It’s been slightly more than two years since the Affordable Care Act was signed into law, but when it comes to small businesses meeting its demands, confusion still abounds.
People wait in line overnight in front of the Supreme Court in Washington for tickets on the eve of oral arguments before the court on President Obama's health care legislation. (AP Photo: J. David Ake)
While some provisions of health care reform – such as expansion of coverage to adult children up to age 26, new coverage options for individuals with pre-existing conditions and eliminating lifetime caps on coverage – have been implemented, the government will continue to roll out provisions through 2014 and beyond.
“There are new provisions and changes made every 48 hours,” said Jonathan Edwards, director of client technology at The Barnett Group, a Memphis-based employee benefits and financial services firm that assists customers with ever-changing benefit regulations. “It’s hard to keep up, even for us – we’re in it on a regular basis. That’s why we’re constantly reading articles and updating ourselves on what’s changing.”
Edwards said the health care law was written with “hundreds of places where it just said ‘to be determined.’ So we’re having to kind of guess at what those to-be-determined parts mean and do our best to interpret how the law will actually end up looking.”
Edwards said his firm deals with a third-party company whose lawyers and content writers constantly provide legislative updates. The Barnett Group translates that jargon into more readily accessible copy to keep its employee groups – everyone from machine shops to physicians’ offices – up to speed on what they need to know about health care reform.
Many smaller businesses are relying on firms like The Barnett Group to help them make sense of the continuing changes and keep up with the act’s timeline.
“People are having a hard time understanding and we’re basically the mediator between the carriers, helping to explain and to negotiate with the carriers to get the best rates,” said Edwards, who joined The Barnett Group earlier this year after it was determined the firm needed a specialist to spearhead its services surrounding the technology aspect of health care reform.
Health care remains one of the few sectors to still rely on paper records, and on
Oct. 1, 2012, the federal government will begin regulating the electronic exchange of health information in an aim to cut costs, reduce administrative burdens, standardize billing and reduce medical errors.
“It’s going to be ever-changing,” Edwards said. “We don’t just visit with clients once a year; I’m sending out emails about every other week now. A person who has 20 or 30 employees may be saying, ‘What does this change mean for me?’ That’s where we’re able to keep them educated. Health care reform is so big, and the small-business owner needs someone to hold their hand and help walk them through the process, and that’s what we’re trying to do.”
Perhaps the greatest source of frustration around businesses trying to meet the demands of health care reform is preparing for something that could potentially – between elections and lawsuits – change dramatically.
“With the election in November, there’s so much that could change,” Edwards said. “It’s not going to be repealed 100 percent in my opinion, and it doesn’t have to be because some of these changes are good.”
Philip Johnson, partner with Argyle Benefits Consultants LLC in Memphis, said most insurance companies have automatically added those changes mandated by law, such as preventative care, covering dependents until age 26, and eliminating lifetime maximums.
“Those elements have automatically been added to your insurance plan,” said Johnson, a chartered life underwriter and certified employee benefits specialist, who has been focusing on how federal health care reform legislation will impact both individuals and businesses large and small. “The issue is communicating those changes to employees and employers.”
There’s a multitude of reasons for rising health care costs – a standard medical trend for the last 25 years. Things like new biotech drugs and innovative technologies increase costs, which translates into higher premiums. But Johnson said the structural changes of health care reform are adding to that cost increase.
“Carriers don’t know what’s going to happen down the road as far as claims are concerned,” he said. “Over the next few years, there’s no exclusion for pre-existing conditions, which means that insurance companies will have to pay all those claims. I’ve been doing this for 30 years, and I can count on one hand the number of times I’m aware of when there was a million-dollar claim. It’s a very infrequent event but when it does happen, this is a great benefit to have. But in terms of delivering the renewal news to somebody who asks why their prices are going up, you have to add all these little odds and ends.”
Michael Lachina, chief medical officer at Saint Francis Healthcare in Memphis, emphasizes that health care reform is really about insurance reform and finding the resources to provide access to quality care for every American.
