As an organization built to service employer-sponsored-health plans, we have spent the last three years researching, interpreting and developing strategies to deploy in response to the Affordable Care Act. Unlike most of the population who is just now experiencing its impact and providing direct feedback, we have been debating the direction of this landmark legislation almost on a daily basis.
At our November C-Suite Series- A Chief Executives’ Guide to Thriving in the Chaos of Health Care Reform, our Managing Principals surveyed the audience regarding their forecast of the fate of ACA. The two most popular positions were:
- The ACA will survive, but will be significantly modified
- The ACA will fall under its weight
Though time will produce the final answer, we asked Bill and Brian to provide thoughts and arguments for these possible outcomes. Brian’s response was posted earlier this week. Bill’s is below:
The ACA Cannot Succeed Without Substantial Restructuring
First things first: I think the ACA is an incredibly bad law. The only reason that it became law in its current form is because it was rammed through the Senate via a procevationdural maneuver made by Democrats called "Reconciliation.” Had Scott Brown not won the old Ted Kennedy seat in Massachusetts, the law would have been reconciled between the Senate and House versions and a cleaner law would have emerged. But since Scott Brown won, the ACA was passed via Reconciliation and we are stuck with one sixth of the economy now being shaped by a bad law.
We cannot go back to the pre-ACA—there is no putting the toothpaste back in the tube. Pre-ACA, there was universal agreement that the cost problems and medical trend that drove the market were huge challenges for employers and consumers alike. On top of that, we all know that new entitlements are incredibly hard to take away, and the insurance reforms (pre-ex, dependents to age 26, etc.) have been successful and enjoy (largely) bi-partisan support.
So the question is this: how can the existing law be amended to fix the major structural problems in the new system? Or can it ever be fixed, or must it fail altogether? To answer the question, we need to define the structural problems, which are clear and unambiguous: COST.
It is really just about the money. The fiscal problems created by the ACA will ultimately drive the need for change. Over the next two years, the cost of insurance is poised to increase--potentially dramatically--which will force carriers out of the exchanges in many markets (reducing competition) and increasing the cost of subsidies exponentially (creating enormous fiscal pressure).
First the how, then the what…
Realistically, the bill cannot be fixed anytime soon with this President and this divided government:
- Either the Democrats win the house and keep the Senate in the 2014 mid-terms (not going to happen) and the Democrats pass whatever fixes are necessary; or
- There is a new President after 2016 and the government is united and a single party fixes the major problems (it will be too late for full repeal); or
- The fiscal problems of the ACA are so big that the tone and tenor changes and bipartisan compromise prevails.
So what fixes are required to make the law successful? Very simply, reduce the cost of insurance premiums for younger participants. There are four separate changes that can be implemented:
- Reduce the cost shift to younger individuals, thereby increasing the premium cost for older participants
- Provide more flexibility in benefit design, including buy-down options that will be more attractive to younger individuals
- Reduce burdens on carriers to reduce the cost of administration and compliance
- Cap or reduce the total amount of government provided subsidies
Attracting younger and healthier employees is the secret to lower costs: 85%+ of cost is driven by healthcare claims, and the less healthcare consumed on average, the lower the cost. The fountain of youth, my friends, is the secret to the survival of the ACA.