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Health Care Affordability Still Confusing to Employees and Employers Alike, Study Finds

April 10, 2013

Participation in employer-offered health benefits plans is contingent on an employee's wages, according to a recent survey published by Automatic Data Processing Inc.

Single-coverage-eligible employees who earn about $45,000 per year, which is about 400 percent of the Federal Poverty Level, were found to participate in health coverage plans 81 percent of the time, according to the study. As incomes decline from the $45,000 mark, however, participation rates begin to fall as well. For example, the study shows that only 37 percent of eligible employees choose to participate in employer-offered plans when making between $15,000 and $20,000 per year.

The federal government determined 9.5 percent is the affordability threshold for health care coverage. According to the ADP study, approximately 8.6 percent of single full-time employees pay 9.5 percent or more of their total income to obtain coverage. Only 1 percent of this group paying 9.5 percent of their income for health coverage purchases it for themselves, while 7.6 percent provide coverage for dependents.

ADP's findings suggest most employees will pay smaller premiums for health coverage by remaining with their employer's plans than they would by switching to a public health exchange. The study predicts people earning $22,340 per year, or wages 200 percent greater than the Federal poverty Level, would likely obtain better health coverage at a lower cost through their employers. And large, self-funded employers may find it "financially preferable" to extend affordable health coverage to lower-income employees rather than pay tax penalties for employees who obtain coverage through an exchange.

Still, regardless of the source of coverage, affordability will likely remain an issue for employees earning between the 200 percent and 400% percent of the poverty range in 2014, according to the survey. Lower-wage employees lacking an immediate health concern may be reluctant to participate in a health plan that consumes a significant percentage of their income, and higher-income employees may resent potential reductions in coverage and higher premium contributions needed to extend affordable coverage to a larger pool of employees, according to the study.

Max Mihelich is Workforce's associate editor. Comment below or email editors@workforce.com. Follow Mihelich on Twitter at @workforcemax.