By Gary Miller
[This article was originally published in the Summer 2020 issue of Update, a quarterly publication of the Association of Catholic Colleges and Universities]
This student's statement, however, caused me to do a little research. It did not take much digging to discover that many adjuncts across the country were struggling with being able to find affordable health insurance. I’d probably complain as well, or at least worry a lot, if I had a medical condition I couldn’t afford to treat or thought I could go bankrupt because of a necessary medical procedure that had to be paid out of pocket.
Adjuncts are particularly vulnerable to being uninsured or having to resort to low-cost limited health plans that leave them exposed to significant coverage gaps. As part-time employees, sometimes working for multiple universities, many simply are not working the equivalent of 30 hours per week, which is the eligibility threshold for many university benefit plans. This threshold happens to be the Affordable Care Act “shared responsibility” standard, which requires large employers to offer health insurance to full-time employees, that is, those who work at least 30 hours per week.[1]
Many university administrators wrongly assume that most part-time staff and adjuncts can easily acquire an affordable comprehensive major medical plan on the Affordable Care Act (ACA) Health Insurance Marketplace, also referred to as the insurance exchange and Obamacare. While it’s true that the Marketplace can be a good option for those without access to an employer’s group medical plan, these plans can only be purchased each year during the open enrollment, typically November 1st through December 15th or during a special enrollment period if there is a qualifying event. While the limited enrollment period may be an obstacle for some, the real challenge with Marketplace plans is that they are no longer affordable for many individuals and families.
Major medical plans purchased via the Marketplace or on a state exchange, where available, offer premium subsidies (technically referred to as premium tax credits) for those who qualify, typically those with household incomes up to 400% of the federal poverty level. These subsidies make it possible for many Americans with household incomes below the U.S. median to afford a comprehensive Marketplace plan. The extremely poor, those below 138% of the federal poverty level, generally now have access to Medicaid, thanks to the ACA.
Many of the people who are now in a difficult place, however, are those who earn too much to receive a premium subsidy, but not enough to afford the unsubsidized premium cost of a Marketplace plan. To get an idea of this cost, in Cook County, Illinois, an unsubsidized Marketplace Silver PPO medical plan with a deductible of $6,600 and an annual out-of-pocket cost exposure of $16,300 (not including premiums) will run a couple, age 45, earning $70,000 with no children $1,198.70 per month.
A Life Issue
The precepts of Catholic Social Teaching, foundational to the mission and strategic direction at most Catholic universities, draw a strong relationship between human dignity and healthcare. The U.S. Bishops captured it concisely: “Every person has a right to adequate health care. This right flows from the sanctity of human life and the dignity that belongs to all human persons who are made in the image of God.”[2] As a life issue, healthcare is a prime concern for universities, not only for the communities beyond its borders, but also for their own internal communities of faculty, staff, and students.
One underlying premise of the ACA rests on the relationship between health insurance coverage and adequate healthcare. An abundance of research supports this premise: Those without health insurance are more likely to suffer premature death. This is not surprising, given that people without health insurance are more likely not to take the medications necessary to treat chronic conditions or address major health concerns.[3]
Beyond the moral consideration of health insurance as a life issue lies some practical ones: What is the impact to the university of classes being taught by adjuncts who may be experiencing serious medical debt, have untreated illnesses conditions, or who are not taking the necessary medications to control chronic conditions? Is there a negative impact on the university’s brand, student retention, or quality of teaching? Such negative outcomes could far outweigh any savings that come from limiting participation in the group health plan.
Beyond the moral consideration of health insurance as a life issue lies some practical ones...
It is unlikely that this affordability gap will be addressed by the nation in the foreseeable future. In fact, next year, the Supreme Court will rule on yet another challenge to the ACA’s constitutionality, possibly even dismantling the entirety of this important safety net. In the meantime, there are practical ways that universities can help their contingent faculty and part-time staff who need insurance. While some options are apparent, such as simply broadening health plan eligibility, these may not be feasible because of restricted budgets. The recommendations below are either low-cost or cost-neutral.
What to Do — and What Not to Do
Perhaps the best starting point is to understand the extent of the problem by surveying the adjuncts who are ineligible for the group plan. Are they finding ways to secure major medical insurance? This information could be used to gauge whether a coverage gap exists for a university or campus; if a gap is found, the findings could be used to develop a customized solution. It may be that most of the adjuncts at a university have other full-time positions or are covered by a spouse’s plan and a solution is needed only for a few individuals.
