Repeal the ACA or is there a "Better Way"?

As we get set to go into the holiday season and move into the reality that on January 20, 2017, President Elect Donald Trump will take office, the focus falls squarely on the most complex, contested, and important issue our country faces: Healthcare and health insurance. Emotions throughout the election were at an all-time high and are still being expressed across our nation. In the world of health insurance and the consulting we do with employers it is now time to put these emotions aside and start to piece together rational thought so we can plan a strategy for success. The question lies in what will President Elect Trump do with the ACA and if he does repeal and replace it, what does it look like and how does it affect employers moving forward?

The notion that there is no other plan(s) in motion is far from the truth. The GOP has a detailed plan published by Paul Ryan and it can be viewed here. (I will touch on some of the main focus points of the plan and what I think it means for employers a bit later.) A few points stand out when one delves into into the details of Speaker Ryan's proposal.

1.   The current system, while it has improved the number of Americans with access to healthcare, we all need to recognize the fact that health insurance costs for individuals and employers are spiraling out of control. Average increases spiked 22% in the individual market and more than 1/3 of all employers have received a 30% health insurance premium increase for 2017.

2. The "Better Way" proposal still holds the macroeconomic notion that all Americans should have access to quality, affordable healthcare similar to the current ACA model. Sure to remain are retaining pre-existing condition waivers and allowing dependents to age 26 to remain covered on their parent’s plan.

3.   A full repeal of the ACA is remotely possible, but not likely, even though Republicans have full control of the House and the Senate.

4.   When the ACA repeal movement is set in motion it will be a complex task for Congress. The Trump camp or the "Better Way" documents neglect the reality that 20 plus million Americans currently covered by the law could lose coverage in 2017.

So what does it mean for employers who have been affected by a law which has increased their premiums, shrunk benefits and imposed expensive compliance and reporting requirements? First and foremost the complexities of the current law won't allow for a repeal to happen and a new plan to be put into effect anytime soon. The focus needs to be on the current compliance and reporting requirements in effect. The employer penalties for not being compliant are arduous to say the least. Offering “minimum value” coverage to 95% of a full time workforce is a tough requirement for many employers. Tracking employee health insurance enrollment monthly, filing compliance forms and tax documents correctly are burdensome and time consuming. The Congressional Budget Office predicts 11 billion dollars will be collected in ACA Employer Mandate penalties in 2017. To ignore these key figures and to hope that these components unwind over the next few years could be fatal to a large number of businesses in the very near future.

“Better Way”

On to how the "Better Way" plan addresses employer-sponsored health insurance. One of the issues with our healthcare system is transparency. What we pay for services and what we are charged for our healthcare are unlike any other industry. There is an obvious lack of price controls. Employees and individuals need to focus on more consumer directed health care in the years ahead. Shopping for quality, affordable health care needs to be a consumer option in order for costs to be kept in check. The good news is the "Better Way" plan promotes consumerism as well as other important key elements:

1.   The focus on consumer directed healthcare is directly tied to having the member have some skin in the game by utilizing HSA's and HRA's. While these are already popular under the current system there are expanded options being proposed for HSA’s. One of them would be setting the maximum contribution level of the HSA to the maximum combined and allowed annual deductible and out of pocket expense limits of a HDHP.

2.   With the idea that the consumer should be holding providers accountable there is also a proposed requirement for price transparency from all healthcare providers. Shopping around for services and realizing that a provider who charges less for a surgery could actually mean that it's because they perform the surgery more often with less complications which leads to lower utilization and costs for carriers and self-funded employers.

 3. Preserving employer-sponsored health insurance is a goal of the “Better Way” plan as well. It addresses how Americans receive their insurance on a pre-tax basis allowing employers greater buying power to purchase higher quality coverage. The premise of putting a cap on the exclusion of ESI on a pre-tax basis would likely lower premiums and increase take home pay. The Cadillac Tax would be eliminated as it essentially drives up costs and taxes people insured in high cost health plans.

4.   The small employer market that currently offers health insurance would also come into focus. Currently more than half of the small businesses who don't offer health insurance can’t afford to pay for it. The proposed legislation details pooling for small businesses and allowing them to band together to offer association type health plans. This would increase negotiating power and free employers from certain mandates.

5.   Self-insurance options for an employer is a key step in consumer directed healthcare and cost transparency. “Better Way” focuses on self-funded plan options to continue to support self-insurance by curbing restrictive regulations impacting the ability for the purchase of stop loss insurance. Affording employers and their consultants to have the flexibility to design plans with transparency and plan design flexibility has the potential to make more affordable group health insurance plans available in the marketplace.

At the end of the day, our healthcare system and the problems it presents are complex. While the first attempt at offering quality affordable care to all Americans was a step in the right direction, there is much more work to be done. Even with a Republican majority in Congress, any attempt to fix out of control costs will be a painstaking job for all concerned. We urge employers that are self-funded to continue to press healthcare providers for price transparency and to also be mindful of all of the current ACA compliance and reporting requirements. Challenge your consultants to help. The same old “status quo” technique of trying to save money or negotiate the lowest possible renewal simply isn’t enough.  If those who are advising you regarding healthcare spending aren't up on these topics or have a plan to move you in the right direction it may be time to look for a resource that can help. As employers and tax paying consumers, we have more power and control than we realize on how we influence healthcare and the dollars we spend on it. Together we can work toward new and innovative solutions to maintain employer sponsored healthcare.