Employers Weigh in on the AHCA

One of the best results of the ACA (Affordable Care Act aka Obamacare) was that it started a national conversation about health care delivery and financing in our country. In this column I hope to inform the reader on how these systems are inter-related.

First and foremost the reader must understand that the primary driver of health insurance premiums is actual health care costs. The ACA requires that insurers pay out about 85% of every premium dollar in direct health care costs to providers. Insurers have been aggressive about cutting their costs and profits are running about 2% of your premium dollar. Granted it’s a huge amount of dollars so they get no sympathy from any of us.

But I will give them sympathy for the fact that they are continually trying to adjust to new rules. Since the election uncertainty is now the biggest challenge facing insurance companies. Be assured that this is a market that lives by actuarial principles, so uncertainty is one of their worst nightmares.

Mercer, one of the nation’s largest insurance brokerages, recently launched a brief employer survey regarding the first Republican attempt at “repeal and replace” since the election: the AHCA. Of 900 employers, the responses were primarily negative toward the bill. The only very positive response came in the area of supporting the expansion of HSA (Health Savings Accounts).

Interestingly, 65% believe that cutting funding for public health and Medicaid cut backs would negatively their communities and their plans. I suspect this is because most large employers are acutely aware of the effect of cost shifting on their plans. Cost shifting means that hospitals and other providers will increase their charges to the private plans in order to cover losses for delivery of care in the public sector, such as MediCAL or the uninsured.

They weren’t enamored of the change to a 40 hour week threshold for eligibility. This is likely because HIPAA established the 30 hour eligibility in 1996 and most employers have adjusted. Retail and food service are the industries most impacted by the ACA because they have traditionally not provided benefits to their employees, while other industries have done so.

The biggest issue for these employers has been the Cadillac tax. This provision charges an excise tax on what are considered to be rich benefit plans. Mercer estimates 23% of large employers will be subject to the tax in 2020 and 46% in 2025.

Mercer’s poll showed that what employers really want is help controlling Rx cost. Again, we are back to the reality that what drives health insurance premiums is health care costs. If we can control or reduce the costs of pharma we reduce overall costs. Medications can often be a low cost management tool for diseases like hypertension and cholesterol. No one argues the validity of their use.

Most health plans are spending in the range of 20-25% of premium on Rx costs. Insurers are continuing to find ways to encourage the use of lower cost drugs such as defining tiers and requiring higher copays for high cost or higher risk drugs. SB17 was recently introduced in California to require more transparency in Rx costs. It would be interesting to see something like that on a federal level.

Dr. Jerry Avorn, a professor at Harvard Medical School and critic of some drug company practices, said the industry “has brought this on itself by charging prices that are so astonishing, it makes citizens wonder, ‘Where did this figure come from?’ ”

Apparently Anthem is having the same issues as they are firing Express Scripps over allegations that they were overcharged by $15 Billion.

As an aside, I would love to see a study on the costs of Rx since the implementation of Medicare Part D in 2006. Prior to that there was no Rx coverage for Medicare beneficiaries.

One other issue in the AHCA that continues to get little support from the insurance or employer sector is the provision to sell across state lines. While it makes for a great sound bite, most knowledgeable folks in the industry agree that it is a waste of time to follow that trail as a cost control measure.

Representative Doug LaMalfa spoke at our professional association meeting last week and confirmed that he is certainly not an expert on these issues, but his goal was to do what is best for his constituents. I believe it is incumbent on all of us to assist him in a direct and respectful manner. Since pharma increased lobbying spending in the first 3 months of 2017 by $4.42 million, we have a lot to do!

In the meantime, we must do our part to adopt health lifestyles that keep us away from high cost medical services.

