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Medicaid Crunch

David P. Lind BenchmarkUnder the Affordable Care Act (ACA), Iowa (and all other states) will be making key decisions on whether to expand Medicaid to those who fall within the 100 percent to 133 percent of the federal poverty level (FPL). Currently, Iowa covers about 104,000 Iowans (aged 18-64) under the Medicaid program who qualify up to 100 percent of FPL.

Prior to the Supreme Court decision in June, each state would need to expand Medicaid from 100 percent FPL to 133 FPL, with the federal government paying the entire cost of this expansion from 2014 through 2016 (federal funding will then eventually drop to 90%). The assumption made in the law was that those who were included in the Medicaid expansion would not receive federal tax credits for health insurance because they would be eligible for Medicaid. Only those who fall between 133 – 400 FPL would receive some form of federal subsidy to help pay for health insurance coverage if purchased through a qualified state-based exchange.

However, after the Supreme Court decision, each state can now decide whether to expand Medicaid coverage to those who qualify up to 133 percent FPL. Should Iowa elect to not expand Medicaid coverage, there could be approximately 134,000 residents who are caught between the 100 and 133 percent FPL – who would not be eligible for Medicaid coverage, but presumably receive federal subidies to purchase health insurance through an approved state-based exchange. These numbers are very fluid, by the way, requiring additional analysis:

 David P. Lind Benchmark

By not expanding Medicaid, Iowa health care providers could have more uncompensated care than anticipated, resulting in cost-shifting to those who have private coverage (employer provided plans).  The Supreme Court ruling has caused a hiccup for those residents who fall within the 100 – 133 percent FPL – especially if Iowa elects to not expand Medicaid coverage. This hiccup may affect employers too. Here’s how:

Under the health care law, employers with over 50 employees would pay a $3,000 penalty for flunking the 9.5% affordability test – but only if affected employees are eligible for federal premium subsidies to buy health coverage in a state-based health exchange. The health law indicates if the employee is eligible for Medicaid, the employee is not eligible to receive the federal subsidy to buy health coverage through the exchange. The employer in this case would not be liable to pay the $3,000 penalty. However, should the state not expand Medicaid, the employer would need to make sure the employee in the 100 – 133 percent FPL does not pay a premium above 9.5% of their income to qualify for a subsidy. Somewhat confusing, but this is a potential unintended consequence of the state refusing to expand Medicaid eligibility.

Even though we now have the ACA, two age old questions remain:  1) Who pays?, and 2) How much?

 

Scary 13 Year Trend

Iowa Employer Benefits StudyI’ll admit it. I’m somewhat of a self-described GEEK! I love numbers, statistics, trends…I love stories!

That is why I enjoy research. Trends that germinate from research can ultimately tell stories. Iowa has a story…unfortunately, a very common (and scary) story.

One comparison slide that I put together provides a very interesting ‘story’ about what is happening to health insurance rates both in Iowa and nationally. This slide (see below) demonstrates that Iowa is not immune from the disturbing trend that the Kaiser/HRET Survey has revealed for the past thirteen years (1999 through 2011) in the U.S. When I superimpose our Iowa study results with the Kaiser results, the trends are eerily similar. OK, downright scary!

David P. Lind Benchmark

The Kaiser single coverage annual premium (light green bar), has increased by 147 percent from 1999 to 2011. By comparison, the Iowa single coverage annual premium (DPLB Single) increased by 145 percent during that same period. In 2011, the national single premium is about 7.5 percent higher than Iowa’s average single premium. By contrast, the average national family premium is 13.4 percent higher than Iowa’s family premium. If anything, Iowa is fortunate to have lower than average insurance premiums when compared to the rest of the country.

But the trend we see in Iowa employer premiums is alarming. We may have lower premiums than many other states, but our premium growth rate appears to be very comparable to the national average – which is not a flattering compliment to Iowa. It is important for Iowa employers to compete both nationally and globally by having quality health care at affordable costs. Clearly, the trends we see on this particular slide are devastating to employers within and outside of Iowa.

I look forward to continuing this ‘story’ to see how health reform will affect these trends. What is your guess? 

 

Wellness – Size Seems to Matter

David P. Lind BenchmarkSize really does matter – it appears.

For many years, we have asked thousands of Iowa employers whether they offer some type of wellness initiative, and if so, what components do they include in their program. From our 2011 Study, we do know that Iowa employers offer the following wellness initiatives:

  • 44 percent offer Medical Information to their employees through a website, newsletter, etc.
  • 26 percent of Health Screening Programs
  • 23 percent offer Smoking Cessation Programs
  • 22 percent offer Chronic Disease Management Programs
  • 21 percent offer Health Risk Assessment Programs
  • 21 percent offer Health Club discount/reimbursement Programs
  • 18 percent offer Weight Control Programs

When we look a bit closer at these numbers, we see a very consistent theme (found in all past studies) – smaller employers are clearly less likely to embrace wellness initiatives (see below).

 David P. Lind Benchmark

A few primary reasons that smaller employers do not offer wellness initiatives relates to cost and time. Smaller employers have fewer resources than their larger counterparts, and therefore desire to spend their time and money on keeping their business, well, in business! For the typical small Iowa employer, focusing on the basics of their business is paramount to surviving in these harsh economic times.

Due to sheer cost, offering health insurance might be considered a ‘necessary evil’. But offering health coverage allows the employer to compete with other employers for qualified workforce talent. From our studies, we know that smaller employers are less likely to offer health insurance to their employees. Compared to larger Iowa employers, small employers tend to receive higher rate adjustments to their health plans, year after year. From this, small employers are forced to drastically change plan designs that shift additional costs to employees through higher deductibles and copayments. When employees have to pay more through higher cost shifting, many may forgo (or delay) seeking health care services altogether. This unintended consequence can be detrimental to the long term interests of small employers.

It may be time for smaller employers to reconsider offering sensible wellness initiatives – perhaps not to expect immediate relief in health insurance premiums, but to promote a healthier, more productive workforce. Size should not really matter when it comes to having a healthy workforce.