Wednesday, May 26, 2010

qotd: What will employers do under PPACA?

Towers Watson
May 25, 2010
The Impact of Health Care Reform on Employers

Although U.S. employers view controlling health care costs as their highest health care reform priority, few believe that the recently enacted Patient Protection and Affordable Care Act (PPACA) will stem the tide of rising costs, according to a May 2010 survey by Towers Watson.

In order to cope with anticipated cost increases, many employers plan on:

* Passing on increases to employees (88%)
* Reducing health benefits and programs (74% )
* Absorbing costs in the business (33%)
* Passing on increases to customers (20%)

More than three in four employers (85%) believe that health care reform will reduce the number of large organizations offering employer-sponsored retiree medical benefits. And 43% of employers that currently offer retiree medical plans plan to reduce or eliminate them.

Fifty-eight percent of employers surveyed believe health care reform will drive large employers to adopt total replacement consumer-driven health plans (CDHP) for their active employees.

Press release:

Key findings:

Report (8 pages):

Comment:  Although we have seen many employer surveys in the past, this one is especially important because it represents the views of employers' human resources professionals who face the reality that the Patient Protection and Affordable Care Act (PPACA) is now law. Since PPACA was designed to perpetuate the role of employer-sponsored health plans, we need to look at the likely responses of employers.

Most employers (90 percent) believe that PPACA will increase their organization's health care benefit costs. What is alarming is that employers do not intend to pass those cost increases on to their customers as they would with any other overhead increases, but instead they intend to pass them on to their employees in the form of increased premiums and cost sharing, and a reduction in benefits (which also results in higher out-of-pocket expenses for the employees).

More specifically, 58 percent of employers believe that large employers will adopt total replacement consumer-driven health plans (CDHP) for their active employees. "Total replacement" means that employees would be offered no option other then the high-deductible consumer-driven health plans. That could be disastrous for employees with modest incomes who develop significant health problems.

And future retirees can pretty much forget about receiving any retiree health benefits. Employers indicate that they are likely to take advantage of the fact that retirees under age 65 will be able to purchase plans in the exchanges without being excluded because of preexisting conditions.

This is the insurance that President Obama, during his campaign, promised that you could keep if you wanted to. What he didn't tell you is that, in most instances, you will not be permitted to drop that plan and select another one in the state insurance exchanges. As long as the employer's plan has an actuarial value of 60 percent (you pay an average of 40 percent of the medical bills), you are prohibited from selecting a better plan in the exchanges.

Once again, we can still fix this. We can enact a single payer national health program - health care for everyone, without financial barriers. 

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