When is no choice a good choice?
Newly hired employees who don't sign up for health insurance on the job could have it done for them under a health law provision that may take effect as early as next year.
But the controversial provision is raising questions: Does automatic enrollment help employees help themselves, or does it force them into coverage they don't want and may not need? A group of employers, many of them retail and hospitality businesses, want the provisions repealed, but some health policy researchers say the practice has advantages and is consistent with the aims of the health law.
Under the law, companies with more than 200 full-time workers have to enroll new, full-time employees in one of the company health plans unless the employee chooses not to join. The Department of Labor has said that employers aren't required to comply until the agency issues regulations spelling out how to do so. The department delayed its initial plan to issue regulations by 2014 and hasn't yet said when regulations will be issued. Industry experts are split on when to expect those rules; some think they could take effect in 2015, while others say that's unlikely.
When the health law was being debated, some said they worried it would prompt many employers to stop offering subsidized health plans to their workers; the automatic enrollment provision was thought to be one way to prevent erosion into the health insurance exchanges, says Caroline Pearson, vice president at Avalere Health, a research and consulting firm.
In addition, the success of 401(k) plans that used automatic enrollment to boost participation may have played a role in getting the provision included in the law, says Paul Fronstin, director of the health research and education program at the Employee Benefit Research Institute.
However, automatically enrolling new employees in a company 401(k) is much simpler than doing the same with a health plan, say benefits specialists. For one thing, if a new hire doesn't like the default choices in his 401(k), he can generally change them at will.
But with health insurance, says Terry Dailey, a benefits attorney at human resources consultant Mercer, if you're paying for coverage on a pretax basis and the employer is deducting the premium from your paycheck, the IRS rules say that you can't withdraw from the health plan until the next open enrollment period, unless you have a qualifying event such as a birth or marriage.
There are also other potential complications, such as if someone's spouse gets automatically enrolled in a health insurance plan but has coverage elsewhere, says Steve Wojcik, vice president of public policy at the National Business Group on Health.
Another difficulty deals with the premium subsidies that may be available to some workers who buy coverage on the state marketplaces when their employer's plan has very limited benefits (sometimes called a "skinny plan"). If that employer automatically enrolls his workers, they would be ineligible for subsidized coverage. But if that plan was offered and a worker didn't enroll in it, he would still be eligible for subsidies on the exchange.
Even though the health law makes administering this provision complex, it's still doable, say health policy analysts. In fact, many large companies have been automatically enrolling their new hires in health insurance for years.
Pitney Bowes is one. For the past eight years, the firm has automatically enrolled new employees in a high-deductible plan linked to either a health savings account or a health reimbursement account. They have 30 days to opt out or choose one of the company plans; if they don't do so they're generally enrolled for the year in the high-deductible plan.
"It probably has added some people who may not have otherwise [signed up], maybe because of cost concerns, and then they say, 'Oh, I can live with that' [when they see the cost]," says Andrew Gold, vice president of total rewards at the company.