In great anticipation of John Torinus headlining this year’s Human Capital Summit on Solving Health Care on March 13, 2014, we are sharing his blog content. Stay tuned for more posts and insight from John as we get closer to our event!
The soap opera titled ObamaCare keeps burning and turning, and the episodes to come promise to be as unpredictable as the ones playing out.
To date, the new law has been a series of missed milestones, deferred deadlines, unintended consequences and politically charged spin from both sides of the aisle. It’s hard to figure out how ObamaCare is really working or not working.
There is even more uncertainty ahead, including:
How many of the nation’s previously uninsured will sign up for individual policies? The financial models for ACA were based on an initial seven million policy holders, but that number looks unobtainable by the March 31 cutoff.
- How many will sign up and then not follow through with premium payments, subsidies or no subsidies?
- How many young people will sign up? So far, a larger than anticipated proportion of older, sicker, more expensive people has rushed to the exchanges for coverage.
- It that trend persists, how many health insurers will go down because of underestimated risks? The new cooperatives funded under ACA, relative rookies in the risk business, could be the first to drop.
- ACA provides for bailouts of troubled insurers. How many insurers will seek taxpayer help?
- How many will be forced to merge with stronger survivors? Some insurance experts predict a consolidation of the industry through mergers.
- Where will premium prices for indivdual poolicies end up? Almost all economists expect increases because the ACA requirements, but no one knows how high they will go in the next couple of years.
- Perhaps the biggest unknown of all is how many companies will drop coverage. How many will choose to pay their employees what amounts to a defined contribution and dump them onto exchanges, either public or private? Early returns are ominous.
The percentage of companies providing a health care benefit has decreased steadily over the last decade, down to 60% in 2013. It was two-thirds a decade earlier. I had guessed that it would drop to 50% in the first couple of years under ObamaCare. But the drop-off could be more severe.
The expectation was that smaller companies with more than 50 employees, especially those with low wages and high turnover, would be more likely to punt on coverage than bigger employers. The smaller firms would be more likely to see the non-coverage penalties of $2000 to $3000 per employee as a good deal. It’s a small sum compared to an average of $15,000 per employee in health costs.
But now it looks like there is a growing number of larger companies making similar moves. Walgreen’s, IBM and Time-Warner are dropping their retirees. Target, Home Depot, Trader Joe’s and Walmart are dropping part-timers. United Parcel is dropping spouses.
Most large and medium companies have played a waiting game, knowing that if they drop the benefit before their competitors drop, they will lose valuable employees. They have kept their 2015 cards close to their vests. But if some of the big boys take the leap and default to the exchanges, it could be a game of dominoes tipping over.
It’s a good bet some will drop both part-time and fulltime coverage.
That would be a tragic turn of events for the country in economic terms. Companies that have made workforce health and related health costs a strategic priority are the real reformers of our busted medical business model. They are delivering top-notch care for $8,000 to $10,000 per employee. They are proactively improving health.
They put pressure on providers for value – price and quality, and that is the cause and best hope for bending the trend on out-of-control health costs in America.
People on left, who opt first for government solutions, will applaud each time a major corporation drops health care coverage. They have always preferred a single payer system, not matter what it costs. But ways and means are crucial for any sustainable system.
Cheers or tears, the nation will continue to watch nervously as the upheaval of a fifth of the U.S. economy shakes out. No one, repeat no one, knows how this melodrama ends. No one can fully calculate the economic consequences. That includes the wonks that wrote the law. Writers of soap operas know the ending.
