Honey, I shrunk the benefits! Jimmy Stewart (1) may be dead but William Bendix (2) is alive and well

Remember those famous words, “if you like the coverage you have you can keep it.”  Somebody should have explained that to employers. 

 

 

 

 

 

 

 Keep the benefits, I want the cash.

I and many others tried to explain the consequences of many of the provisions of the health care reform law to the staff of key members of Congress who were writing the legislation. We talked about the implications of changing the tax status of the prescription drug rebate to employers offering retiree coverage. We talked about the long-term impact of taxing so-called Cadillac plans, we talked about the added cost of new mandates and about the unintended consequences (or maybe not) of the penalties for both individuals and employers who do not have or provide coverage.  We talked and talked and talked and all we received back was rhetoric spouting the theoretical goodness of the deed about to be done.

If you are among the 170 million Americans who have employer-based coverage and especially if you are among the 70 million who have employer-provided self-funded health benefits, your coverage is changing, becoming more expensive to you and perhaps heading for extinction.

Today we are seven months down the road and as predicted, employers are reacting to provisions of the Patient Protection Affordable Care Act, (an interesting title for the law since it neither protects patients nor makes health care more affordable). Employers are looking at the new mandates and see higher costs so they increase co-payments, raise deductibles and coinsurance and increase the portion of the cost paid by the employee. They trim or eliminate prescription drug coverage for retirees and some simply eliminate Medicare supplemental coverage altogether.  Some employers are using PPACA as an excuse to cut benefits. Of course, employers are not reacting solely in response to the law, but also to ever-growing health care costs as well and the prospect that such growth will continue. Employers are seeking health care that is actually affordable; imagine that. 

Twenty eighteen may seem a long way off, but some employers are already thinking about the possibility of their plans being subject to the new tax on high cost plans and consultants are raising the issue as they help employers lay out a long-term strategy for their employee benefits.  Remember, we are not talking about small employers but rather the Fortune 1000 most of whom are self-insured plans.  All of this will lead to some interesting discussions as collective bargaining agreements are negotiated over the next several years. 

Some employers will become more aggressive as we approach 2014 and the health insurance exchanges.  First, there is no reason to offer a new employer plan, simply pay the penalty tax and let the employee join the exchange.  Other employers will conclude that dropping their coverage, paying the penalty and even raising the employees pay a bit is better than offering health benefits.  In effect there are strong incentives to do exactly the opposite of what we are told is the goal of health care reform. Why should you care? For the simple reason that the law contains large subsidies for many people using the exchanges, families earning up to $88,000 a year in 2010 dollars get a subsidy from the government and the more people getting the subsidy, the higher the costs for government.  That cost shift from the private sector to the government coupled with still uncontrolled health care costs means yet another entitlement is set to follow the path of Social Security, Medicare and Medicaid.

Newton’s third law should be carved into the desk for each member of the House and Senate. They apparently never heard of it or think it applies only to physical bodies. The reaction to federal policy pushing people into home ownership is the first clue this decade and health care reform will be the second clue. For every action, there really is a reaction. 

As we shift more costs to workers and ultimately as we cut them lose to buy their own health insurance we are creating yet another health crisis of affordability. Workers are also losing a valuable resource in obtaining and managing health care coverage and their health care as well.  The vested interest employer sponsors of health benefits have in promoting health and wellness and in assuring accurate claim processing, claim appeals and communication will be lost.  The point of view that employers have no business providing employee benefits is short-sighted. Rather than destroy that relationship, we need to assure benefits are fully portable while leveling the tax treatment of employee benefits between those who receive their benefits in the workplace and those who do not.