Employers surveyed by Watson Wyatt Worldwide acknowledge that maintaining the status quo in the health care system isn’t a viable option. On the other hand, they express concerns that reform might create more problems than it solves. They fear new legislation may threaten existing group plans, increase an employer’s costs and counteract emerging gains in cost management.
To understand the proposed legislation and calculate its true impact, employers should get the facts and convey their concerns to legislators before a bill is finalized.
“Any plan to reform health care must address the issue of supply and demand and individual accountability to be viable and sustainable,” says Caty Furco, FSA, MAAA, office practice leader for group and health care at Watson Wyatt Worldwide. “The introduction of a play-or-pay system or the weakening of ERISA pre-emption may actually drive up costs by threatening existing employer programs.”
Smart Business spoke with Furco about the potential impact of health care reform on businesses.
Which reform elements are endorsed by employers?
In July, Watson Wyatt held round-table discussions with 95 large U.S. employers, which employ more than 400,000 workers and provide health care coverage to more than 970,000 individuals at an annual cost of $7.3 billion. Similar sessions were held in the Bay Area and local employers have echoed the sentiments of employers nationwide. In general, employers agree that we need health care reform, but how those changes are delivered and paid for is a major concern. The areas of consensus include the need for quality health care at a reasonable cost along with the need to reduce the ranks of the uninsured, the cost of which has been passed along to employers offering group plans. Improving efficiencies in our health care system, such as those achieved through the automation of health care records, and maintaining ERISA pre-emption were also endorsed by employers.
How might reform threaten employer-sponsored health plans?
Unless ERISA pre-emption is maintained, employers with multistate operations could be forced to comply with a multitude of local insurance laws, escalating the administrative burden for geographically dispersed employers. And the introduction of a play-or-pay mandate will specify a minimum benefit level. A ‘one-size fits all’ minimum benefit package could result in employers paying more, as currently many employers tailor their benefits to meet the specific needs of their own population.
What are the unintended consequences of reform?
Employers fear that reform will create a two-tiered insurance system, forcing them to offer a lower-cost government option to lower-paid workers, or perhaps leaving them with a high-cost population of insured workers if lower-paid workers are allowed to opt out of group coverage in favor of the government option. If the government option contains coverage limitations, competition could force employers to offer workers additional benefits to supplement the minimum mandates. Legislation needs to take into account today’s mobile work force — where an employee moves geographically but stays with the same employer. Reform could add layers of complexity and bureaucracy that drive up costs. And small business subsidies could yield an unfair advantage while shielding them from the true cost of health care.
Employers have been using claims and employee demographic data to customize employee wellness programs and create initiatives that encourage the proactive management of chronic conditions. When employee education programs are combined with high deductible plans, health savings accounts and other incentives, they are showing real results. Employers expressed apprehension about a government option undermining their progress in controlling costs if they end up without access to data or the autonomy to encourage personal responsibility and positive employee behaviors.
How can costs be controlled?
Three things must be included in any health care reform plan to control costs.
- Cost transparency. Patients are currently shielded from detailed cost estimates before consenting to a procedure. Consequently, no one really knows or understands why the cost of a knee replacement in the U.S. is $98,000. To create wise consumers, patients must know the costs and consider alternative treatments before making a decision. Greater cost transparency will not only invite scrutiny, it will encourage competition.
- Consumer education and responsibility. Consumers need to know the risks and outcome history for a particular treatment and provider to make prudent decisions. Complexity determines the price for a procedure, so consumers need to question whether a high-cost procedure is really necessary.
- Reduction in worker shortages. Unless reform addresses the supply side of health care by increasing the number of front-line, cost-effective health care professionals, such as physician assistants, nurses and primary care physicians, costs will continue to escalate.
How can executives help?
Legislators are currently seeking input, so executives must understand the details and the consequences of each proposal, then voice their concerns and recommendations. The bills are lengthy; executives may review a summary of the proposals at www.watsonwyatt.com/topics, under Controlling Health Care Costs, or by contacting their Congressional representative.
Caty Furco, FSA, MAAA, is the office practice leader for group and health care at Watson Wyatt Worldwide. Reach her at (415) 733-4309 or email@example.com.