Don’t feel bad if you can’t predict what’s going to happen to the employer-sponsored health insurance market now that the Affordable Care Act is on its way out. The experts don’t really know, either.
Bob Seng of the Minneapolis law firm Dorsey & Whitney said he was happy to chat about the topic and invited his partner Melinda Maher to join the conversation. “We were actually just sitting here trying to figure out what to tell our clients about that tomorrow morning” at a Dorsey client roundtable discussion, he explained.
As the Dorsey lawyers and others pointed out last week, the crystal ball may be particularly cloudy right now but there is also no action employers need to take. What they should be doing is paying close attention to Washington.
“What we’re telling employers is that there’s a lot to be keeping your eye on, but in particular keep your eye on timing,” said Michael Showalter, executive vice president with the health benefits technology firm Health e(fx) of Minnetonka, with about 400 large-employer clients across the country.
Congress took the first step last week to roll back the ACA using a legislative budget tactic. Anything related to taxes and spending will affect the budget, and the ACA happened to be filled with such provisions.
A great example of how Congress can use the budget to change policy is with the penalties that employers would get charged if they fail to offer health insurance coverage this year to 95 percent of full-time staff, as defined under the law, and their dependents.
This employer mandate of the ACA has to be one of the least popular provisions of the sweeping 2010 law. Employers this year not only had to offer coverage but make sure it had a “minimal value” and was also “affordable” to employees. So there are three ways for employers to mess up and get tagged with a financial penalty.
To avoid those costly penalties, employers have to show they did all these things by reporting what they did to the Internal Revenue Service, a compliance headache that’s proved to be so painful that it created a business opportunity for companies like Health e(fx). “On the face of it, that sounded easy, but it wasn’t very simple at all to figure all of that out,” Showalter said.
Since the penalty for not complying is money collected by the IRS, it’s government revenue and can be tossed overboard through the budget reconciliation process. Interestingly, the law and its requirements for employers could remain on the books. The result would be what Seng called “a bizarre time with the law that says employers have still got to do this but where there is going to be no enforcement.”
In a quick follow-up after their roundtable discussion at Dorsey late last week, Maher explained that the firm’s big-employer clients seemed to lean toward keeping their health care benefit plans largely unchanged if the government decided not to enforce the employer mandate, likely only doing things like tweaking the coverage offered temporary employees.
In a market as highly regulated and complex as health insurance, there are a lot of other policy levers to throw besides employer mandates. One looming issue, said Maher, is the potential trimming of a big tax break that employer-sponsored health care gets right now, something that’s been in place since the 1950s.
It’s a big benefit of our health care system that many rank-and-file employees probably don’t realize they receive: how they get health insurance from an employer as a form of pay for coming to work yet don’t pay taxes on it.
Employers need to pay attention to the functioning of the individual insurance market, too, Showalter said. It’s under stress already, and depending on how the ACA gets taken apart, insurance companies could decide there’s nothing but uncertainty and risk ahead and pull out.
That might sound like something small business has to worry about and not big employers, but that’s not how Showalter sees it. If enough individuals leave the insurance market, he said, because they’ve lost their subsidies and can no longer afford it or for other reasons, it likely would mean hospitals and other providers will take a financial hit from delivering care they can’t get repaid for. They will have to make it up by charging more to big self-insured employers and other private payers.
That’s one reason Showalter advises Minnesota employers to pick up the phone and call their representatives in Washington, urging patience if nothing else, and not count on trade groups to try to influence the debate. And, he said, employer-based health insurance is no one’s favorite in Washington. Left-leaning representatives look to government to do more to pay for health care and right-leaning folks want to put individuals more in charge of their health care.
“Many of our clients believe a strong health care benefit plan keeps their workforce engaged, healthy and more productive,” Showalter said. “There’s no side of the aisle arguing that we need to keep employment-based health care strong in this country. There are just two different approaches for how to get rid of it.”
So if that’s really what’s under discussion this year, making fundamental changes to the way Americans pay for their health care, it’s no surprise Seng of Dorsey suspects the process of replacing the ACA can’t get wrapped up quickly even with one party in charge of Congress.
“I see the next two years being status quo-ish, maybe come ’19 there would be employer reactions to whatever legislation we get,” Seng said. “And based on what I’m hearing, there really is still no coherent Republican plan in Washington. And this was as of five minutes ago.”