Assessing the Impact of New Health Reform on Employers
Originally Published in RMP Advisor, April 2010The conventional wisdom is that the last few weeks have revolutionized healthcare in America, with the passage of two major pieces of legislation (HR 3590 and HR 4872). If all the changes under Obamacare are implemented as currently written into law, the healthcare landscape in the United States will be very different in 10 years from what exists today. But what about next year? The next 4 years? And what is the impact on business?
For the average employer who is currently providing benefits to his/her employees, I would argue that very little changes in the foreseeable future. Let’s examine what is in the health reform bill and its practical impact on the business owner. (For more detail, see the NFIB Timeline for Small Business.)
Basic Provisions and Short-Term Impact
Under Obamacare, we still have an employer-based system of healthcare purchasing from private insurance companies. That may not be what a number of legislators arguing for a single-payer system wanted, but it is what we have, and nothing in the law changes this basic approach to insurance purchasing.
Over time, the new law does change the relationship between government and the private insurance industry in terms of benefit design and flexibility, rate setting, underwriting, requirements for and limitations on coverage, and so forth. Many experts believe that this will cause premiums to rise, but that’s what has been happening anyhow. In the near term, the following are the more significant aspects of health reform that may have an impact on some, but not all, employers:
- A small business tax credit goes into effect in 2010 for businesses that meet certain size and compensation requirements (see related article).
- Beginning in September 2010, children may stay on their parents’ health insurance policies until age 26. This will cause an increase in costs to employers.
- Employers who provide prescription drug coverage to retirees will have a negative accounting impact from the future loss of their Medicare Part D subsidy.
- New insurance carrier requirements prohibit certain underwriting practices, annual/lifetime limits, terminations of coverage, rate regulation, and so forth.
Over the next few years, new taxes will phase in (e.g., tanning salon, brand-name drugs, medical devices, Medicare payroll and Medicare investment taxes for higher-income taxpayers). My conclusion is there’s no relief here for the average employer beleaguered by years of higher health insurance costs. So, your challenge remains the same—to purchase health insurance wisely in order to provide the best possible health benefits to your employees at the lowest possible cost.
The Longer Term
More significant changes arrive in 2014, but that’s a long time to hold your breath. Even at that point, if you are not eligible for participation in a Health Exchange—or you choose not to participate—you’re still on your own. You will have to comply with minimum benefit requirements and an employer mandate to provide insurance to your employees or face penalties. There will be certain new subsidies. There will also be a major expansion of Medicaid coverage, which will add significant financial requirements to state governments. Finally, the so-called “Cadillac Tax” takes effect in 2018, if we should be so lucky.
I would be remiss to not mention regulatory efforts to control and reduce healthcare costs. These include a Payment Advisory Board to reduce Medicare costs, a $5 billion “prevention and pubic health fund,” and experiments in medical liability reform. Again, for most employers, not much will change in the foreseeable future, and those changes that do occur will not be for the better—higher, not lower, costs (unless YOU take appropriate actions).
Our Message to Employers…
The ball is in your court. Not much has changed. It’s up to you to take the ball and run with it. You need a multi-year plan for controlling your health benefit costs. Educate and empower your employees. Change the economic incentives—do they have “skin in the game?” Do you have a “trusted advisor?” Let us know if we can help.