If you’re like me, you could not wait for the election to be over! But, regardless of who you voted for, I think that many employers, healthcare providers, insurance carriers and brokers can agree that the current state of the Affordable Care Act is in trouble. With a repeal and replace presidency on the horizon, changes will be made, but not overnight. In fact, there’s a chance that parts of the ACA may never be repealed.
Honestly, in my opinion as a benefits advisor there are a couple of good things that have resulted from the implementation of the ACA—but the majority of it can benefit from a rework. As a broker looking around the industry, employers and providers have been suffering and overburdened for the last six years and especially during the last two. In my opinion, things have to change immediately as escalating costs are hurting companies and employees alike.
In the wake of the election and with an uncertain road before us, what we can do now to lower the cost health insurance for employers and employees? Consensus is building for retaining two things that are part of the ACA. These include pre-existing conditions and dependent coverage for children to age 26. Beyond that, nothing is clear. What is clear is that when Trump starts taking healthcare reform apart, there will have to be a comprehensive substitute at the ready. You can’t repeal parts of Obamacare without affecting the rest of it. Many of the exchanges are unstable, and would be even more so if we remove the mandates. Also, the political fallout from not having coverage for the 20 million people who have signed up under the ACA would be catastrophic.
Here is what I think will happen in 2017:
- Law(s) will be passed that will ease and/or encourage the sale of insurance across state lines, and the increased competition will be good for everyone.
- Nobody has talked about this much, but I think the MLR ratio part of the law will be struck down. In my mind this has been one of the most challenging aspects of the law for employers.
- Individuals will be able to claim the cost of their insurance as deductible when they file their taxes.
- Legislation will be brought forward that will increase competition in the drug market--perhaps even increase foreign pharmacy competition that will significantly reduce the cost of prescriptions. As we know, RX costs are rising faster than any other part of health insurance.
- Medicaid will be brought back to the state level.
While these items would be a good start to retro-fitting the law, I don’t think anything will happen to the Individual Mandate or the exchanges for at least the first year. It is a far more complicated issue than just stating that they both aspects of the ACA will end tomorrow. That would be a total disaster and even though the exchange is in a “death spiral,” it is still necessary at this point. We have to come up with a better solution and it must be implemented gradually.
The question then remains, if premiums will still be increasing dramatically over the next year, what can we do right now? There are several things that you can do to circumvent or minimize the effects of this law:
For companies classified as a small group, self-funding is an opportunity to circumvent the exchanges and the rates are typically 20% or lower if your company is in relatively good health. It is also an effective way for large and small companies to lower costs by getting around all of the different mandates out there, or substantially limiting some of the covered items. There are some instances in which I have seen employees being limited or excluded from treating certain illnesses under these plans, which would have been fully covered under a fully insured plan. However, if the employer and employees are properly informed about the plan than I do think there is some merit to a self-funding strategy.
Professional Employment Organizations (PEOs)
A Professional Employer Organization (PEO) is a firm that provides a service under which an employer can outsource employee management tasks, such as employee benefits, payroll and workers' compensation, recruiting, risk management, and training and development. While PEOs may lower costs in most instances, joining one also means that you usually have to sign up for some extra human resources services that can be very expensive. If you do need help in the human resources arena, then this can be a decent option.
Bona Fide Association Plans
What makes a Bona Fide Association medical plan so price-competitive compared to the other options in the market and how does it work? The simple answer lies in its status as a "Bona Fide Association" plan. There are many associations out there that claim to have association plans but they are really just glorified enrollment systems that provide little to no benefit at all to member companies. The GHBA allows companies to be underwritten outside of "community rating" and off the exchange. This means that GHBA rates are determined by claims experience reports or the health status of employees. The program rates average 20-30% lower than the same plan in the regular market and there are substantial savings even for very large companies. In addition to the underwriting advantage, the program is written as one large group and therefore benefits from price advantages because of its size. The size and favorable loss ratio of the program are very beneficial for companies on the renewal. Instead of moving every year or two, it can provide employers a low cost, high quality and long-term solution to their benefits needs.
I have to admit that I was a little pessimistic about our industry until just recently. As OneDigital advisors, I believe we have an opportunity to lead in this space, providing strategic consultation and peace of mind to our clients in what will likely be an uncertain time.