This month, Gov. Cuomo announced that health insurance plan rates that will be offered through New York’s Health Benefits Exchange have been approved. There was much made in the press about the individual market rates that will be offered in 2014 and how they are at least 50% lower than current rates.
Of course, those are not the same rates employers are paying on group coverage, nor has coverage ever been sorted so definitively into assigned tiers. So, as with understanding penalties, really evaluating the exchanges takes a little deeper review of the figures.
In 2011, the average cost of family health insurance coverage in New York for an employer-sponsored group was $16,572 per employee per year, or $1,381 per month. I could not find 2012 or 2013 data, but assuming a modest increase each year, you can imagine that the average annual premium for 2013 is somewhere close to $18,000.
Now, that is the average for all of New York, and for all employer-sponsored coverage, so really good coverage and not-so-good coverage is lumped into “coverage as a whole.” Thanks to the Affordable Care Act, we now have four defined levels of coverage (bronze, silver, gold and platinum) to consider. So to really see what we are getting you would have to be able to go back and sort all that coverage into the appropriate tiers and then price them out, which you probably can’t do. Otherwise, you are comparing apples to donuts … both taste good and are good to eat (in moderation) but have decidedly different reputations in the food world. So let’s set that thought aside and look at numbers.
For 2014, the New York exchange rates are established across eight geographical regions and offered, more or less, by 21 different carriers. Not all carriers offer for all regions, and not all regions have the same price. For example, bronze-single coverage ranges from $217.83 per month for Rochester to $595.71 per month in Long Island depending on the carrier you select. Gold-family ranges from $887.95 per month to $2,394.91 per month depending on where you reside and what carrier you choose.
A few weeks ago I wrote about the Vermont exchange that will have an average bronze-single rate of $365.76. Well, according to the New York published rate, the average bronze-single coverage rate will be $404.84 statewide, and $425.00 in New York City. So the average annual cost for base family coverage in New York City will be about $14,535 a year if purchased through the exchange.
Of course, employers don’t face a penalty in 2014, and if the average annual cost of coverage is about $18,000 for family coverage for the employer, the real question becomes whether or not to offer coverage or how much employee contributions to require. Hypothetically, if an employer requires an employee to contribute anything less than $14,535 toward family coverage, they are getting out ahead.
However, until 2014 group renewal rates are out, we also won’t know just how much employers are subsidizing exchange coverage through increased premiums for group coverage. Plus, employers will definitely need to consider whether to offer coverage from a lower tier (like going from gold to bronze) as a cost-control mechanism.
The point is that over the next few weeks, many more states will release their exchange rates and much will be made about whether there will be great savings or rates that are too high. In reality, for employers, this is sort of just noise. Plans sponsors have to look at their costs and evaluate three things: (1) whether to offer coverage, (2) what level to offer and (3) what contributions to require. Comparing the exchange rates to group premiums for employer-sponsored coverage is not a fair comparison.
But just for the record, based on the rate published recently in New York, the average 2014 family premium across all plans, all tiers, all regions and all carriers in 2014 will be $1,515 a month or $18,179 a year.
Keith R. McMurdy is a partner with Fox Rothschild, focusing on labor and employment issues. He can be reached at firstname.lastname@example.org or 212-878-7919.
This alert is intended for general information and educational purposes and should not be taken as specific legal advice.
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