Healthcare Reform and American Business – More cost shifting is not the way to a better healthcare market

We hear so much in the news these days about healthcare reform, the Affordable Care Act (ACA) Exchanges and the need to reform “Obamacare” that one might think that most health insurance in America is provided through the Exchanges or Government programs.

However, in fact approximately 177 million Americans (61% of covered Americans) get their health coverage through an employer. We find that is nearly 16 times the number of people who get their coverage through the federal or state exchanges.

We also find that in 2015, employers collectively spent $668 billion on health benefits (more than federal spending on Medicare), it is obvious from these facts that as Congress looks into healthcare reform — repealing or amending the current programs, they make sure to take into account issues that affect Employers health plans. One of those issues is the ongoing trend by Government to shift costs away from Government programs to private employers which also forces private employers to shift most costs to their employees in the form of higher deductibles and premium contributions.

In any healthcare reform, congress should maintain current Medicaid expansion and funding levels as set up under the ACA changes to those programs. Block granting Medicaid and rolling back the ACA expansion would likely result in an increase in uninsured and even lower payments to Medicaid providers.
Such changes could lead providers to increase their charges to private payers, thereby shifting more cost to employers.
It is estimated that 12.9 million Americans could be at risk of losing coverage if the Medicaid expansion is repealed. An increase in the number of low-income uninsured people increases hospital and physician provider risk for uncompensated care. (In 2013, that cost was $84.9 billion.)

Under Federal and State, cost shifting employers have carried the increased burdens. For example, under the ACA’s Transitional Reinsurance Program (TRP), American business contributed more than $16 billion to support the individual health insurance market, with more yet to come- with rather dismal results to date.

Although price hikes in the individual marketplace are in the news, employers not only have had to deal with the higher cost of their own health benefit programs, they have also contributed money behind the scenes to help cover insurance company losses through the TRP. This explicit cost-shifting approach did not make the individual market successful and is not a sustainable strategy.

Even more cost shifting to employers could result from several of the majority’s ACA reform plans under consideration. Some propose rolling back the ACA’s Medicaid expansion and allowing states to choose between block grant and enrollment-based financing. Moving to block grants would reduce federal involvement in Medicaid and offer states more flexibility to administer their programs.

A 2013 analysis by the Bipartisan Policy Center estimated that a proposal to block grant Medicaid would reduce federal funding for the program by $160 billion in 2022, but the shortfall would need to come from somewhere — private employer’s plans.

Government cost shifting does not address the underlying causes of healthcare cost growth, and increasing costs to employers will make it harder to provide affordable coverage to their employees.
For example, since the ACA has been implemented the majority of employers health plans have migrated from 85-95 % Actuarial Value Plans (AVP) down to 60- 75% AVP in order to be able to maintain their health plans and conform to the ACA mandates. The majority of today’s plans require employees to pay significantly larger deductibles than previously, most in the $900- $3000 range.

When a firm changes to a Consumer Directed High Deductible Plan qualified for an HAS account, most plans are required to remove Prescription drug copays and to assess deductibles between $3,000 and $6,000 annually. This extra burden on low income employees has resulted in some provider’s, like hospitals, starting to offer medical loans for people who require hospitalization or surgery in order to cover the huge increase in Out of Pocket expenses.

In summary, as the politicians move toward amending the existing laws and regulations, employers and their employees need to make their views known regarding this consistent increase in cost shifting to employers and their employees, in the attempt to reduce the government’s health care bill.

HR Expertise On Demand
Should you require some professional help dealing with how these issues affect the design of your Health Plans, Mercer People Pro experts are available to assist you. Contact us today and receive a two-hour consultation FREE. To set up your free consultation, visit MercerPeoplePro or feel free to contact me, Richard Hill, for assistance.
Source: MMC Health Reform and American Businesses: Critical Partner for Success, February 2017.