The Effects of Obamacare on Company Sponsored Insurance

The bulk of the provisions in the widely discussed Affordable Health Care Act, also known as Obamacare, will go into effect throughout the country on January 14, 2014. This initiative was developed to help offer affordable health care insurance to everyone living in the United States and to help improve the quality of the health care that is delivered.

The biggest aspect which will affect businesses and the health care benefits they offer their employees is the mandate that all businesses which employ 50 or more full time employees must provide insurance benefits for those workers or pay a government fine per employee. Any individual or small business without coverage will be able to sign on to a health care insurance exchange sponsored by their state, or use tax credits to pay for a private health insurance plan, in order to purchase affordable health insurance.

This health care reform initiative also makes it necessary that all residents in the United States have health insurance coverage. For those who do not enroll in plans through their employers or on their own using the private insurance marketplace or the state exchanges, there will be an assessed financial fine.

Although Obamacare does not directly affect life insurance, there are financial repercussions of this vast health care reform that can affect the way companies handle the upcoming changes which may have an indirect effect. Four ways Obamacare is going to affect company sponsored life insurance are:

Businesses May Drop Benefits Package Altogether

There are specific items covered under Obamacare that indicate companies are not to reduce employee hours or make other employment decisions that are designed to prevent the company from paying the fines and fees indicated for non-compliance with Obamacare. However, these penalties can be much more affordable if businesses dropped their entire benefits packages for employees, including life insurance. Besides leaving employees without other valuable benefits, the negative to this decision is that if it can be proven the business acted in this manner to avoid the fines, it will have to pay them.

Fewer Insurance Companies to Work With

Many insurance companies are unsure of what the big picture impact will be on their industry. Agents are concerned that the structure of Obamacare cuts them out of the insurance shopping process by empowering customers with enough information and entities such as “exchange navigators” who will help consumers decide on which insurance they will purchase from the exchanges. As a result, insurance companies may begin to see a reduction in services offered to business and personal customers for all their products, including life insurance.

Limited Medical Plans Phased Out

If a company has typically depended on limited medical plans for employee health insurance coverage will find that these plans may no longer be available because they do not meet Obamacare’s minimum coverage standards. Without these lower cost options, some businesses may decide to reduce employee hours to place them out of full-time employee status and reduce any discounts the company may receive on other group benefits, such as life insurance, it is providing to a large number of full time employees.

Insurance Industry in State of Flux

The provisions of Obamacare have impacted the insurance industry as a whole. For instance, the regulation that places limits on overhead spending at insurance companies has been viewed as detrimental to insurance companies. With only 20% of premiums from individuals and small businesses and 15% from bigger group plans allowed to go towards insurer’s administrative costs, many brokers will see their commissions cut. This could result in fewer purchase options for businesses looking to purchase other insurance products, such as life insurance.

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