As comprehensive healthcare
reform has taken shape and become reality, it is now time to
have discussions on the impact on the employee benefits
landscape. Throughout the planning process, Hill, Chesson
& Woody has remained quiet on the topic so as not to
become involved in the reporting of the debate or the
political forces behind it. However, we have been
tracking the developments to allow us to provide practical
advice to employer groups, and we feel this is the right time
to approach the subject of reform and what it means for
employers.
First of all, the Patient
Protection and Affordable Care Act of 2010 is major social
policy enactment similar in scope and impact to the
introduction of Medicare in 1965 and the creation of Social
Security in 1935. Both of those programs addressed major
issues in American society, and were widely debated prior to
their enactment. Similarly, this healthcare reform act
will have significant benefits to our society, but like
Medicare and Social Security, it may very well have some
unintended consequences, as well.
The Benefits of
Reform
Healthcare reform is something that has
been strongly desired across the country, and now this act
provides mechanisms to move it forward. The key to
passage of the act has been providing health insurance
coverage to millions of uninsured Americans, and this bill
does precisely that.
Other benefits include: slowing
medical cost trend by bringing more individuals into the
healthcare pool through mandated coverage provisions (thus
removing much of the cost shift from the uninsured population
to the insured); the encouragement of best practices through
comparative effectiveness research, which will provide a push
toward evidence-based medicine (see Eyes on Benefits dated April 9,
2009);
and additional measures for simplification of health insurance
administration.
But likely the most welcomed
benefit for employers would be enhancement of preventive
healthcare measures and the funding of national wellness
initiatives. Creating a culture of corporate wellness has
been a growing trend among employers, and this provision would
greatly enhance efforts to help businesses in this
endeavor.
Unintended
Consequences
Most often, mandates as complex as
these often come with consequences that may not be realized
until years down the road, when the full effects of the new
laws will come into play. The most significant of these
are the concerns of: how much this is actually going to cost,
whether there will be any significant decrease in health
insurance trend to offset the costs, and who is going to foot
the bill. Again, even most financial experts cannot agree
to the answers to these questions, but there are indications
that it may create, among other things, a vicious cycle of
cost transference. The idea is that any new taxes used to
fund the mandate would be transferred to producers of medical
goods and services (manufacturers of medical devices,
pharmaceuticals, insurance companies). The medical
insurers would then pass it on to employers in the form of
higher premiums (because the claims cost has increased), and
finally, on to the end-user employees in the form of higher
payroll deductions.
In addition, the comparisons to
Medicare and Social Security include the solvency issues that
continue to be associated with these programs. Many
businesses are concerned of our inability to afford another
program of this magnitude and nature, which is one of the
reasons why many employers are in opposition to the new
law. Considering how close Medicare and Social Security
are to becoming insolvent, it makes one wonder if this program
is headed in the same direction. There are also the
additional cost burdens on state and local governments to fund
the expansion of Medicaid put forth in the legislation and a
strain on healthcare administration provoked by the expected
shortage of primary care doctors.
For employers, the final law may
produce compliance and financial concerns over such things as:
penalties for not offering coverage to all employees (for
businesses with 50+ employees); the “Cadillac” tax on certain
robust group plans, changes in how fully insured plans are
rated (based on adjusted community-rated standards rather than
experience-rated standards) and much more.
Another hidden pitfall is the fact
that the bill may not have the impact on healthcare costs that
lawmakers intended simply because it does not specifically
address how the uninsured, or underinsured will change their
habits in terms of receiving care. In other words, just
because they have access to health insurance doesn’t mean that
they necessarily have equal access to care or even the
understanding to effectively use the care available. The
previously uninsured who are accustomed to receiving care at
the emergency room, for example, may continue that practice
rather than going to the primary care physician for which
their new insurance would provide (to properly address their
condition and eliminate the need for an ER visit) – and that
would exacerbate the cost trend problem.
The Bottom
Line
While the new healthcare reform laws are
still taking shape, there are still plenty of questions and
concerns about its overall impact that will be addressed over
time. But one thing that is clear is that the most
significant impact we, as American citizens, can have on the
cost of healthcare is by taking responsibility for our own
health. While legislation can have some effect, any real
change will need to come from a behavioral standpoint of our
society. As American citizens, the most significant
impact we can make on the cost of healthcare is by realizing
the need to take better care of ourselves and hold ourselves
responsible for our own health and well-being.
Healthcare reform may be just the first step, but it is up to
us as individuals to make real change happen.
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