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Waiting for 2014 and Beyond

David P. Lind BenchmarkUncertainty remains…we continue to wait.

A Deloitte study was released on July 24 indicating that 9 percent of employers in the U.S. said they may stop offering health insurance in the next three years. Based on numerous study results from last year, this number is not at all surprising. In fact, we surveyed Iowa employers last summer and found that less than 6 percent of employers reported the possibility of dropping health coverage when 2014 arrives (see below).

2011 Iowa Employer Benefits Study 

So what gives? Why do employers feel that they may no longer offer coverage? For one, in 2014 employers with over 50 employees who fail to offer minimum essential coverage will incur a penalty of up to $2,000 annually per employee. In addition, if employees are required to pay more than 9.5 percent of their income for self-only coverage, the employer would be penalized $3,000 per year, per full-time employee who enrolls in the exchange and is eligible for government subsidies…a non-deductible expense to the employer.

Perhaps another more plausible approach employers might take would be to pursue a “defined contribution” strategy whereby the employer provides a defined amount of money to each employee who will then purchase coverage through the exchange. Keep in mind that by 2014, individuals will not have to worry about pre-existing conditions when applying for individual coverage. Employers may find this approach more palatable than offering their own health plan, which takes time and resources to keep the plan in compliance (and remain competitive).

When we asked Iowa employers whether they would terminate their current group medical plan, pay the $2,000 penalty per employee, and increase employee compensation with the money saved from dropping health coverage, less than 1 percent said they were “very likely” to pursue this approach (see below).

 2011 Iowa Employer Benefits Study

There are many studies to draw from when attempting to understand what employers will do in 2014 and beyond. Needless to say, there is still much confusion from the employer community about how the health reform law will impact their health coverage.

Playing a “wait and see” approach may be the most logical strategy for the time being.

Health Care Fortune Teller

David P. Lind BenchmarkDuring the past two years, I’ve fielded countless inquiries from curious Iowans asking me to put on my fortune-teller hat and look into my crystal ball to predict how health care reform will impact their lives. Questions run the gamut:  

  • Do you think it will solve the ills of our health care system?
  • How will health insurance rates be affected by the new health reform law?
  • Will I be able to keep my own doctor?
  • Will employers continue to offer health insurance to their employees in 2014 and beyond?
  • Will the U.S. Supreme Court deem the individual mandate unconstitutional? If so, will health reform be repealed?
  • Who will be the chief czar of the newly created “Death Panel” in Washington, D.C.? (OK, this one was a bit exaggerated by me!).

Anxiety and fear are often at the root of these concerns. Perhaps the questioner watched the nightly national news and caught a vignette about how reform will impact a certain segment of society, or perused a magazine article that portrayed a certain provision in the law as either negative or positive. We have certainly been bombarded with “facts” from supporters and detractors of the law since March, 2010. No wonder we are feeling confused and overwhelmed with the complexities imbedded in this mammoth law.

I typically refrain from giving my views on the health reform law. But, when confronted, my comments sound something like this:

  • There are usually two (or more) sides to every argument, and health care is no exception to this maxim.
  • Determine the source of the information before accepting it as truth. Supporters and detractors may not portray competing arguments with much objectivity. Be mindful of possible agendas that may cloud the “truth” they espouse.
  • There are NO Silver Bullets that will solve the ills of our health care system. It took us 60-plus years to get into this mess, and it will take time to put our health care ‘system’ on the road to “recovery.”
  • Lastly, I will ask them if they always believe the weather forecast. Because forecasting how reform will impact us is similar to trying to predict the changing weather patterns in Iowa over the next year (or week)!