Will Your Income Determine Your Health Plan Participation?

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ADP Research Institute Study: Employee Income is a Determining Factor in Health Benefits Participation

If Current Patterns for Participation Rates Based on Income Persist in 2014, a Significant Portion of Newly Eligible Employees May Opt to Remain Uninsured

ROSELAND, N.J., March 5, 2013 /PRNewswire/ — ADP®, a leading provider of employee health care benefits administration and human capital management (HCM) services, today announced the findings of a new ADP Research Institutesm study indicating that if 2012 health benefit participation rate patterns persist into next year, then a portion of newly eligible employees may opt to remain uninsured because they perceive the cost of insurance is too significant a percentage of their annual income.

Access to Report

To view the multimedia assets associated with this release, please click here.

ADP’s “Planning for Health Care Reform: How Income Impacts Employee Health Benefits Participation,” is a companion study to the previously published “ADP’s 2012

Study of Large Employer Health Benefits” and is based on actual, real-world data for approximately one million employees and more than two million covered lives.

The new study provides a comprehensive examination of the impact of income on employee health benefits participation.

Income / Participation Level

With data showing how employee income and health benefit plan participation are closely intertwined, the study details the potential impact and ramifications of the Affordable Care Act (ACA) on employers who will need to comply with new mandates beginning in 2014.

Specifically, the ADP Research Institute study findings show that employees with W-2 wages greater than 400% of the

Federal Poverty Level (FPL), or roughly $45,000 for a single individual under 2012 guidelines, consistently participate in health coverage at a rate of 81%.

However, as income declines below 400% of the FPL, health plan participation rates decline sharply to just 37% for single employees earning between $15,000 and $20,000 per year.

“While no one can predict the future, the ADP Research Institute findings suggest that lower income employees may avoid participation in a health plan that consumes a significant percentage of their income,” said Tim Clifford, president of ADP Benefits Administration Services.

“Clearly, employer to employee communications will be essential in explaining the options moving forward.”

Other key findings of the ADP Research Institute study include…

ER Penalties

Across the entire study population, approximately 8.6% of single, full-time employees pay 9.5% or more of their W-2 earnings to obtain health coverage.

However, among a certain subset of employers, nearly 25% of employees spent more than 9.5% of their wages on health coverage.

According to the ACA, beginning in 2014, employers may begin paying an annual penalty of $3,000 (calculated monthly) for every employee for which the premium for self-only coverage exceeds 9.5% of their wages (with respect to

each full-time employee who receives a federal premium credit for public exchange coverage, assuming the employer offers health insurance coverage to at least 95% of full-time employees).

ER’s Group Health Plan Favored

Employees earning $22,340 or more per year (200% of the FPL for a single wage earner) may still be better off obtaining coverage through their employer’s group health plan, despite affordability issues, rather than participating in a public health exchange with government-provided subsidies.

“While many project that the impact of the ACA will be most significant upon small businesses, certain industries, such as retail, hospitality, construction and business services, could face a dramatic increase in the number of employees that are newly eligible for health benefits,” notes Clifford.

“In some cases, employers could face a sharp increase in the number of covered employees and subsequent costs, and if they choose to stop offering employer-sponsored benefits, they may face a significant tax penalty.”

“How employers choose to comply with ACA requirements can have a very significant impact upon multiple aspects of their business and their human capital management strategy,” Clifford adds.

“While increases in total health care benefit plan costs and potential penalties can have a direct impact upon revenue, employers also need to consider the full business implications of their benefits decisions, as they can affect employee compensation, company reputation, and recruitment and retention.”

Copy of Report

To request a free copy of ADP’s “Planning for Health Care Reform: How Income Impacts Employee Health Benefits Participation” study, and access a video as well as related infographics and articles, please click here.

Upcoming Webinar

On 28-March-2013, Chris Ryan, ADP Vice President of Strategic Advisory Services, will conduct an in-depth webinar focused on Health Care Reform and share research findings to help employers examine the benefit purchasing habits of newly eligible employees under the ACA.

Entitled: Health Care Reform: How Income Impacts Participation in Employee Health Benefits, the webcast will be available at 11:00 a.m. ET (-5 GT) on Thursday, March 28. To register and attend, please visit http://www.hr.com/stories/1362424920044.

What Are Your Thoughts??

As with anything, there is cost versus ‘costly’ factor — namely, at what point is it more economical NOT to have something than it is to have it. Risk is sometimes part of this consideration. The exemption of pre-existing conditions has raised some eyebrows, especially from the younger adults. They are least likely to have a health problem but are being ‘sequestered’ into paying for a public health plan that is supposed to cover everyone (the irony is it will cover an additional 10 million, leaving 36 million without coverage). The penalities they face are LOWER than the cost of having coverage. As most are just starting their lives as adults, can anyone really blame them for wanting to save a buck or two, especially with something they most likely will not use (but are being required to enroll in per government regulations). The catastrophic insurance is still around, many will enroll in this to save a dollar as well. There are other considerations that are beyond the scope of this article, feel free to share in the comments below.

  Rationing and price increases have started already and we are one year from implementing the system. What are you going to do if the prices do not come down? Have you even thought about this?

  The history of nationalizing a healthcare system is not pretty, and none have been implemented without rationing going into effect as well as costs increasing. President Obama promises this won’t happen. Truth?

  There are always some positives to any situation, what positives do you see with the PPACA going into affect?

Please share your thoughts with our audience in the comments section below!

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About the ADP Research Institute

The ADP Research Institute provides insights to leaders in both the private and public sectors around issues in human capital management, employment trends, and workforce strategy.

About ADP

ADP, Inc. (NASDAQ: ADP), with more than $10 billion in revenues and approximately 600,000 clients, is one of the world’s largest providers of business outsourcing and human capital management solutions. Leveraging over 60 years of experience and a global footprint spanning more than 40 countries, ADP offers a wide range of human resource, payrolltalent management, tax and benefits administration solutions from a single source, and helps clients comply with regulatory and legislative changes, such as the Affordable Care Act.  ADP’s easy-to-use solutions for employers provide superior value to companies of all types and sizes. ADP is also a leading provider of integrated computing solutions to auto, truck, motorcycle, marine, recreational vehicle, and heavy equipment dealers throughout the world. For more information about ADP or to contact a local ADP sales office, reach us at 1.800.225.5237 or visit the company’s Web site at www.adp.com.


Jim Larkin, ADP; +1 (973) 407-9714; jim.larkin@adp.com

Web Site : http://www.adp.com

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