Healthcare Reform: It Was Happening Even Before Government Regulation

Art Brooks

"Healthcare reform: Competition or chaos?"

"Lawmakers introduce bill to repeal part of healthcare reform law"

"Health reform could lead to higher insurance rates"

…these are just a few headlines of the day that point to the public uncertainty and fear surrounding healthcare reform.

Regardless of whether President Barack Obama’s recent healthcare plan is eventually repealed or not, healthcare as we know it is changing. Healthcare offerings have been evolving to address market needs years before formal reform was announced.

Few would argue that the U.S. healthcare system is broken. Individuals with preexisting conditions are often denied coverage; vital services are sometimes not included; and medical and benefits costs have skyrocketed.

According to a survey of large companies by the National Business Group on Health, employers estimate their healthcare benefit costs will have increased by an average of 8.9 percent in 2011, compared with an average increase of 6.9 percent in 2010. According to HR and outsourcing consulting firm, Hewitt Associates, the average total healthcare premium per employee for large companies is expected to be $9,821 in 2011, up from $9,028 in 2010 and double what they paid in 2001.

Whether it is through government intervention, market demand, or a combination thereof, the consensus is that reform is necessary, and has already started to happen. New services and plans have begun to emerge to address companies’ needs for more cost-effective options. HR needs to stay on top of these evolving options to ensure its department’s and company’s success.

Basics on Government Healthcare Reform

The Patient Protection and Affordable Care Act is the federal statute signed into law in 2010 for healthcare reform. It imposes new regulations and restrictions on U.S. corporations as its provisions are phased in over the next seven years. As a result:

  • Organizations are required to disclose their benefit offerings and their value on employees’ W-2 forms starting this year.
  • Businesses with more than 200 employees need to automatically enroll new hires in their healthcare plan. Employees can opt out should they desire.
  • Employers are required to notify employees about the state health insurance exchanges by March 31, 2013. They will also need to provide information to them about their plan coverage.

As part of this new statute, companies may elect to pay a fee in lieu of providing employees with insurance. In fact, one in five employers say they will consider this option, according to Lockton, an independent insurance broker. For those companies that do opt to pay the fee versus provide insurance, their employees would need to secure their own coverage. Health insurance exchanges will be set up in each state to provide a marketplace where individuals and small businesses can compare policies and premiums, and buy insurance. Helping employees navigate benefits and healthcare will become increasingly important as corporations address these and other options.

The Impact of Market Demand on Reform

Even before formal government intervention, many corporations had begun to pass on the growing costs of healthcare to employees through higher premiums and deductibles. Others looked to creative alternatives to continue to provide value. As a result, options like self-funded plans, high-deductible health plans, flexible spending accounts, and voluntary benefits were born. These options have gained growing interest for a number of reasons, illustrated below.

Plans that give employers greater control in the services they provide.

Self-funded plans
give companies the ability to provide more customized healthcare offerings with the potential for greater cost savings than traditional plans. With this option, employers assume the risk for the cost of all covered healthcare services. Although these plans used to be used mainly by larger companies, smaller organizations are also looking to them as an alternative to traditional carrier-offered plans. According to a 2010 survey by United Benefit Advisors LLC, about 12 percent of employers with less than 200 workers have self-funded plans, and 12 percent of all employers want to switch to them some day.

Plans that allow employees to put money away tax-free for benefits.

High-Deductible Health Plans paired with health savings accounts
allow individuals to put money away tax-free to pay for benefits. They give employers a cost-effective solution to offering benefits, and employees the financial power to alleviate some of the burden of medical expenses and deductibles. In addition to giving employees more options, HDHPs and HSAs also give employers a cost-effective solution to offering benefits. With 2011 contribution limits of $3,050 before tax for individuals and $6,150 for families, HSAs can offer added flexibility for employees. Employees can use the money to pay for healthcare expenses or grow it tax-free for retirement if the funds are not needed.

Flexible Spending Accounts,
like HSAs, have become a staple in many benefit plans because they allow employees to put aside pre-tax money to pay medical expenses. FSAs can sometimes help employees buffer the increased financial burden of higher out-of-pocket expenses and deductibles being required of them today.

Benefits that provide added value and augment existing plans.

Non-insurance voluntary benefits
such as auto and home insurance, 529 college savings plans, deferred compensation, estate planning, fitness programs, lunch programs, medical opt-outs, pet care, profit sharing, stock options, and uniforms can help to address the personal needs of a company’s employees at a low cost to the employer. Voluntary benefits can also help reduce employer payroll taxes and improve the bottom line.

Looking Toward the Future

When it comes to ensuring employees’ health, HR departments have more options than ever. As the range of plans grows and offerings become more complex, HR will need to find ways to work more efficiently and effectively. HR will also need to navigate increasing government regulations, all while protecting the bottom line.

HR cannot do it alone, which is why technology can be critical in helping to manage benefits plans, enrollment, and costs. Experts, such as brokers who "live and breathe" benefit plans, can be an excellent resource.