Market Views

The Impact of the ACA on Hourly High-Turnover Workers

To be compliant, a plan offered by an employer must meet both a required minimum benefit level AND an “affordability” threshold. For 2021, the IRS has raised the affordability percentage from 9.78% to 9.83%. This means that an “Applicable Large Employer” (ALE) cannot charge employees more than 9.83% of their income for an ACA-compliant plan.

With statistics from the Bureau of Labor, we find the average worker makes less than $40,000 per year. Under a compliant plan this average worker pays a little less than $4,000 a year for insurance. They are “covered.” It’s “affordable.” That is the implication, right? By offering an ACA-compliant plan, an employer has performed their duty. But let’s look at reality.

The Affordable Care Act, with noble intentions, no doubt, eliminated pre-existing conditions preclusions and removed limits on coverage thresholds. It does not take a statistics wonk to see that insurers’ risk skyrocketed. There were only two primary ways allowed to mitigate the risk of unlimited coverage: through deductibles and co-pays. So they sky-rocketed as well. For a Bronze plan, which is the “affordable” level that covers more than 33% of people who enroll in exchange plans, the average deductible is over $6,000 per year.

In many cases, the “average” worker therefore, must pay $6,000 toward their medical expenses before they satisfy their plan’s deductible and begin receiving more substantial benefits. The average worker rarely meets that deductible. In fact, it takes a catastrophic healthcare event to reach that deductible. That means, not only is the average worker paying almost 10% of their wages for insurance, they are also paying out-of-pocket for ordinary doctor’s visits, unexpected emergency room visits, outpatient surgery and the like.

Surveys reveal that the average worker has less than $1,000 in savings. They don’t have disposable income. So that $6,000 deductible can produce severe financial hardship on low-wage, hourly workers, when they are forced to pay for their everyday healthcare needs. Do they get the new tires they need on the car? Or do they take their kids for a strep throat test and treatment? All totaled, the low-wage, hourly worker is disproportionately negatively affected by the healthcare act that is meant to protect them. The bottom line: the government program designed to guarantee affordable healthcare does not meaningfully provide for everyday medical needs, because of that $6,000 average deductible.

Fixed Indemnity insurance bridges that gap. Under the right plan, workers can get valuable, usable benefits to help cover the cost of doctor’s visits, emergency department visits, outpatient surgery and the things they are statistically more likely to need in a year. Our internal studies go even farther, finding that employees who are offered our Fixed Indemnity plans stay with their employer 47% longer - proving the connection between usable, effective benefits and job satisfaction. Fixed Indemnity helps level the playing field for these workers who have fallen through the cracks under the ACA.

While industry professionals have proclaimed supplemental insurance like Fixed Indemnity as almost a necessity, we have seen recent, politically-motivated invectives calling this “junk insurance,” as we exposed in our previous news release. These attacks are misguided at best, and the proposals being made to regulate them further will only harm an already vulnerable segment of the population.