By Brad Bofford and Mike Flower, Special for USDR
Employer-based healthcare plans are in a state of flux as large and small businesses assess a host of requirements and plan options following this year’s implementation of the Affordable Care Act (ACA).
Since health care costs in retirement are a major source of financial stress, changes to coverage is having an inevitable impact on how Americans tackle retirement planning, according to Mike Flower and Brad Bofford, Managing Partners of Financial Principles.
“Until recently, most of the focus of the ACA has been on coverage for the previously uninsured or of those covered through individual health plans,” said Bofford. “But the conversation is beginning to switch towards the impact the insurance exchanges are having on employer-based group plans.”
More than 156 million Americans receive health insurance through the workforce today, according to a report by PricewaterhouseCoopers’ Health Research Institute (HRI).
“Full-time and part-time employees, as well as small business owners and early retirees with employer coverage need to tune into what is happening with their health insurance or run the risk of being unprepared during retirement years,” warned Flower.
“I’ve worked recently with several small businesses that have switched their healthcare coverage this year from group pricing to individual pricing,” explains Flower. “Traditionally, employees would choose from price-fixed categories such as: married with children, married couple, single parent with children, and single person. By moving to individual pricing, coverage is based upon the age of the employee, spouse and each child – maxing out at three children.”
“I find it surprising the amount of time and effort now going into the administration of these plans on the front end in the collection of data, as well as the back end after enrollment, because every employee is paying a different price,” said Bofford.
There is only so much money employers have to spend on total employee benefit packages. As health care costs continue a steady rise companies shift more of the cost sharing on to their employers, forcing them to allocate more of their own money towards health and less on other savings such as retirement vehicles, explains Flower.
With all the potential changes coming up, Flower and Bofford suggest a few tips for employees to shore up their benefit plans. Tips include asking questions of the company’s plan manager and choosing a high deductible health plan with an HSA.
Emphasis is placed on keeping the retirement plan unharmed. While it’s tempting to reallocate money otherwise put into retirement accounts such as a 401(k) or an IRA to pay for increasing healthcare costs, people are advised against such a move.
“In my opinion, we are not experiencing a revolutionary impact from the ACA, but rather an evolution,” says Flower. “Changes will be rolling out for years to come but one thing is for sure, the market trend appears to be moving toward more consumer responsibility and less employer control.”
Written by Brad Bofford and Mike Flower Securities America, Inc. Registered Representatives, in conjunction with Impact Communications.
SOURCE: Financial Principles