Tuesday, December 11, 2012

An Uncertain Future: Healthcare Reform Moves Forward

Believe it or not, like it or not, we are 2.5 years into the largest social and financial transition of our lifetimes. Of course, this refers to Healthcare Reform.  HCR will affect every person in the USA. Some rejoice and others lament but its implementation moves forward.  Not all is going according to plan; there have been many bumps in the road. Implementation has been trying but not traumatic up to now; however, the year 2014 will be a test for all.

In 2014, two big changes happen. First, community rating begins; carriers will no longer underwrite policies as they do now.  There will be little or no rate differentiation for the risk associated with your group compared to others.  In 2014, industry, sex and health conditions will have nothing to do with the specific rates charged.

There will be limited consideration given to age, smoking status, and geography.  If your group is historically a low risk, we expect your cost to increase, if high risk, you may get a breather from rate increases but we don't expect them to decrease.  It is expected that community rating will place significant upward pressure on costs for all in the future.  The second and most significant change will be the introduction of healthcare exchanges or buying pools.  The path of implementation is not clear.

EXCHANGES ARE A STUMBLING BLOCK

The availability of healthcare exchanges will mean the biggest changes yet.  Businesses will have decisions to make.  Do they stick with the old tried and true group model of providing benefits to their employees or do they drop existing health plans, give employees some cash, and send them to the health care exchange to buy coverage?  Will they do some combination of the two? 

For some, the decision may be easy, but for most it will be complicated.  Lower paid employees will qualify for huge federal tax subsidies if they buy coverage from the type of exchange defined by the law. Higher paid employees may see their costs go up considerably.  This is especially true since benefits will be paid with after tax money rather than pre-tax dollars.

Some employees may get $1000's in subsidy and others may pay $1000's in tax because of reform.  This is all very complicated. The decisions made will affect every employee in your company.  Some may like the new way and some may be devastated.  Calculators available online allows you to check your cost: http://laborcenter.berkeley.edu/healthpolicy/calculator/.

Unfortunately, the results are hypothetical.  The actual implementation of exchanges is up in the air. The law places this responsibility in the hands of the state governments. Many states have pushed back and decided not to implement a healthcare exchange.  When states choose not to participate, the federal government is supposed to provide that state’s exchange.  A federal exchange isn't close to being developed.

More importantly, the huge federal subsidies are only available if employees buy coverage from state exchanges.  Federal exchanges do not qualify.  Unless this changes, it will be difficult for businesses that had planned to off load their benefit plan to do so.

Businesses may find the cost for employees is just too great without those federal dollars to offset the initial sticker shock as employees pay the real cost of health coverage.  Without a qualified exchange, healthcare reform will grind to a tortuously slow pace if not be halted altogether.

UNCERTAIN FUTURE OF HCR

So, the future of group health insurance is not clear.  Will the private market for group health insurance be dismantled?  If so when...3, 5, 10 years?  What will that mean for your employees? How do you, as a decision maker, capitalize on any opportunities that exist?

How do you prepare and explain to employees all the changes that will occur as the implementation begins to affect their paycheck? This is all very complicated.

Of course, there have been anxious moments at TransparentRx as this has unfolded.  The debate, the drama in congress, the signing by President Obama, the Supreme Court decision and now the decision by governors that many states will not have exchanges. It has been interesting.

What will the future hold....I'm not sure.  But it is crystal clear that employers will need help deciding what to do.  There are decisions to make and your employees’ moral and productivity will suffer if not done properly. Moral and productivity affect profit.

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