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‘Disruption’ Will Be Painful (Part II)

Health care in Iowa 2013 and beyondIn last week’s blog, Seeking Truth in Health Care (Part I), I shared four observations regarding health insurance for Iowa employers. This blog continues the discussion about how this may impact the health care provider community in Iowa.

As reported annually from the Iowa Employer Benefits Study©, health insurance premiums continue to skyrocket, which erodes take-home pay for employees, especially those who fall below the 400% Federal Poverty Level. In addition, employers continually purchase higher cost-sharing health plans that require employees to assume more out-of-pocket expenses. All of this means that health care providers – hospitals and physicians alike – will continue to see inflated receivables from individuals in the private payer sector. Not only is this unsustainable for the employment market, it will create greater financial tension for health providers when attempting to collect the cost-sharing portions from employees.

The wellness culture is taking root, as the emphasis in the employment community is all about healthy and productive employees. This new transformation in wellness can be seen not only with employers, but also in communities and statewide, as witnessed by the Healthiest State Initiative and the Blue Zones® Project. Many smaller Iowa employers have yet to embrace wellness initiatives, but appear to be willing to do so – as they are looking for both assistance and direction to make this process easy to implement and maintain. With this, opportunities to partner with employers exist for health care providers. Developing sustainable business models will be paramount for such opportunities to flourish in the new health world.

Another implication that will likely impact health providers is the concept of ‘defined contribution’ (DC.) As health premiums increase, employers will look for obvious ways to limit the ‘distraction’ of offering their own health plan(s). One possible and likely approach is to provide employees with a flat subsidy (that might be tied to the Consumer Price Index) to purchase their own coverage through a private exchange.

It is my understanding that an employer offering access to a private exchange (and providing “adequate” subsidies) would be similar to offering health coverage and therefore not be subject to the $2,000-per-worker penalty under the Patient Protection and Affordable Care Act (PPACA) for employers with over 50 employees. The DC approach may intensify improved efficiencies, price concessions, access and convenience – as employees would become more astute to the true cost of insurance…and demand more information from health care providers. As a result, health providers will need to transform themselves to be more efficient due to increased pressure to be transparent both in cost and outcomes.

Finally, most Iowa employers believe that health reform will NOT solve the cost issue. Greater complexities in the insurance market will only serve to frustrate employers who look for new directions on how to manage the cost and uncertainties. A ‘Provider Renaissance’ is sorely needed to deliver higher quality care at lower costs. Without a doubt, disruption in health care will be painful for all.

There you have it. The above implications are my best guess – at least for now!

Next week’s blog will address the potential “Winners” in the future – and what it may eventually mean for the employer community.

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  1. Anne Kinzel says

    Interesting observations and all delivered in a very understandable style. So many experts feel the need to obfuscate so that prospective clients will flock to them! David Lind is the real deal!

    I have to admit to some serious skepticism about e so-called wellness movement. I know that being skeptical about wellness is sort of like being against ‘mom and apple pie,” but I digress. My concern is where we locate “wellness” as a public/private initiative. Right now, wellness is seen as part of the greater healthcare system, or as tightly adjunct thereto. From my perspective, the concept of “wellness” is a set of public and private sector initiatives that when made a priority will lead to greater/ better population health. The focus is on policies that will lead to gains in “health” across the population, such as farm bill policy that will subsidize foods proven to lead to better health outcomes or rational gun laws that will reduce violent trauma. The focus is on population and not individuals.

    In this vein, we have extremely successful “wellness” initiatives from our past to inspire us, such as polio vaccine and anti-smoking campaigns, and in the automobile sector, seatbelt campaigns, collapsible steering wheels and any number of other technological gains.

    My larger point is that going after “health” one person at a time in a nation of over 300 million persons will leave us bankrupt long before we would reach our goal.

  2. Nicole Keller says

    I am happy to see your comments on defined contribution plans. I have long thought they were a better design for employer involvement – they allow for employee choice (of individual insurance) and portability. The more people covered by individual insurance the greater the spread of risk across a large population and thus the lower the premiums. Individual insurance puts the health care consumer in the position to drive price/value competition, another downward pressure on pricing. DC plans also maintain the employers leverage of using health benefits as a recruitment/retention tool. On the other hand, it removes them from the responsibility of negotiating plan benefits. This makes sense starting in 2014 when the minimum plan will cover, by law, a comprehensive set of essential benefits. Iowa already has regulations that accomodate defined contribution plans for small businesses. That combined with support for employer dc vouchers on Iowa’s health insurance exchange could enable voluntary migration to dc plans.

    Your comments related wellness are encouraging, but I have to think wellness motivated by real cost savings for the individual would be more effective. We should reward individuals, rather than employers for wellness. Vanishing deductibles could be used to reward compliance with medical home consistency and maintaining individual wellness measures.

    Keep talking about reform in health insurance in Iowa – we have a wealth of opportunity to do it better and cheaper.

    • David Lind says


      Great comments, thank you!

      One item that will require additional clarification, I believe, is whether employers with at least 50 employees can discontinue offering their own health plan and still provide subsidies to each eligible employee so that coverage can be purchased through the state-based exchange. According to a July 2012 Brief published by the Employee Benefit Research Institute (EBRI), the employer can do so only using a PRIVATE exchange in order to avoid the $2,000 per worker penalty. This is found on page 5 of the document: Many issues like this will need to be thoroughly addressed as we approach 2014.

      Again, many thanks for your comments…! My best to you in 2013!


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