The quest for health reform by a divided Congress is echoing loudly across the U.S. employment-based landscape. Although a final legislative outcome is far from being decided as of this writing in mid-September 2009, the direction of emerging legislation would have a significant effect on employer-sponsored plans that cover 165 million Americans—an overwhelming majority of whom tell pollsters they are generally satisfied with the health benefits they receive through their employer.
Key Components
There are six key components impacting employer-provided health care contained in the bill that appears likely to emerge from the U.S. House of Representatives, The American Affordable Health Choices Act of 2009 (H.R. 3200):
• All Americans would be required to enroll in a health insurance plan meeting minimum federal standards or face a tax penalty.
• New insurance reforms affecting such practices as pre-existing condition limits, medical loss ratios and rating would go into effect.
• All plans would have to cover mandated minimum health benefits.
• A system of health exchanges through which individuals and employers could purchase health insurance would be established.
• A “public plan” run by the U.S. Department of Health and Human Services would be offered in the exchanges.
• A “pay or play” mandate would require employers to offer health insurance or pay a fee to the federal government.
Impact on Employer-Based System
The overall impact of the House bill, many fear, would be to diminish the role of the employment-based system.
A new federal legal structure would be superimposed over current law. Because the Employee Retirement Income Security Act (ERISA) does not pre-empt other federal laws (it pre-empts state laws), new federal insurance standards designed to eliminate certain "undesirable" restrictions and practices under insured plans would apply to employer self-insured plans as well, thus eroding the important distinction between insurance and self-insurance as funding methods for health benefits. Among insurance reforms under discussion are pre-existing condition exclusions, provider network adequacy rules, prompt pay claims, external review procedures and subrogation.
The House bill would allow for waivers from ERISA federal pre-emption. This provision opens the door to multiple state health reform efforts that could further undermine an original purpose of existing federal law aimed at promoting uniform, cost-effective benefits across state lines.
The proposed federal “pay or play” provision calls for employers with annual payrolls of at least $400,000 to elect qualifying coverage or pay an 8 percent payroll tax. Employers could elect to cancel coverage in exchange for paying a tax. States would be allowed to move ahead with their own employer mandate efforts. While the future of this provision is uncertain, as written it poses a major threat to voluntary job-related health plans and uniform health benefits sponsored by multistate employers.
Transitioning to Public Exchanges
Eventually all employers would be allowed to transition into the government-supervised exchanges; employees of existing plans could migrate at any time. The independent Congressional Budget Office (CBO) says only 12 million to 15 million people would migrate by 2017, but the Lewin Group's analysis puts the figure at 83.4 million people, or 48 percent of covered employees.
Exchange-based plans would have to offer a federally approved minimum “essential benefit package” for “core” and “tier” coverage. State mandated benefits would be included in the basic package, and the U.S. Department of Health and Human Services could add benefits such as substance abuse and mental health.
While some of these changes would provide greater access to health coverage to the uninsured, such reform would come at a significant cost. The CBO estimates that reform proposals would result in federal budget deficits of over $1 trillion (that’s 12 zeroes) over the 2010-2019 period, including about $773 billion in federal subsidies for insurance purchased in new exchanges. The package under discussion would drive up future deficits by $240 billion or more—hardly a ringing endorsement for cost containment.
Strengthen Employment-Based System
Evidence submitted during hearings underscored that the federal framework regulating the job-related health benefits system can be strengthened in a multiplicity of federal laws, including ERISA. New incentives to stimulate transparency and greater use of technology to control health care costs are also needed.
Employers have been at the forefront adopting market-based cost-saving innovations, such as programs for wellness, disease management and pharmacy management. With greater employee engagement through social media, these programs can address the nation’s growing “disease burdens” (obesity, smoking, etc.), which add billions of dollars to health care costs.
One innovation—health plan performance management—using social media as well as data and predictive modeling analytic technology, is showing early promise in reducing health costs—without increased government spending. New software programs can give employers the technical tools needed to manage their health plans just as they manage other aspects of their business. Employers managing their plans proactively with new technology report millions of dollars in cost savings.
Differing House and Senate bills set the stage for a conference committee to resolve differences so a final bill can be sent to the president for signature. The challenge for Congress is to walk a fine line by adopting needed reforms while strengthening the current system.
George J. Pantos, formerly U.S. Deputy Under Secretary of Commerce and counsel, Self Insurance Institute of America, is now a senior advisor to WellNet Healthcare.
Related Articles:
Viewpoint: HR's Health Care Hurdles—A First-Person Account, SHRM Online Benefits Discipline, September 2009
Health Care Debate Could Heat Up in September, HR News, August 2009
Health Care Reform: A ‘Game-Changer’ for Employee Benefits?, SHRM Online Benefits Discipline, July 2009