Do Not Endorse Limited Health Plans
Try a web search on “low-cost medical plans” and you will find plenty of carriers offering to sell limited medical plans. Most of these plans have pre-existing condition limitations as well as extensive policy exclusions. A particular type of limited medical plan, short-term medical, has an additional risk. In many states, these policies must have expiration dates. In Illinois, for instance, policies can be issued for a maximum of six months. A serious health condition developed during a six-month coverage period could make it impossible for an individual to renew for the next period. While limited plans can provide helpful reimbursements for some medical services, because of their coverage gaps, annual maximums, and other limitations, they also put the adjuncts who purchase them at risk of serious medical debt. While there are legitimate uses for some of these plan types, they are not ideal as standalone coverage.
Not endorsing limited benefit plans means making no mention of them on any university website or in any official university communication, unless they are used to supplement the university’s comprehensive group medical plan. For instance, an accident or hospital plan could be used to help faculty and staff offset major medical plan high deductibles. If used in such a fashion and paid for on a pre-tax basis by employees, then they would also have to be listed in the university Section 125 plan document, as well as ERISA documents.
Even worse than endorsing a standalone limited medical plan as an alternative to major medical insurance would be to incorrectly describe it as “comprehensive.” I am aware of a limited benefit student plan that is currently described on a university’s website as a “comprehensive health plan.” This misinformation could possibly create liability for that university. Even the insurance company that provides this policy advertises it as a limited health plan.
Avoid the Family Glitch
Universities that cover adjuncts and part-time staff should be aware of the ACA Family Glitch.[4] This applies when the group plan requires employees to make little or no premium contribution but requires disproportionately higher contributions for spouses and children. An employee with low annual earnings, such as an adjunct, may only be able to afford employee-only coverage. When the spouse turns to the Marketplace for coverage, he then finds that he is not eligible for a subsidy and cannot afford these plans either.
Families that have access to an affordable major medical employer health plan are not eligible for a subsidized Marketplace plan. The glitch is created by how the ACA determines whether an employer’s group plan is affordable. If employee-only coverage is less than 9.78% of household income, then the group health plan is considered affordable not only for the employee but also for the person’s spouse and children. Because the plan is considered affordable based on the employee-only premium, none of the family members are eligible for subsidized insurance on the Marketplace.
Consider a family of two adults and two children, with a household income of $75,000, an income that would qualify for a substantial Marketplace subsidy. Assume that only one of the adults was employed and had access to a group medical plan. If the parent with the group medical plan had a required premium contribution of $150/month for employee-only coverage, the employer plan would be considered affordable by the ACA because the annual employee contribution would only be 2.4% of the family’s household income, well under the ACA threshold. Even if the addition of the non-covered adult and children caused the family’s premium contribution to increasing to $1,200 per month, 19.2% of the family’s household income, the non-covered spouse and children would still not be eligible for a Marketplace premium subsidy. That’s because the ACA determines affordability based on the employee-only premium contribution amount. Thus, the disproportionately high family premium, in this case, would likely have put comprehensive health insurance out of the financial reach of this family.
Take away: Group health plan premium contributions should be structured in such a way as to keep the medical coverage affordable for spouses and children. Even creating a separate plan for part-time staff and adjuncts that excluded spouses would, in many cases, be a better alternative for the employees’ families than to require a disproportionately higher premium contribution for spouses and children.
Overinform Faculty and Staff of the Marketplace Option
Given the variability in many adjuncts' teaching schedules, those who are covered by the university’s medical plan may have periods of ineligibility. When adjuncts lose coverage, they are entitled to continue coverage at their own cost through the provisions of COBRA. Such continuation can be very costly, and the Marketplace may be a more affordable option because of the availability of premium tax credits. Unfortunately, employers are only required to notify employees of the Marketplace option at the time of hire.
Adjuncts who lose group health plan eligibility after participating in a university's plan for a period may not remember there is a Marketplace option. As a result, they may elect the extremely expensive COBRA continuation option and may likely find it unaffordable after a couple of months. Compounding matters, the ACA stipulates that the COBRA election disqualifies them from enrolling in a Marketplace plan until the next open enrollment period.
