Small Businesses Must Be Both Cautions And Creative In Today’s Choatic Health Benefit Market
There will be no Republican healthcare bill this year, but much will change. What health benefit strategy makes sense for small businesses until the direction of the new administration becomes clear?
The challenge that healthcare creates for small businesses continues to grow. The cost of employer healthcare benefits is rising about twice as fast as general inflation. The chronic disease epidemic rolls on. The obesity rate for U.S. adults supersizes about 0.5% per year. Obesity is a primary driver of several major chronic diseases: e.g., diabetes and heart disease, and chronic diseases drive about 80% of healthcare spending. And small companies continue to pay more for equivalent health insurance compared to large companies.
Healthcare impacts the morale and effectiveness of your staff. Employees cannot perform their duties well if they or their loved ones are seriously ill. And the cost of healthcare is often financially painful or prohibitive, especially for lower-paid employees.
Speaker Paul Ryan says the ObamaCare (the ACA) is the law of the land for the foreseeable future. And, serious observers such as the CBO say the insurance exchanges are stable. Following the embarrassing defeat of its healthcare proposals, the Republican party needs a victory badly and will likely turn its attention to areas where it thinks it has a good chance of putting points on the board before the mid-term election. Right now, they are talking about tax reform. They may move on to other, easier challenges. It’s not likely they will come back to healthcare soon.
But that does not mean that the future of the ACA is assured. Secretary of Health and Human Services Tom Price observes that there are over 1,000 passages in the ACA that empower him to define or elaborate what the law really does. Within the ACA, the Republicans object most strongly to the expansion of Medicaid, the “individual mandate” which coerces Americans to buy insurance, and the subsidy and coverage-requirement aspects of the insurance exchanges.
Each of these programs can be degraded by executive action. The administration can grant waivers to states to “experiment” with alternative Medicaid programs which, if launched in red states, might amount to less funding or tighter eligibility requirements similar to the Medicaid proposals in the Republican health care bill. It can make enforcement of the individual mandate looser, allowing healthier people to opt out of insurance, driving up premiums for those that remain. (The IRS is now accepting “silent” 2016 individual tax returns that omit information about health insurance coverage.) And it can degrade the exchanges in many ways: by failing to provide usability upgrades to the website or advertising to bring in users; by fostering uncertainty and failing to address technical problems, causing insurers to withdraw from the market; by watering down the benefits that must be provided by exchange health plans; and most powerfully by ceasing to defend against a court challenge to the program that provides financial assistance with deductibles and co-insurance to the lowest-income exchange customers. The loss of this program would cause many lower-income customers to withdraw from the exchanges.
Hence, the exchanges have no upside and plenty of downside with the Trump administration in office. And Medicaid may get trimmed as well. The two programs that have increased coverage for lower income people are at risk of shrinking. This puts more burden on employers, and particularly on small employers whose employees typically earn less.
What strategy makes sense in this very uncertain environment?
Use commercial group insurance if possible. This part of the healthcare system is strong and will be least affected by the administration. If your company is big enough to self-insure you can escape a great deal of regulation, and new offerings are bringing self-insurance to smaller companies. A strategy based on sending employees to the public exchanges with a stipend, which made sense for some companies when the exchanges had the government’s full support, will be risky until we know how the new administration will implement the ACA.
Explore offering a health savings account (HSA) in combination with high-deductible insurance. Trump has said he favors HSAs and wants to expand their use. He can make regulatory changes that will make HSAs more broadly available and more attractive. High deductible health plans produce savings, but studies have shown that the savings often come from avoidance of needed care. Adding an HSA, which the employer can fund, makes money available for necessary care that falls into the deductible, and it gives employees incentives to spend wisely because they are spending “their own” money.
Get creative by investing in new approaches to wellness that are showing strong results. This includes comprehensive programs targeted at chronic diseases like Omada Health and digital tools that help people adopt healthier lifestyles and eating habits. There is a lot of noise in the latter space, however, some of the products are producing strong documented results. These programs attack the root cause of the chronic disease epidemic that drives the bulk of our healthcare bill.
The next few years are likely to be difficult for health benefit sponsors: when the gods are at war mortals need to stay out of their way. In such periods it makes sense to stick with the things that are working and watch the change carefully, looking for the opportunities that emerge and well as the threats.
First posted @ blogs.forbes.com/toddhixon on March 30, 2017.