Many aspects of the Patient Protection and Affordable Care Act (PPACA) become effective Jan. 1, 2014, but preparing for that date is difficult for businesses because not all of the rules and regulations have been written.
“As of last month, there were still 1,200 regulations yet to be written by the end of the year. I don’t think anybody has it figured out yet — that’s the biggest problem,” says William F. Hutter, president and CEO of Sequent.
Nonetheless, there are steps businesses can take now to be ready for 2014. “The first thing to do is to understand the PPACA. Unfortunately, there is no definitive source of information on how it will impact companies because of the yet-to-be written regulations. So you need to read a variety of materials, starting in July — that’s when we should see those rules and regulations start to manifest,” says Hutter.
Smart Business spoke with Hutter about strategies small and midsize businesses can take to deal with the uncertainty surrounding health care reform.
Is there a chance that the effective date of PPACA provisions might be delayed?
Some factors already have. The Small Business Health Options Program (SHOP), an exchange for small businesses to purchase health insurance, has been delayed for a year. Also, nothing has been presented showing how the federal health care exchange, a marketplace for individuals to purchase insurance, is going to work.
Since everything is in flux, what can companies do in preparation?
A number of strategies are going to emerge, and many might have questionable structure. If someone presents an opportunity too good to be true, it probably is. Be careful about vetting companies offering creative strategies to avoid some of the impact of health care reform.
One legitimate strategy on the increase is the use of cell captives. Companies will self-insure, but with minimal exposure. There are good self-insurance options for businesses in the 60- to 70-employee range that will exempt them from certain aspects of the legislation, such as unlimited rehabilitative services. An employee can go to rehab for 30 days, come back and four months later have another drug problem that sends him or her back to rehab — there’s no limitation and it’s covered under the Family and Medical Leave Act. A company can design a plan that doesn’t allow that because it’s not required in a self-funded plan, even though it is part of the minimum essential coverage required under the PPACA in the fully insured environment.
All of these self-funded plans will become high deductible health plans with three layers of risk. The first is the employee deductible, which will pay the first layer of claims. The second layer will be an amount of self-retained insurance risk a company insures. The insurance company will pay the third layer. That setup protects insurance companies from a lot of the smaller claims. In Ohio, about 70 percent of claims are less than $8,000.
What impact will reform have on health care costs?
It will not bring down the cost of insurance because there’s nothing health care reform can fix relative to the aging demographics of the workforce. There’s been a dramatic increase in recent years in the use of medication and cost of defensive medicine. As baby boomers continue to age, those costs will only increase. There are not enough 20-somethings coming into the workforce to compensate for the aging demographic in the state of Ohio.
If anything, the cost of regulation just keeps increasing. A recent study stated that fines and penalties are expected to total $88 billion. All kinds of alternative strategies are being considered, not to avoid the intent of providing good coverage for employees, but because of uncertainty with the legislation. If you can create certainty by having a new health care plan design, that’s good for business. At least you know what you have.
We’re not going to see the conclusion of how health care reform is going to be implemented for a decade. It’s going to be a really long time.
William F. Hutter is president and CEO at Sequent. Reach him at (888) 456-3627 or firstname.lastname@example.org.
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