Four months from now, open enrollment begins for insurance offered under the federal Affordable Care Act. And effective Jan. 1, 2014, additional consumer-protective measures kick into the system, including tax credits for the middle class, and prohibition against denial of coverage for pre-existing conditions. It’s laudable, but is it sustainable – and if so, how?
David Shore, president of the Massachusetts Association of Health Underwriters, relays the obvious: health insurance is expensive because health care is expensive, and that the ACA does little, near-term, to change this. Upcoming federal rating rule changes compounded by new fees, taxes, and assessments on health insurance premiums are game changing events for employers throughout the country, he says. He recommends that employers of all sizes actively consult with their chosen experts to identify, evaluate and mitigate exposure where permissible.
Expanding the number of insureds by legislative fiat widens the risk pool to include more relatively healthy individuals, to promote better access to health care and to rein in the cost of uncompensated care for people for whom a brief hospital stay can amount to more than their annual gross income.
Large companies have more latitude than smaller ones because their group of insureds is larger, so risk is spread across more people. That concept is as old as insurance itself, and the ACA does nothing to change it.
Once annual coverage caps are lifted, what happens when the insured choosing an individual policy who pays a $500 monthly premium racks up a $1 million health care bill? That’s not unheard of, particularly in Massachusetts.
Self-insurance amongst employers is expected to increase and be more readily adopted by smaller employers. Additionally, under the ACA, employers can add a surcharge to employee contributions of up to 50 percent of the total cost of single coverage for certain conditions, for example tobacco use, without compromising the affordability of coverage – at least to the employer. That’s a much-desired break for employers but not necessarily for the insured employees. It promotes more individual skin in the game for individuals to stay healthy, but just consider the longevity of New Years’ resolutions in determining the projected success rate of such endeavors. We hope we are wrong in raising this behavioral issue.
The ACA presumes that employers will use insurance brokers to shop for the best insurance products under the new system. Well, doesn’t everybody? Well… no. At the New England Family Business Conference held in Connecticut on May 16 and 17, one of the health care panelists asked a room of about 100 whether they use insurance brokers. Only about three attendees raised their hands. Once again, many attendees were from smaller companies.
Okay, then the ACA should increase the opportunities for insurance brokers, right? What we’re hearing is that it also increases the legal risk for brokers if clients think the brokers did not fully inform them of the downstream consequences of a specific plan choice or strategy. The lines will become more sharply drawn in 2015 when federal penalties kick in.
These are among the possible side effects of wide-scale implementation of the ACA. Before we dismiss opposition to the ACA, we should devote some thought to solving any unintended consequence. The country will be healthier if we do.