“It’s all about cost reduction and savings,” Lachina said. “There are some good points to it that are really focused around care coordination, preventative health – what I call managing health versus treating illnesses. We know how to treat illnesses because that’s what we’re in the business of doing primarily. We’re not in the business of managing health or doing preventative health because we don’t get paid for that. But if the government is going to start paying us to manage health, then we’ve got to figure out what that means and how to do it and get paid appropriately if we’re no longer focused on treating illness.”
Lachina recommends that businesses concerned about the cost of employee health benefits as it affects their bottom line should focus on improving the health of their employees.
“They can think a little more about corporate health programs with incentives versus employees ignoring their own health, falling apart and ending up in the hospital, which ends up costing everybody a lot of money,” Lachina said. “That’s a perspective that should be part of the discussion.”
The health care reform discussion garnering everyone’s attention is the one taking place in the U.S. Supreme Court, which has begun hearing challenges to the law and is expected to rule in May or June.
“If that decision comes down against the bill, the Supreme Court could say, ‘We’re going to throw the whole bill out,’” Johnson said.
One of the most contentious issues surrounding reform is the federal mandate requiring citizens to purchase health insurance by Jan. 1, 2014, with some arguing the mandate is akin to the government essentially forcing its citizens to purchase a product.
“They could say, ‘We’ll just take the individual mandate out,’ or they could do some combination of changes to the bill,” Johnson said. “That’s causing a lot of small businesses to kind of sit on the sidelines until we know what’s going to happen. And then you’ve got to consider that we’ve got congressional and a presidential elections coming up; any one of those things could turn this thing on its head.”
Along with the federal mandate, employers will be required to enroll full-time employees in their company health plans or face penalties.
“The focus has been on what happens Jan. 21, 2014,” Johnson said. “That’s when everything will be fully implemented. There are some odds and ends that come after that, but that’s kind of the target date, when all these things you’ve heard about become effective.”
Experts anticipate some employers will swallow the penalties for not providing insurance if the penalty is significantly less than the cost of providing employee health insurance coverage.
“If you consider that an employer paying $6,000 or $8,000 a year in coverage for an employee can say, ‘Hey, we’re going to pay a $2,200 fine and that employee can go to an exchange’ – now that may upset their employees, but from a business perspective, that could save a large company hundreds of millions of dollars in health care costs.”
– Jonathan Edwards, Director of client technology at The Barnett Group
“If you consider that an employer paying $6,000 or $8,000 a year in coverage for an employee can say, ‘Hey, we’re going to pay a $2,200 fine and that employee can go to an exchange’ – now that may upset their employees, but from a business perspective, that could save a large company hundreds of millions of dollars in health care costs,” Edwards said. “That’s one of the flaws; the penalty right now isn’t enough to keep groups that are struggling financially, with health care costs driving them down, from sending their employees to the exchanges and paying the penalties.”
The federal government says small businesses with fewer than 100 employees will be able to shop in an Affordable Insurance Exchange that offer plans similar to those used by large businesses.
Companies with fewer than 25 employees that provide health coverage may qualify for a tax credit of up to 35 percent to offset the cost of insurance. This credit will increase to 50 percent in 2014, which the government says will lower the cost of providing insurance.
Employees whose employers choose to pay penalties will be able to purchase affordable health benefit plans from the state-based government exchanges.
Johnson said people who fall below a certain income level – $90,000 for a family of four – will be eligible for subsidies to help purchase insurance through the exchanges. However, there are still many gray areas surrounding what shape the state-based exchanges will take.
“What processes does the state have to go through to establish it?” Johnson said. “Well, you can’t do anything in any state without legislative approval. So when is it going to go to the legislature, or are there ways around going to the legislature? There are those kinds of questions. So all of the legwork has to be completed and we have to be ready by September of 2013 for first enrollments.”
Johnson said Tennessee has taken a wait-and-see position regarding the establishment of the state’s exchange hinging on the Supreme Court’s ruling. But in terms of preparedness, Tennessee’s position puts it ahead of many other states.
“Mississippi’s legislature said, ‘No, we’re not going to do it,’” Johnson said. “Texas’ legislature said they’re not going to do it. Florida’s legislature said they’re going to file a lawsuit. You’ve got states all over the country saying ‘no.’”