To help adjuncts avoid this pitfall and ensure they are aware of the possibly much more affordable Marketplace option when losing university coverage, a notice of the Marketplace option can also be included with the COBRA election form. The Department of Labor model COBRA election letter includes such notice. But even this extra step has a problem.
If a person enrolls in the Marketplace before her/his university coverage ends, then the Marketplace coverage will begin the first of the month following the date of loss of group coverage. Otherwise, if they don’t enroll in a Marketplace plan until they receive the COBRA election notice, possibly longer than a month, they can’t enroll in a Marketplace plan until the first of the month after a Marketplace plan is elected. The problem is that Marketplace coverage is not retroactive to the date of termination, like COBRA. The person could be forced into COBRA just to pay medical bills incurred in the gap period.
The simple solution is to provide more notice of the Marketplace option than is required by law. Ideally, a separate notice should be provided as soon as a person is informed that they are going to be terminated or become ineligible for the university’s medical plan. This will give them time to enroll in a Marketplace plan before terminating and allow for the earliest possible news coverage date.
Provide Tax-Advantaged Assistance to Adjuncts Not Eligible for the Group Health Plan
As of January 2020, a new way for employers to help employees with health insurance became available, the Individual Coverage Health Reimbursement Account (ICHRA).
These HRAs can be implemented for just a single class of employees, for example, part-time faculty and staff not eligible for the group health plan but teaching a set number of courses or hours per week. Through an ICHRA, a university can make tax-free payments to the adjuncts to reimburse a portion of the cost of individually acquired health insurance. Not only would these reimbursements be tax-free to those eligible, but they also would not be considered pay and therefore would not create additional payroll taxes for the university.
One caveat: If an adjunct not eligible for the group plan finds that she is eligible for a premium subsidy on the Healthcare Marketplace, she would need to opt-out of the ICHRA to qualify for the subsidy. She would not be able to obtain assistance from the employer and from the Marketplace simultaneously.
A Macro Approach
A final suggestion: Given budget constraints caused by the pandemic, perhaps this would be an appropriate time for universities to consider pooling resources for the purpose of providing benefits. Collaborative arrangements among Catholic universities could potentially save millions of dollars.
What if universities collaborated to:
- Share legal and consulting expertise, develop best-practice plan design options, and centralize administration?
- Contract with a company specializing in helping adjunct and part-time staff not covered by the group plan to understand their insurance options and help with their billing challenges? This service would not be excessively expensive and would be a much-appreciated employee benefit. This benefit could be extended to all employees who are recipients of surprise medical bills.
- Create a separate self-funded third-party health insurance program established among participating universities for adjuncts and part-time staff not eligible for the universities’ regular medical insurance? Perhaps the fund could be partially funded by grants as well as limited employer contributions and adjunct contributions.
Continuing to diminish health benefits for cost reasons with the justification that such changes are a competitive practice is reactive. Such a reactive approach does not address the underlying issues and ultimately will make high-quality plans unaffordable for many Catholic universities. Benefits issues can often fly under the radar of senior university officials. That is unfortunate because of the missed opportunities: significant savings to the university and its faculty and staff, the potential to improve faculty and staff retention, and most significantly, access to medical insurance for all employees.
Gary Miller is an employee benefit, human resources, and organizational consultant who works with both universities and businesses.
[1] For more information on the employer Affordable Care Act requirements, see this summary from the Society for Human Resource Management.
[2] NCCB/USCCB, “A Framework for Comprehensive Health Care Reform: Protecting Human Life, Promoting Human Dignity, Pursuing the Common Good,” Pastoral Letters and Statements of the United States Catholic Bishops, Volume VI, 1989-1997 (1998): 519-526.
[3] Regarding the relationship between lack of healthcare and mortality and morbidity, see these sources for starters: (a) https://www.pewtrusts.org/en/research-and-analysis/blogs/stateline/2014/05/12/health-insurance-and-death-rates and (b) https://news.gallup.com/poll/269138/americans-delaying-medical-treatment-due-cost.asp.
[4] For a more detailed explanation of the glitch issue, see https://www.verywellhealth.com/aca-family-glitch-1738950.