Margaret R. Beck
Margaret Beck  CLU, ChFC, CEBS started her insurance practice in Redding in 1978. As an insurance broker/consultant,  she represents businesses and individuals as their advocate.  She assists in choosing proper products, compliance with complex benefit laws and claims issues once coverage is placed. All information in her column is provided to the best of her knowledge, subject to final regulation by the respective agencies. Questions to be answered in this column can be submitted to info@insuranceredding.com. Beck's column is also published in the Redding Record Searchlight.
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12 Responses

  1. cheyenne says:

    Right now there are some counties that have no ACA providers because insurers pulled out or went bankrupt.  If Anthem pulls out of the ACA marketplace, as has been noted in the news, the ACA will be dead as in many areas, Wyoming, for example, Anthem is already the only ACA provider.

  2. cheyenne says:

    As far as the future in prescription costs go.  The Denver Post reported, in Colorado naturally, on this weekends CSU-Pueblo Institute For Cannabis Research conference attended by representatives from 10 countries and 21 states about the past and future of Cannabis’s role in medicine.

    • Rod says:

      Imagine.

      Being off big pharma drugs entirely, while at the same time in the kitchen garden, growing organic medications.

      Health insurance should be declared an illegal immigrant, deport now!

       

  3. kerr, david says:

    The Sacramento Bee is a good place to follow the CA single payer proposal.  I suspect it is not serious, but is to raise demand for national single payer.

  4. Richard Christoph says:

     

    “First and foremost the reader must understand that the primary driver of health insurance premiums is actual health care costs.”

    Indeed.  Thank you for this very informative and interesting column.

  5. Larry Winter says:

    “Be assured that this is a market that lives by actuarial principles,…”

    This is why a single payer is so enticing.  With the added benefit of County, City, School Districts, and employers not having to budget for health care.

    • Ron Greiner says:

      Larry Winter, President Trump’s age-based tax credits will also lift the heavy burden of health insurance off the backs of American employers so the economy will soar and Make America Great Again (MAGA).    The Pasco School District is charging teachers $1,213 per month to add a spouse and child in Tampa Bay to EVIL Blue Cross PPO.  YET, in the Free and Open Market a 30-year-old husband and child can purchase Short Term Medical (STM) for the year for just $260 a month with a little $2,500 deductible and 100% coverage.  EVIL Blue Cross is charging 5 times too much!

      President Trump’s age-based tax credits give a 30-year-old couple and 2 children $9,000 a year to purchase Individual Medical (IM) insurance.  In most of America this family can get HSA Qualifying medically underwritten health insurance for about $4,500 a year so the balance of the credit goes into the family’s tax-free HSA, TAX FREE.   Except in California where the State would tax it, SICK.

      Nobody is going to pay $1,213 to add their family to employer-based insurance when Trump is giving it away for FREE.  So not only is Obamacare the TITANIC but employer-based health insurance is DEAD TOO!

      Move to Florida with NO State Income tax and NO Democratic Governor.

      https://www.donaldtrumphsa.com/2017/04/30/senator-ernst-r-ia-begged-for-a-shot-at-obamacare/

      • cheyenne says:

        Ron, interesting.  I would say move to Wyoming with No state income tax, no Democratic governor or DC politicians, where the state health insurance plan for state employees from the governor, police, teachers. snow plow drivers is considered a Cadillac Plan by the ACA and subject to the Cadillac tax(That may change with Trump} and no humidity.  Also the Wyoming legislators are talking about expanding the Cadillac health plan to include all Wyoming residents.  When Win Health, the ACA provider, went bankrupt the state took over their patients plans.

    • political girl says:

      So, you want Donald Trump, Washington politicians, and the bureaucrats, who do what the President tells them to do, 100% in charge of your healthcare?

      • Larry Winter says:

        I have to ask why Medicare isn’t on the chopping block because people don’t want Washington politicians %100 in charge of healthcare?  Or is it that this government run program works and is popular?

         

    • political girl says:

      Why  do you want Donald Trump in charge of your healthcare? You understand that’s what single payer is, right. The president, his bureaucracy and D.C. politicians making decisions.

  6. political girl says:

    It would have been nice to link to the poll so we could see the questions.

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