It would appear that President Joe Biden has decided that the Build Back Better Act (BBBA) will be the signature legislative initiative of his first term. He is pressing hard to convince the Senate to pass it, though passage is anything but guaranteed at this point. Should the bill become law as is, it stands to significantly impact employee health benefits.
In a blog post published in August 2021, Dallas-based BenefitMall suggested that insurance brokers in the employee benefits space should work on leading their clients rather than merely responding to their needs. That being the case, it behooves brokers to pay close attention to the BBBA moving forward. It could end up being as impactful on employee health plans as the Affordable Care Act was a decade ago.
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Redefining Health Insurance Affordability
The BBBA contains several provisions that will impact employee benefits if it becomes law. The most profound among them is a provision that redefines health insurance affordability. It does so by lowering the threshold for what constitutes an affordable health insurance plan offered to a single employee.
The threshold for 2021 was pegged at 9.83.%. That means a health insurance plan was considered affordable if an employee’s share of the premium did not exceed 9.83% of their income. As for the remaining 90.17%, it constituted the employer’s share.
Language in the BBBA drops the affordability threshold to 8.5% through 2025. The lower threshold will simultaneously increase the amount employers are required to pay. Their share would increase to 91.5%. That is an increase of more than one percentage point.
A Double-Edged Sword
Analysis of the BBBA provision shows that it is a double-edged sword. On the one hand, an analysis by the Congressional Budget Office (CBO) suggests that lowering the threshold would add millions of workers to the rolls of the fully insured. At the same time, it would reduce the number of people getting their insurance through employer-sponsored plans.
How is this possible? There is only one way. Employers already on the verge of dropping their health insurance coverage may be faced with no other choice should the threshold be lowered. They simply will not be able to afford higher premiums. All those who are dropped will be eligible for government subsidized insurance through a state exchange will be enrolled in Medicaid.
The administration has thought this out in advance. As a result, the BBBA calls for additional money to be spent on ACA insurance subsidies and Medicaid expansion. Their goal appears to be one of expanding government involvement in healthcare coverage rather than empowering the private sector to do better.
Be Prepared Either Way
Getting back to BenefitMall’s suggestion of brokers leading their clients during these uncertain times, it is in a broker’s best interests to be prepared regardless of how the BBBA plays out. One way or another, health insurance plans are going to be affected by the outcome of the bill.
Should the bill pass, it will have to go to reconciliation. Just about anything could come out of that process. The bill could be reconciled in such a way as to keep all the major provisions intact. On the other hand, Congress could be forced to significantly alter or completely drop certain provisions to get reconciliation done.
Moving forward, employers will be looking to their benefits brokers to help them understand all their options for health insurance. Getting out ahead of things gives the broker an opportunity to proactively approach clients with new options and better solutions. The BBBA is going to have an impact one way or the other.