In a surprising turn of events, by redefining the healthcare law mandate as a tax, U.S. Supreme Court Chief Justice Roberts reaffirmed the constitutionality of PPACA.
The reaction by employers won’t be so surprising.
The employer-based system will be paying for this historic coverage expansion. So costs will be going up— significantly—particularly for insured plans. Therefore, employers are going to look to cut back and also manage risk.
The law mandates minimum essential benefits. These benefits will be much lower than employers provide today—so look for greater cost-sharing by employees.
Affordability will be determined as a percentage of income—so employers will be considering contributions based on salary, and higher-paid employees will pay more out of their paycheck.
Insured plans will be subject to rate-stabilizing formulas, so younger and healthier groups—as well as groups large enough to absorb risk—will self-insure. This will cause a spiraling adverse impact on insured plans.
Professional Employer Organizations (PEOs) will become more popular as smaller employers, unwilling or unable to self-insure, will look to take advantage of larger pools. I believe legislators will catch on to this and equalize the rules for these entities.
Employee activation will gain traction as both employer and healthcare consumers will realize that affordability starts well before the healthcare purchasing point: We will simply need to take better care of ourselves, because if we get sick it will cost us a lot.
In a recent survey, 52% of Americans think the law should be overturned in full or in part. Congress and rules-writers will continue to make incremental changes and miss deadlines, requiring extensions. But extensions won’t let employers off the hook.
So put a good healthcare advisor with wellness consulting experience on your speed dial.
That is an excellent concise write up on the “real” implications of the PPACA!!
I wanted to offer a few thoughts on your recent blog and I hope you take them in a spirit of openness.
I am surprised by the critical in the negative sense of your commentary on the Supreme Court’s decision and its effect on employers. I would expect more on the practical side of what to do now and what to consider since I see your role as a consultant not an advocate. Your statement in the first sentence about Chief Justice Roberts is at best incomplete. I have read the judgment noting, too, the intensity of the commentary from both the concurring and dissenting judgments. Most importantly, I believe the Court found a way to put the issue back to the legislative and executive branches where it belongs.
The political will to repeal the law may not be as strong in November even if Mr. Romney wins. In any case, it will not be a simple political or legal process to do so.
So, from an employer’s point of view, the question is what to do and what costs, if any should be considered as additional? If additional, what costs should an employer reasonably absorb or share? And other related questions. Other, particularly smaller employers, have new issues that need to be addressed and that is important. At the same time, there are many larger employers out there who need some guidance.
You allude to potential new costs but, even though it is a blog and space is limited, your more speculative statements have no qualifying remarks. For example, you state that insured plans will be subject to rate-stabalizing formulas. You state categorically that “This will cause a spiraling adverse impact on insured plans.” . I am not sure that is the case but, if it is, there is nothing in the blog that makes me see that it could be true. The words certainly evoke out of control costs.
Also, in my view, the suggestion at the end of putting a healthcare advisor on speed-dial is hyperbole in the nature of advocacy against the decision and the law. Whether we like all aspects of the law or not, in the near term, we need to take the necessary measures to comply. And are not wellness campaigns an integral part of what we are or should be doing now anyway?
From my point of view, in other words, I would prefer to see some practical direction rather than what appears like political commentary. Perhaps, I am not attuned to the role of blogs. Obviously, they draw attention so I may not appreciate the marketing dimension. But, for me, I repeat in another way, I would rather see such commentary from an outside observer than from a benefits consultant. Just my thoughts.
I really appreciate your well thought out response to this. I see the purpose of the blog as to begin a conversation – about topics everyone is concerned about… My personal view – is that I am happy the Supreme Court did not overturn the legislation. What employers need most is clarity so that they can plan. And regardless of what happens in November, I highly doubt we are going backwards. The rules are being rewritten and we all need to deal with the new rules.
If anything, I am negative about the lack of cost control mechanisms. What started as The Patient Protection and Affordable Care Act, largely became insurance reform with a coverage mandate. Other than Accountable Care Organizations (I blogged about ACOs in an earlier post) and electronic medical records – there was not much help in affordability. Wellness and more specifically employee activation is the component that most employers have been unwilling to force – but with the increases in cost – the impetus will clearly be there to control costs.
A self-insured employer with a generous benefit package will not likely be as adversely impacted by the new PPACA costs than would an employer that doesn’t offer a generous benefit package to all employees. With the legislative changes, however, there will be a lot for employers to deal with .. for example, salary based contributions will gain traction and balancing exchange programs for all or a part of your workforce will be necessary. Even looking at potentially opting out entirely is possible, but not likely.
Most of the rules are unwritten, so coming up with concrete strategies at this point at best would need to have a great deal of flexibility as rules are written and amended in response to the certain legislative tweaking. Also, market changes will need to be factored into the dynamic planning. There is much to do – but right now it’s like a football playbook where the coach doesn’t know what the other team or even his own players will be doing (throw in bad ref calls and the weather… I think you get the picture).
By the way. We have two events set up to go into the intricacies of the decision and the impact on employers.