Context of Healthcare Reform: Understanding the Environment
- more than 160 Million Americans were covered by employer-sponsored health insurance in 2012.
- According to Kaiser Family Foundation, 60% of all U.S firms offered health benefits to full time employees in 2011 (the prevalence is toward larger firms offering health insurance, with smaller firms less likely to do so)
- Average wage growth for employers increased 2.1% while the cost of healthcare coverage rose by 9% during the same time frame
- “Most employers that provide insurance coverage are transferring more financial risk to employees; from defined benefits to defined contribution” Deloitte
“Employers might drop coverage if state health insurance exchanges and other elements of the ACA are implemented and effective….it was estimated that potentially between 23 million and 65 million individuals may join a health insurance exchange by 2020.”
Employers Believe U.S. Healthcare System Under Performs
- According to the Deloitte study employers believe that the U.S. health care system under performs, and 64% of those surveyed gave the healthcare system a grade of a “C,” “D,” or “F”
- Furthermore, the study shows that the most unfavorable views center on wastefullness and high cost. In fact 80% believed that high costs were driven by hospital costs, 68% stated that high costs were related to inefficiencies, and 67% stated that high costs were related to unhealthy lifestyles.
- On a bright note, employers believe that investments in primary care have provided a higher value return than investments in other areas
What Employers Think About the ACA
- The Deloitte study found that most employers feel that they have a “good” understanding of the ACA. Executives from mid sized to larger sized firms stated tha tthey have a good grasp on the ACA and its impacts, but those executives as smaller organizations did not bode as well
- Though the understanding of the ACA overall was categorized as “good” the same group of survey respondents indicated that they did not have a good understanding of delivery system changes. Only 45% stated that they were familiar with the health insurance exchanges, while the group indicated that bundled payments and accountable care are not understood at all
- Most employers stated that they were “not well prepared” to implement the 2014 provisions of the ACA. In fact only 4 out of 10 mid sized and larger firms felt well prepared, while only 1 in 4 of the smaller firms felt well prepared
30% of those surveyed stated that the ACA was “a good start,” while 59% stated that the ACA was “a step in the wrong direction”
Employers Will Drop Coverage
One of the most important findings of the Deloitte Study is the high percentage of employers who will drop coverage, or are unsure if they will drop coverage for employees. Further concerning indications show that of those who do not anticipate dropping coverage, cost sharing with employees through increased use of co-pays, deductibles, and increased premiums will be a key strategy to keep costs low for companies.
- 9% of companies anticipate dropping healthcare coverage for their employees within the next 1-3 years, and an additional 10% of companies are unsure if they will drop insurance as a result of the ACA. Prohibitive cost was noted as the driver for those who will be eliminating employer based insurance coverage
- For those who will retain employer based insurance coverage, increased cost sharing with employees has been highlighted as the preferred strategy to keep healthcare costs in check. This may mean increased use of co-pays, deductibles, and premium increases.
“Employers support repeal/delay of the ACA as a means of reducing the federal deficit” – Deloitte
What it All Means
Employers as a whole are generally not in favor of the ACA, and do not have a firm understanding of cost savings through healthcare delivery shifts that will accompany the ACA. While their general comprehension of the Affordable Care Act is listed as “good” many of the details of the act elude them, and when it comes to the healthcare exchanges, they are representative of the general public in being woefully uninformed. Employers do have a good understanding of the general provisions of the ACA which are most likely to impact their organizations in general (such as the employer mandate), but feel unprepared to implement the called for changes which will be occurring in 2014. Furthermore, many organizations will eliminate healthcare coverage for their employees with 9% dropping insurance coverage and an additional 10% undecided. This could potentially leave 16% of the currently covered work force without health insurance in the future, forcing more people into the exchanges and shifting costs of healthcare coverage to the federal government. Those that will maintain coverage for employees tend to be the nations largest employers, and though coverage will still be available, it may not be the same coverage as an individual currently has. In order to offset costs employers will look to find corporate savings through cost sharing with employees leading to higher out of pocket expenses for both care and premiums at the individual level.
Individuals will want to stay aware of coverage shifting trends, such as the UPS announcement that spouses will no longer be covered, and the Trader Joe announcement that employees who work 30 hours per week will no longer be eligible for healthcare coverage. This is a trend that will likely become more prevalent in the future.
(affordable care act / shutterstock)
