No matter where you turn, people are talking about health care reform or health insurance reform. The big question on most employers’ minds is how the recently passed health care legislation will affect their businesses.
“Employers are asking a lot of questions and not getting any concrete answers,” says Albert Ertel, chief operating officer of Alliant Health Plans.
The uncertainty has made it difficult for employers to develop a plan of action, but Ertel says staying informed will help keep them prepared for whatever happens.
Smart Business spoke with Ertel about how unintended consequences of health care reform could affect cost and quality of care and what you can do about it.
What has been employer feedback on health care reform so far?
The 2,000-plus pages within the Patient Protection and Affordable Care Act (PPACA) is the law of the land, but there is no one place employers can go to get answers. The questions employers have been asking about the PPACA are designed to shed some light on some simple but very important issues that may impact their business both immediately and in the future.
- Do I need to change my health insurance plan and when?
- What will it do to the rates I am paying?
- How will it affect my employees and their families?
Fear of the unknown and contradictory government statements have led some to false beliefs. Some people have been acting under the assumption that if they have a plan in place today, they need not do anything. That is not necessarily the truth.
What are some potential unintended consequences of the reforms?
The regulations that are slowly dribbling out will generate rules that may end up having a number of unintended consequences. They include but are not limited to the following:
- Increased insurance costs
- Increased utilization of emergency rooms
- Exacerbation of physician shortages
- Government focus on cost cutting that affects access and quality
- Reduced R&D (lower margins will lead to cuts in all areas of health care)
- Private insurers having to follow government guidelines
- Increased ‘medical tourism’ — sending patients overseas for elective procedures
How are those consequences affecting the cost and quality of health care for employers?
First, enhanced benefits are not free. Someone has to pay for the new ‘well care’ benefits added by the new legislation.
Second, adverse selection adds unknown and potentially tremendous risk. Several pundits are criticizing insurance carriers for increasing premiums today to prepare for the anticipated costs that will follow. One example is that employers must provide health insurance to dependents up to age 26. And it’s important to note that required proof of qualified eligibility is non-existent. Also, coverage must include payment for any pre-existing conditions. The additional risk adds up quickly and must be passed on through increasing premiums.
Third, the whole dynamic of purchasing health insurance is changing. Will employers look to their professional agent or consultant or go directly to the ‘exchange’? Health insurance is not a commodity. It is a contract for payment of health care services that are medically necessary, appropriate and completed in an appropriate setting. Who will be setting the new rules? Today you can work with your carrier. Due to cost constraints, it may all move online. Medical treatments and the consequential billing are already very complex and will get even more complex. I am afraid the government will dictate the rules for eligible services and set reimbursements. The role of the professional agent or consultant will change. Will they continue to assist with purchasing decisions as well as the service and support many provide to employers today?
What are some solutions, and how can they be implemented?
Knowing and understanding what is happening is so important today. Employers must stay informed. But that will not be easy. Things are moving very fast. Even though the full scope of the law is not to go into effect until 2014, there is a lot happening right now. For example, starting Sept. 23, (six months after the law was signed) those dependents up to age 26 must be offered coverage. Also starting Sept. 23, health plans can no longer have annual or lifetime limits within their benefit plans.
What can be expected in the future?
The law included more than 2,000 pages of text. The regulations are estimated to exceed three million pages. The regulation defining an eligible dependent child exceeds 120 pages of text. It should be quite clear numerous changes and a number of surprises are expected. All benefit plans, insurance companies and employers currently self-insuring their benefits will be required to pay at least 80 percent or 85 percent of equivalent premiums towards medical costs. Medical costs or claims may include direct payments for services and services ‘expected’ to improve the health of covered lives. This MLR (medical loss ratio) rule will apply to all insurance companies and employers self-insuring their benefit plan. As it reads today, any money available for claims not paid out during the policy year must be distributed as a rebate to the insureds of the plan and not back to the employer. Although promised to be available by July 1, the MLR regulations have not been released. This provision becomes effective Jan. 1, 2011.
Health care reform or health insurance reform, whatever you want to call it, will affect us all: large business, small business and individuals. And I do not see costs going down.
Albert Ertel is the COO of Alliant Health Plans. Reach him at (706) 629-8848 or firstname.lastname@example.org.