carve-out” to its health benefits plan. 

Starting next year spouses of white-collar employees will no longer be eligible for the UPS health plan if they can be covered by their own employer plan. Some 15,000 employee spouses could be affected by the decision.

Other employers are considering becoming “29ers,” i.e., limiting the hours of part-time workers to below the 30-hour weekly threshold that triggers eligibility for health benefits under the ACA “play or pay” mandate. While the restaurant and retail sectors are leading the shift, some local governments are also managing down part-time employee hours.

And limited benefit plans appear to be making a comeback, notwithstanding the ACA prohibition on annual benefit caps and the employer mandate to provide “minimum value” coverage.

Kaiser Health News reports some employers are considering “bare-bones” health policies, plans that exclude certain benefits like hospitalization or surgical care but are still technically ACA compliant. Of course such plans do not meet the ACA “minimum value” test so employers could be subject to a $3,000 penalty for each employee that qualifies for a premium tax credit for exchange-based coverage.

By definition, no one can predict where the Re-imagination Megatrend will take us—just as early PC designers couldn’t predict mobile apps or cloud computing. Re-imagination is, well, discontinuous.

One completely unpredictable direction employee health benefits could take is toward the insurance exchanges.

Some employers may gravitate toward exchanges for some or all of their employees. Employers will be watching as exchanges launch this fall, offering platinum, gold, silver and bronze options with subsidies for individuals and families up to 400% of the federal poverty level—$94,200 for a family of four in 2014. Re-imagination could involve a public or private exchange-based scenario.

In some ways a re-imagining of health benefits has been evolving in response to double-digit cost increases. But the Affordable Care Act will play a catalytic role in creating a dynamic new environment for innovation.

Today’s employer-sponsored health benefits model resembles in most respects the model some employers conceived during the World War II-era.  ACA-inspired re-imagination is about to break with the past.