The Affordable Care Act doesn’t fully implement until 2014, and in the meantime, health care costs will rise. In fact, costs for employers, among the more stable in the broken insurance market, are expected to jump 9% in 2011, according to a study by Pricewaterhouse Coopers. And the only reason the overall cost increase is this low is because employers plan to shift costs to their workers. So the total increase to the employer and employee is easily into the double digits. And that will continue at least until full implementation. The study hopes that some of these costs hikes are due to provider consolidation and capital expenditures, which should ease in the medium term, but given the trajectory of health care costs in America over time, that looks like wishful thinking.
But clearly, the biggest fear is that employers make their coverage crappier and crappier, offloading these increased costs onto their workforce. The Obama Administration is actually writing rules designed to put a stop to that.
The White House on Monday will issue new rules that strongly discourage employers from cutting health insurance benefits or increasing the costs of coverage to employees, administration officials say.
The rules limit the changes that employers can make if they want to be exempt from certain provisions of the health care law passed by Congress in March. Many employers want the exemption because it allows them to keep their existing health plans intact with a minimum of changes. More than 170 million Americans have employer-sponsored insurance.
The administration said the rules would allow a smooth transition to a new, more competitive insurance market that works better for consumers. But in some respects, the rules appear to fall short of the sweeping commitments President Obama made while trying to reassure the public in the fight over health legislation.
Specifically, certain plans in place on the day of the signing of the ACA are grandfathered in, and under this rule, those plans would lose that exemption if they “make significant changes in deductibles, co-payments or benefits.” The PWC study shows that we know employers are already doing this. Here are some of the metrics:
Under the rules, a health insurance plan can lose its exemption if it eliminates all benefits for a particular condition or if it increases deductibles or co-payments by more than the rate of medical inflation plus 15 percentage points.
Likewise, a health plan loses its exemption if an employer reduces its contribution so that its share of the total cost of coverage declines by more than 5 percentage points. If, for example, an employer is paying 60 percent of the cost of family coverage, it would run afoul of the rules if it cut its share to 50 percent.
An employer would also lose its exempt status if it increased co-payments for doctor’s visits to $45, from $30 — a 50 percent increase — while medical inflation was 8 percent.
Some health plans require consumers to pay a percentage of the bill, rather than a fixed dollar amount. An insurer loses its special protection if it makes any increase in this percentage — if, for example, it requires patients to pay 25 percent of the bill for surgery, rather than the 20 percent charged in the past.
Obviously this does little for the 2010-2014 period, but it could be a major boost to the quality of employer-based insurance after that. They need to leverage whatever exemptions that are out there, if they’re going with a large employer-based system, to ensure that system is sustainable and provides half-decent coverage. I don’t think the Rube Goldberg solution for health care was the best practice, but at the very least, the government was put on the hook for the nation’s health care, in certain ways, which means they need to use tactics like this to ensure the best coverage possible in these markets.