Reform Law Changing Health Benefit Climate

The environment is constantly changing.

H.L. Mencken (184-1956),  The American Mercury

ObamaCare’s impact on the industry has created a climate of change.

Timothy Martin and Christopher Weaver, “Burden Shifts on Insurance:  Firms Change Health Coverage,”  Wall Street Journal,  September 18, 2012

Because of ObamaCare’s many ripple effects, the rising costs of complying with its regulations, and the cost of health care itself, companies are changing how and whether to provide health care benefits.  Some are dropping coverage for employers or their spouses.  Others are paying workers a fixed amount,  a defined contribution, for coverage.  Still others are raising premiums,  co-pays, and deductibles.

·         Walgreens,  the nation’s largest pharmaceutical chain, is requiring 160,000 employees to shop for coverage in private exchanges,  an idea mimicking Obama’s public health exchanges.  IBM, Time Warner, Sears Holding, Darden Restaurants are doing the same.

·         Companies,  large and small, are becoming self-funded, allowing them to avoid Obamacare and state mandates, which sharply increase costs and  lessen the costs of administering benefits by paying workers’ expenses directly.

·         Seventeen percent of employers are offering health savings accounts with high deductibles as the only health care option.  More than one-third  of companies with over 200 employers have annual deductibles of over $1000.

·         Employers and large health systems,  like the California Public Employees Retirement System,  which covers 1.3 million retirees, are meting out fixed amounts of money to retirees and asking them to shop for care at  narrower networks of hospitals and physicians.

·         United Parcel Services (UPS),  Delta, and the University of Virginia has dropped coverage for spouses of employees.

As a consequence of these and other changes, including sharp rises in premiums and co-pays, cost-sensitive consumers, and an economy in the doldrums,  health costs rose just 1% in July compared to the previous July,  and health care inflation is the slowest in 50 years.

Companies, in short, are adapting to health care cost climate changes, induced in part, by the sweeping ripple effects of Obamacare and increasingly unaffordable care.  They are shifting the cost burdens to consumers and making them more sensitive to price.   Doctors and hospitals are feeling the effect of this climate change  by limiting the growth of Medicare expenditures to these  providers.  Some doctors are dropping third party coverage and entering cash only,  retainer, or concierge practices or by going to work for hospitals.  

Nobody is locked into the old ways of doing things, which brings to mind this quote from Jacob Bronowski (1908-1978),  A Polish historian, poet, and scientist

“Among the multitude of animals which scamper, fly, burrow, and swim around us, man is the only one not locked into his environment.  His imagination, his reason, his emotional subtlety and toughness, make it possible for him not to accept his environment, but to change it.”

Tweet:  The health reform law, the Affordable Care Act,  is directly and indirectly changing how and whether businesses provide health benefits.