How health care exchanges will impact health insurance offerings of employers

Ron Present, Principal, Health Care Advisory Services, Brown Smith Wallace, St. Louis, Mo.

Now that the 2012 presidential election is in the history books, a lot of attention has befallen the health care industry, particularly in terms of “health care exchanges” due for implementation under President Barack Obama’s health care reform beginning Jan. 1, 2014.

Ron Present, principal of health care advisory services at Brown Smith Wallace in St. Louis, Mo., says, “On a broad level, these health care exchanges are like an Amazon.com for insurers to offer their services. But there are implications for employers that can be far-reaching.”

He says while these exchanges can offer certain employers a way to unload the burden of providing health insurance to employees, business owners should carefully consider the implications — in terms of strategy, cost, and talent acquisition and retention — such a move could have.

Smart Business spoke with Present about health care exchanges, what they are and how they might impact health insurance options for employees.

What are health care exchanges?

On the broadest level, they’re a marketplace that offers health care coverage options for a given geographic area. It’s an access listing point for insurance companies to identify what costs and benefits would be available for customers in one collected area. These portals will look different depending on whether it is a federal- or state-created exchange, and the options within would, of course, differ accordingly.

When someone goes on the exchange, that person would be presented with a multitude of options through carriers like Aetna and United Healthcare, and those selections would be made by a user based on demographic data, type of coverage and so on. The exchange calculates costs, eligibility, payment options and such, allowing potential buyers to decide what’s best for them. Then it’s up to the buyers to decide what suits them best.

What’s really interesting in light of the election is that a lot of states are talking about not complying with this provision of health care reform. Exchanges are supposed to be in place by Jan. 1, 2014, and notifications of intent to the federal government by the states were supposed to be completed by Nov. 16, 2012. However, U.S. Department of Health and Human Services Secretary Kathleen Sebelius recently has extended the deadline to Dec. 14. The problem is, if states don’t have a state health care exchange set up, they’ll have to revert to the exchange that’s set up on the federal level, with more federal involvement. It’s an interesting irony for those resistant states.

How can health care exchanges benefit businesses from an accounting perspective?

Exchanges are currently geared to individuals and small businesses, with the definition of the latter differing by state guidelines. The most common definition of small business is one with fewer than 100 employees; those entities may be able to use an exchange to purchase insurance for group employees, which in theory opens them up to a better deal. The buying power of a large group is good for smaller employers and helps keep their overall costs down — think standards and levels of cost.

The other theory is, that in going to these exchanges, so many people will be buying insurance that the insurance competitors with similar benefits will make things interesting. It’s anticipated that by 2016, or perhaps 2017, this model may open up for larger employers, as well.

How did the election results change the way health care exchanges are viewed?

The big impact of the election is that health care reform is here to stay, so many individuals and companies who took the wait-and-see approach are now scrambling. Some 42 percent of health care providers hadn’t really done much at all about it leading up to the election, according to a recent survey by Modern Healthcare.

Are there tax advantages to health care exchanges?

It’s difficult to discern, but the penalties and the taxes aren’t really related to the exchange itself so much as they are to the actual health care reform. If we’re focusing specifically on the exchange, you could say that if certain employers opt to cut all health insurance, they might decide that it is cheaper to leave employees to find their own health insurance. It leaves them open to a bit of a double whammy though. The employer would have to pay a penalty for noncompliance, and it would no longer have the deductible from the insurance side.

How can business owners prepare for changes in health care exchanges?

Work with your accountant to do a complete financial analysis of your business. A lot of the issues in health care reform are more strategic than financial. The real challenge is looking at the ‘What if I don’t offer insurance?’ model, because the financial implications are mostly related to not doing it.

The jury’s still out on how it will all play out. But even those situations aren’t just a black-and-white number-crunching approach. It’s looking at what your competitors are doing. You might ultimately be saving money by not offering health care, but if you’re unwittingly losing your best employees to a competitor, where is the savings? Maybe you’re paying the price another way without really counting the cost.

Ron Present is principal, health care advisory services, at Brown Smith Wallace in St. Louis, Mo. Reach him at (314) 983-1358 or [email protected]

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