Much of the debate about health care reform in Washington still swirls around how to improve access to, and the affordability of, individual coverage. But a complicating factor for employers is that some of the proposals dealing with those challenges could also hurt employers' long-term plans for providing health care benefits.
A survey by HR consultancy Mercer, taken earlier this year during the rise and fall of the American Health Care Act (AHCA) bill, highlights large employers' concerns. (The AHCA was the Republican-proposed replacement for the Affordable Care Act [ACA]. It was withdrawn from a vote on March 24.) The survey also suggests a set of principles for health care reform that employers might choose to rally behind when Congress re-engages on "reforming reform" — something the President is encouraging it to do.
The Mercer survey asked employers to comment on the impact that the AHCA would have had on their organizations. Overall, 56% were "relieved" or "very relieved" that the measure was pulled from consideration. Meanwhile, 21% were either "disappointed" (16%) or "very disappointed" (5%) that the bill was yanked. The remaining 23% were neutral.
Only one AHCA provision was viewed positively by most (66%) of survey respondents: the plan to liberalize Health Savings Account (HSA) rules. Contribution limits would have approximately doubled by linking them to the total of the employee's deductible and out-of-pocket expenditure maximum. Also, HSA funds could have been used to pay for medical expenses incurred up to two months before the date an employee had an HSA, and HSAs could have financed nonprescription medications.
Even without changes to HSA rules, Mercer predicts that the popularity of high-deductible plans featuring HSAs will continue to grow. According to a different Mercer report, 53% of employers with at least 500 employees currently offer HSA-eligible plans. Adds the National Bureau of Economic Research: "[The plans] have been shown to have a real impact on consumer behavior, decreasing total health care spending about 5% in each of the three years after a plan is introduced."
Mercer suggests a number of new federal policies, which would increase the popularity of HSAs beyond what was offered up in the AHCA. Examples include:
It's becoming increasingly clear that HSAs will likely play an important role in 21st Century health care, no matter which path reform takes.
The next most popular provision of the AHCA in the survey — the proposed repeal of the employer mandate — wasn't particularly popular at all. Only 35% of employers said it would have a positive effect on their organizations, while most other survey respondents believed it would have "little effect." Why would employers not want that flexibility?
The reason, according to Mercer, is that most employers in the survey already had plans that satisfied ACA requirements before the law was enacted. And those that had to beef up their plans to accommodate the ACA "may not be able to picture clawing that back."
Along similar lines, about two-thirds of survey respondents didn't support the AHCA's elimination of the "individual mandate" or the reduction in Medicaid funding. One possible reason why is that, under these provisions, providers could wind up incurring greater costs associated with treating low-income patients. As a result, they might shift the cost of treating those unable to pay to those who can — that is, employer plans. Mercer described this scenario as "hard to prove, but it stands to reason."
What employers emphatically don't want to pay, according to the survey, is the 40% "Cadillac" tax on particularly expensive plans that is currently scheduled to take effect in 2020. The AHCA would have delayed its effective date to 2025 instead of eliminating the provision. Mercer estimates that 23% of large employers will be impacted by the provision by 2020, and about double that percentage by 2025.
Three weeks after the AHCA's collapse, President Trump indicated he wanted Congress to enact some version of health care reform before moving on to tax reform. "We have to do health care first to pick up additional money so that we can get great tax reform," he stated in a television interview.
This may suggest he'll push for some variation on the AHCA that collects more revenue from employers and others. The President also said he's considering withholding cost-sharing reduction subsidies that are paid directly to insurers to help cover out-of-pocket medical expenses for low-income individuals.
In a set of policy recommendations published earlier this year, Mercer warned that the resulting cost-shifting "does not address the underlying causes of health care cost growth." Its policy recommendations emphasize "innovations such as value-based care" that have shown promising early results, but have yet to scale up.
As noted above, transparency on providers' cost and quality is a key. "To have a transformative impact on health outcomes," thereby improving health and lowering systemwide costs, "providers and payers, both commercial and government, must align interests and be transparent about metrics, measures, and performance," Mercer argues.
At the end of the day, the Mercer survey indicates that the broad issues regarding health care reform remain largely the same. It's agreement over fine details and, moreover, consensus on funding mechanisms that continue to be so elusive. So, for the time being, all employers can do is remain in "wait and see" mode while striving to properly manage their own health care costs.
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