As political battles over the possible repeal, replacement or repair of the Affordable Care Act (ACA) drag on, employers may have to come to grips with an unpleasant reality of receiving the worst of all worlds for the foreseeable future. Here is what we mean by considering the ongoing health care limbo:
- The portions of the ACA that create the greatest burdens on employers will remain in place until this impasse is resolved. Unpopular provisions that will remain in place include the employer mandate (and the associated taxes for failure to meet the mandate), the Cadillac tax on higher-cost health plans, the reporting and filing requirements created by the ACA (such as the Form 1094-C detailing coverage offered to employees) and the record keeping requirements needed to comply with the ACA.
- As carriers shy away from individual markets and/or increase premiums, individuals between jobs may be more likely to defer or forego medical treatment. For example, if the Administration stops making Employers can, therefore, expect that new hires may start employment with untreated or under-treated medical conditions. And, guess what—once hired, these conditions are part of employers’ healthcare costs.
- Concern over access to health care (and publicity about insurers leaving state exchanges and raising premiums) will affect late career employees who might take early retirement to launch a “next act”—such as starting a new business or volunteering at a nonprofit. Concerns over the loss of access to affordable health care can be expected to increase the number of “reluctant retirees” – individuals who might be interested in retirement, but not at the cost of access to healthcare.
- Nature – and politics – abhors a vacuum. If the federal government’s gridlock over healthcare continues, more states are likely to take action to address problems in the health care system. For example, Maryland has passed legislation prohibiting price gouging on essential off-patent or generic drugs. If states follow this path larger (multi-state employers) will find themselves trying to comply with a patchwork of state rules.
- Under the ACA the federal government makes a variety of payments that can be seen as “shock absorbers” of healthcare costs that would otherwise impact employer costs. For example, in the past few years, hospitals’ uncompensated care costs have dropped from 6 percent of total expenses to 4 percent. As the political stalemate roils the insurance markets, these costs could transfer back into the private system and (ultimately) into employer costs. Similarly, it has been estimated that if the federal government does eliminate risk adjustment payments to insurance companies the cost of silver-level plans could increase by another 10-15 percent (on top of regular medical trend). In effect, if the federal government stops making these payments under ACA these costs will shift to the “system”—which means employers.
The current health care debate may play out in a number of different ways. But, in light of the challenges posed by the current limbo, employers may just want this to just play out.