double-digit increases a decade ago to mid-single digits. The wonks are puzzled by that unprecedented drop. How did it happen? Look no further than the Grassroots Revolution led by private payers. They are demanding change, and they are making it happen.
This book lays out the initiatives that many companies have launched and the platforms they have built for a restructured health system.
Unlike the current system that revolves around specialist doctors, hospitals, and insurers, the new model centers on the employee, the consumer. The new delivery model listens first to the voice of the customer. It is patient-centric.
That’s the heart of what I learned from the innovators at the ramparts of real health care reform, and it’s at the heart of this solutions-oriented management book.
WITH MAJOR CHUNKS of the new health care law taking effect in 2014 and 2015, companies across the country have been faced with a decision on whether to continue their health benefit, to begin coverage, or to pay federal fines.
On its face, this may not seem like a very involved decision. After all, if companies have been offering health care to employees, why wouldn’t they continue to do so? Yet, the new law offers an escape hatch of sorts. It might look like it’s cheaper for a company to pay the new fines than provide insurance for each employee. But there’s a lot more to the decision.
The new law, above all else, is complicated, and those complications spill over to private companies. Even with the new law, though, the real issue remains the underlying costs, which is why the name of the legislation—the Affordable Care Act—is so ironic. Health care has been many things, but affordable is not among them, and everyone agrees that the new law will not change that reality, that ACA will actually add costs. The only debate is over how much.
The escalating costs are the primary reason companies are faced with the go or no-go decision under ObamaCare. If costs were low, like they were after World War II when companies first got into offering a health care benefit, the decision would be less difficult. No economist is predicting that general cost escalation will lessen in the future.
So, should businesses default to the government exchanges created under ACA to avoid the financial burden of health benefits, or should they stay in the health care game?
This book focuses on ways companies across the country have innovated to reduce health care costs so they can maintain the benefit. It profiles innovators—company by company at the ground level—to describe a rapidly emerging business model for health care. It is a disruptive new model that will force radical change in the way providers and health insurers operate.
Even deeper, at the very root of the national problem, is necessary behavior change by individual employees, as they become engaged consumers. The new model is based on individual responsibility.
Yet while costs and improved health are at the center of the reform in the private sector, no company can ignore the impact of the Patient Protection and Affordable Care Act, also known as ObamaCare or ACA. The decision on whether or not to offer health care for employees is made difficult by the complex, unclear, and still developing rules to flesh out the law. Businesses got a one-year reprieve when the Obama administration moved the effective date of the mandate on employers to provide care or face a penalty from January 1, 2014 to January 1, 2015. But that doesn’t change the need to make a fundamental decision on whether to offer health care as a benefit.
THE CHANGING LANDSCAPE OF HEALTH CARE
The percentage of employers that provide a health plan has been dropping steadily over the last several decades. Hyperinflation (a justifiable term) of medical costs has driven 40 percent of U.S. companies, mostly smaller firms, out of coverage. That’s down nine points since 2000. No one really knows how many more employers will drop coverage because of soaring medical expenses or because of the new law. But some will, because they haven’t figured out how to manage or afford ever-higher premiums.
If a company with 50 or more employees decides to offer health care coverage, it will use either a self-insured plan or a plan sold by an insurance company that meets two ACA tests: 1) it can’t cost more than 9.5 percent of an employee’s pay, and 2) the employer coverage must pay at least 60 percent of the employee’s health care bill.
There are many insurance plans with medium to high deductibles, offset by personal health accounts, that can meet those hurdles. However, for those crunching the numbers, it’s a little like shooting in the dark, because no one really knows how much premiums will jump in the years following enactment of the new law. If you can’t fix a premium cost, you can’t do the percentages.
Most analysts agree, though, that the addition of people with highly expensive pre-existing conditions and other mandates can only drive premium costs upward.
The Obama administration had already pushed back the website startup for small businesses to purchase insurance on the new public exchanges from 2014 policies to 2015. That was a broken promise to those employers that have seen the biggest premium hikes in recent years and were hoping the exchanges might give them some relief. Many extended the small group policies as 2013 came to a close. That bought them a 12-month reprieve to see how prices will shake out for 2015.
SMALL COMPANIES WILL GAME THE RULES
Congress gave small companies a break in the new law. Businesses with fewer than 50 full-time equivalent employees escape the ACA penalties for not providing coverage. That means many small companies will game the rules to stay below 50. They will:
■ Choose not to grow
■ Adopt labor-saving methods like automation
■ Outsource work
■ Buy rather than make components
■ Split a company into separate corporations to get below the maximum
■ Keep part-time employee hours under 30 hours per week so they can’t be counted in the full-time equivalent totals
They are already taking those steps in anticipation of the activation of the new law.
The penalty is a slap on the wrist compared to health benefit costs.
Some financially strapped companies with more than 50 employees will be relieved to pay the ACA penalty of only $2,000 per employee as they retreat from a benefit plan that includes health care. The penalty is a slap on the wrist compared to health benefit costs.
THOSE SAYING “GO” TO HEALTH CARE: MOSTLY MEDIUM AND LARGE COMPANIES
My guesstimate is that at least half of the employers in America will make a decision to stay in the health care business, down from 60 percent that offered a health benefit in 2013. Polls confirm that most large and medium employers will continue coverage, and brokers that each represent hundreds of companies, medium and large, also report that almost all of their clients intend to stay the course in offering a health care benefit.
