Health care coverage is probably everyone's favorite snooze topic. But you'd better perk up--and fast.
Enormous changes are coming your way in 2015, thanks to the Affordable Care Act, and you probably want to start preparing now. Everything from the way your business must plan for employee coverage to the cost of coverage and the availability of care itself is poised for major transformation.
That was the message from a recent webinar sponsored by Bank of America and Inc., with panelists David Cutler, a professor of applied economics at Harvard University and former senior health care adviser to President Obama, and Sean McGuire, founder and president of E.D. Bellis, a health care consultancy in Omaha.
"An estimated 11 million adults are newly covered who were not covered by the middle of last year," Cutler says. "The base is very good, and this population is big enough and diverse enough that the exchanges look like they will survive."
Breaking It Down
According to Cutler, the ACA is really two pieces of legislation. One deals with expanding access to the millions of uninsured. The second piece of legislation involves trying to compress runaway costs of health care that have strangled entrepreneurs and consumers alike. As a nation, we spend $3 trillion annually on health care. Of that, $1 trillion is wasted, Cutler says. Further, it costs about $15,000 a year per consumer for insurance, an amount that typically increases annually.
In the next two years or so, employers will have to figure out how they will organize employee coverage. Many small-business owners will shift to defined benefit plans, Cutler says, which means they will offer their employees lump sums of money and send them to an exchange, either public or private, that will offer them plans they choose, and purchase, themselves.
Employers will also need to figure out how to get their employees to cut down on their consumption of health care and medical services in the first place, which probably means offering financial incentives for wellness, Cutler says. And, depending on your size, you might even consider setting up a closed network of care with negotiated discounts from local doctors.
For his part, McGuire says, enacting the ACA is "as big as putting someone on the moon" for the first time. In the next few years, he says, he expects to see a greater interest in self-insurance, which essentially means employers paying for individual claims, usually from some sort of stop-loss insurance fund that they've purchased. In the long run, for businesses with fewer than 100 employees, self-insurance could actually be cheaper than paying insurance-broker premiums.
McGuire also says he expects to see more high-deductible plans, linked to tax-favored health savings accounts to which employers might contribute some portion of the overall benefit. As another add-on, in the case in which deductibles are very high, McGuire suggests you think about contributing to very high expenses, such as those employees might incur through hospitalization.
And here are some other tips from McGuire:
- First and foremost, comply with the new law, and document your health care process. That includes having materials in writing and notifying employees about state and federal health care exchanges.
- Run an analysis of your payroll and employees, keeping in mind that the federal qualification for full-time employees has changed to 30 hours from 40, and that the cutoff is those who have worked more than 780 hours in the previous six months.
- Educate your employees about their health care options, and have personnel they can go to for answers.
"It will take time for things to work out, and it's important to be proactive and think about these things," McGuire says. "A lot of businesses are making the mistake now of avoiding the issue."