By Christine Cooper, CEO of aequum LLC
Providing Americans with access to affordable, quality healthcare is one of our nation’s greatest economic challenges. Finding adequate, affordable coverage that is financially sustainable and achieves the right balance, has never been easy.
The availability and cost of insured coverage varies by state. Populations, demographics and risk, and insurers vary by state. Health reform arrived just in time for states like New York where the individual coverage marketplace was broken. There, insured-paid rates declined due to the expansion of Medicaid and the introduction of taxpayer subsidies. For comparison, Tennesseans experienced rate increases since the marketplace opened in part because Health Reform mandated higher levels of coverage. Tennessee is a Health Reform outlier as it was one of 9 states that did not expand Medicaid eligibility, less than 3% of the population enrolled in a marketplace plan, ~90% of those enrolled receive taxpayer subsidies, and the percentage of Tennesseans who are uninsured still exceeds 12%.
The Intent of Health Reform
Health Reform, also known as the Affordable Care Act (ACA), is the government’s approach to accessing coverage. Enacted in March 2010, the ACA’s primary intent is to make, through federal and state law, health insurance coverage affordable and available. It was not designed to reduce the cost of employer-sponsored coverage.
Health Reform succeeded in its #1 goal - to reduce the number of uninsured. Health Reform accomplished that by expanding access to taxpayer-subsidized coverage through expanded eligibility for taxpayer-paid Medicaid coverage and taxpayer-subsidized marketplace/exchange coverage. The percentage of non-elderly Americans who are uninsured has declined from 18.2% (48.2 million) in 2010[i], to 7% (~28 million) in 2023[ii].
Eligible Tennessee residents apply for ACA health insurance plans during the annual Open Enrollment Period, which usually occurs from November 1 – December 15 each year. Tennessee participates in the federal exchange, so enrollees use HealthCare.gov to sign up for exchange plans.
A Decade Later: Inflation and Recession Challenges Affordable Healthcare
Most non-elderly Tennesseans have employer-sponsored health coverage where Health Reform mandates have added to costs. As inflation continues into 2023, medical providers are increasing their fees to maintain revenues. So, most employers and participants in employer-sponsored plans should expect to pay more for coverage, and in taxes to subsidize those covered under Medicaid and the Health Insurance Marketplace.
Impact on Employer-Sponsored Health Plans
Looking forward, “what’s next” is projected to be ever-increasing rates for those covered under employer-sponsored plans. Despite the rate increases, employer-sponsored health benefits have persisted. However, should we see new policy initiatives, such as the extension of ACA subsidies and the provision of a public option, employers may decide to reconsider their practice of offering health benefits to their workers.
The average costs for U.S. employers that pay for their employees' healthcare exceeds $13,800 per employee, according to professional services firm Aon.
Data from the annual Kaiser survey shows that worker contributions for single coverage have increased 3.3% per year during the 12-year period shown. Employers have shouldered slightly more of the burden of health care inflation, where their costs for single coverage increased 4% per year. For family coverage, worker rates increased 3.6% per year, employer rates increased 4.4% per year.
Single Worker Employer % EE Paid
2010 $899 $4,150 17.8%
2022 $1,327 $6,584* 16.8%
Family Worker Employer % EE Paid
2010 $3,997 $9,773 29.0%
2022 $6,106 $16,357 27.6%
Source: https://www.kff.org/health-costs/report/2022-employer-health-benefits-survey/
Health Reform Not as Predicted
A study by the Employee Benefit Research Institute (EBRI) and the Commonwealth Fund, What Employers Say About the Future of Employer-Sponsored Health Insurance[1], identifies the conditions that might lead employers to stop providing health benefits. Study findings revealed that employers often view themselves as paternalistic: they wish to make it easier for their workers to get affordable health coverage. Accordingly, those interviewed found it difficult to imagine future circumstances that would lead their companies to stop providing health coverage.
Migration to Employer-Sponsored, Self-Insured Health Plans, “Done Right”
Health Reform did prompt many employers to self-insure their coverage to avoid certain insurance taxes, state benefit mandates, insurer profit margins and the other requirements typically part of traditional, fully insured plans. Self-insured coverage also offers a greater level of flexibility – employers can tailor the plan to meet their employees’ needs. Self-insured plans can also benefit from the most effective cost management strategies such as direct contracting, price transparency through reference-based pricing, and effectively designed HSA-capable coverage.
Direct Contracting Presents a Cost Containment Opportunity
Self-funded health plans are discovering that “going direct” lowers costs by eliminating the “middleman.” Superior results are achievable via a direct contracting arrangement where the plan sponsor and the health provider align their respective business interests by aligning their respective economic interests.
Adopting “Pure” Reference-Based Pricing
Adoption of a “pure” reference-based pricing (RBP) plan design enhances price transparency.
A “pure” RBP structure, coupled with tech-driven data support, may avoid unreasonable or excessive provider charges – lowering both the cost of coverage and employee-paid out-of-pocket costs.
“Health and Wealth” Strategy Via Health Savings Accounts
HSAs offer a strategic option to alleviate “financial fragility.” HSA assets receive America’s most valuable benefits tax preference since contributions are pre-tax for federal income tax purposes, as well as most state income taxes FICA (Social Security) and FICA-MED (Medicare). Earnings accumulate tax deferred and payouts for eligible medical expenses that are tax free. Tax-preferred HSA assets are capable of “Quadruple Duty” – covering out-of-pocket costs in current and future years and Medicare premiums, while also providing for retirement income and survivor benefits.
With the right planning, preparation and plan design, employers can ensure their health plans are adequately covered and their employees can receive the accessible and affordable healthcare they need.
Christine Cooper is the CEO of aequum LLC and the Co-Managing Member of Koehler Fitzgerald LLC, a law firm with a national practice. Christine leads the firm’s health care practice and is dedicated to assisting and defending plans and patients. For more information visit www.aequumhealth.com.
[1] Jake Spiegel and Paul Fronstin, What Employers Say About the Future of Employer-Sponsored Health Insurance (Commonwealth Fund, Jan. 2023). https://doi.org/10.26099/1ead-x061
[i] Centers for Disease Control and Prevention, Health Insurance Coverage: Early Release of Estimates From the National Health Interview Survey, 2010, Accessed 4/27/23 at: https://www.cdc.gov/nchs/data/nhis/earlyrelease/insur201106.htm
[ii] Health and Economy Baseline Estimates – 2023, Center for Health and Economy, Accessed 4/27/23 at: https://healthandeconomy.org/health-and-economy-baseline-estimates-2023/