Watch Out! Five Ways ObamaCare Will Impact Your Business In The Next Two years
(This post originally appeared on Inc.)
Just last week three small business owners told a Senate hearing that the Affordable Care Act (ACA or ObamaCare as we know it) is “riddled with problems that are leading to more expensive insurance policies, which is making it harder for companies to provide high-quality healthcare to their workers.” To be fair, there are plenty of great things about the healthcare law – particularly the availability of coverage for those with pre-existing conditions and for others that can’t afford it. Even so, there are cost issues. Big cost issues that could potentially become even bigger in the next few years. And it’s your job to think ahead and have a plan. Here’s what you should be thinking about.
Risk Corridors and Reinsurance programs are ending after 2016. A big (and very controversial) part of the ACA involved what some called “bailouts” of the insurance industry in the form of Risk Corridors and Reinsurance programs. These aren’t really bailouts, just short term government programs designed to help the insurance industry with its transition to ObamaCare. Under the Risk Corridor program, the Department of Health and Human Services collects funds from plans with lower than expected claims and makes payment to plans with higher than expected claims so that these plans can limit losses beyond an allowable range. The Reinsurance program is designed to provide payment to plans that enroll higher cost individuals and to protect insurance companies against premium increases in individual markets by offsetting the expenses of high cost-cost individuals. A great summary and description of these plans is here. Once these programs that protect insurance companies expire at the end of next year, many in the industry are fearful of dramatic rate increases.
Insurance companies are already demanding huge rate increases for next year.According to a recent New York Times report “Blue Cross and Blue Shield plans – market leaders in many states – are seeking rate increases that average 23 percent in Illinois, 25 percent in North Carolina, 31 percent in Oklahoma, 36 percent in Tennessee and 54 percent in Minnesota. In their submissions to federal and state regulators insurers cited several reasons for big rate increases. These include the needs of consumers, some of whom were previously uninsured, the high cost of specialty drugs, and a policy adopted by the Obama administration in late 2013 that allowed some people to keep insurance that did not meet new federal standards.” These are just requests for rate increases and most believe that federal and state regulators will push to keep these under 10% next year. But this can’t go on forever and clearly there’s pressure on the market. The numbers are coming in since the law was adopted in 2010 and the data is revealing the truth: providing affordable health insurance for all is not as affordable as hoped.
Hospital consolidations are predicted to decrease competition and increase costs. As reported in the Wall Street Journal: “The five largest commercial health insurers in the U.S. have contracted merger fever. Hospital mergers have climbed every year since 2009, and in 2014 the number of deals that closed was 50% higher than the number in 2009, which was the year before the health law passed. Three of five hospitals now belong to a system. Hospitals are also absorbing physician groups, with the estimated share of doctors who are salaried workers at hospitals ranging from one-seventh (the American Hospital Association) to two-thirds. If the logic of ObamaCare prevails, this exercise will conclude with all five fusing into one monster conglomerate. This multibillion-dollar M&A boom is notable even amid the current corporate-financial deal-making binge, yet insurance is only the latest health-care industry to be swept by consolidation. The danger is that ObamaCare is creating oligopolies, with the predictable results of higher costs, lower quality and less innovation.”
Small business exchanges aren’t doing well. Where more than 10 million individuals have signed up for their healthcare on Healthcare.gov, only a smattering of small businesses are taking part in the small business exchanges. According to this report: “Only 10,700 employers are currently enrolled in coverage through the Small Business Health Options Program, or SHOP, exchanges. That figure represents about 85,000 Americans, the government said. There are multiple reasons.” Right now SHOP exchanges are only available to employers with less than 50 full time people that will soon expand to 100. Not enough health insurance carriers are participating so there’s lack of choice. And 70% of workers have to participate in their employer’s plan in order to use the exchanges. The SHOP exchanges are intended to provide a more competitive marketplace for small businesses. So far…not happening.
Next year’s elections could be a game-changer. A total of 469 seats in the U.S. Congress (34 Senate seats and all 435 House seats) are up for election on November 8, 2016. All of the Republican presidential candidates want to reform healthcare, with most (including Bush, Perry, Christie and Rubio) demanding a full repeal and replacement of the law. If the Republicans manage to keep their control of Congress and a Republican is elected to the White House then big changes could happen to the legislation. This being July, 2015 I’m not about to predict the outcome. But that doesn’t mean we all shouldn’t be prepared.
And preparation is key. Even if you’re not required to provide health insurance because you have less than 50 full time equivalent people in your company, you’re still looking at some potentially huge cost increases in the next few years. And smart business owners who know what’s coming make their plans. Maybe you should be softening up your employees to expect higher contributions by them in the future. Or implementing health savings accounts. Maybe you should renew efforts to push certain people to the ObamaCare exchanges where subsidies may make the coverage cheaper for them and you. Talk to your benefits consultant, your CPA, your advisor, your attorney. Plan for these increases now. Ignoring these trends could hurt you and your business later.