What’s the future look like under the Affordable Care Act? Springfield Business Journal Editorial Director Eric Olson sat down with Nixon & Lindstrom Insurance CEO Trevor Crist, HM Senior Vice President and Managing Director Mark Roberts and Employee Benefit Design LLC Partner Dan Ruggeri to find out. They talked premiums, wellness plans and fundamental changes in this month’s Insurance and Benefits CEO Roundtable.
Eric Olson: In a word, how do you characterize the insurance industry today?
Mark Roberts: Stabilizing.
Trevor Crist: Uncertain.
Dan Ruggeri: Complex.
Olson: From your vantage point, what has been the net effect of the Affordable Care Act on small-group insurance plans? Is it working as intended?
Ruggeri: I would say not. We have seen higher rates. We have seen much higher out-of-pocket costs. From that perspective, if you look at the ACA, I don’t think it’s done its job. It’s not very affordable.
Crist: When this was first rolled out, even more important than affordability, leading up to it, what the platform was really based on, was more options. In southwest Missouri, we have less than half of the carrier options we had before this process started. That is something very few people have recognized and really discussed.
Ruggeri: If you look at ACA, it addressed accessibility. Nowhere in the provisions did it address cost. There was no drug cost reform or tort reform. I think it moved the liability of that cost to the taxpayer.
Olson: How have small groups responded to this? Are companies moving away from offering plans?
Crist: From the employer standpoint, from what they have seen and what they have done has been a little bit different. The can got kicked down the road another year in 2014. The majority of our clients have kept what they had at a higher cost, but it was better than the alternative. In all but a couple scenarios, the ACA option was much more expensive than what they already had. Since they had the option to delay those effects, most took it.
Olson: An option I’ve heard kicked around is removing a small-group plan and giving individual stipends to employees to buy coverage on the marketplace. Is that happening in our area?
Ruggeri: As an employer, we want to allow for those people who can’t get a subsidy to at least pretax their health insurance. For whatever reason, I haven’t figured out a good one yet, (the IRS has) now disallowed the deductibility of health insurance. It’s counterintuitive to the overall plan to get more people into an exchange product.
Crist: Weekly we are getting more direction from the IRS. Now, they basically have made it to where an employer cannot mirror or give the perception of a group health plan via individual health plans by doing it pretax or giving a set dollar amount.
Ruggeri: Or adjusting wages.
Crist: Right, adjusting wages. Anything they see that would mirror a replacement of a group health plan.
Roberts: It continues to evolve. There are changes, like Trevor said, each and every day. Being able to keep on top of it creates chaos.
Ruggeri: If we go back to the bigger overall problem, this isn’t unique to southwest Missouri, everybody knows that. We are a global economy. Not only do we need global tax reform that makes sense to compete in the global economy, we need health care reform that makes sense to compete in the world economy. While we spend twice the dollar amount per capita, and overall have no better outcome as a nation than countries who spend 50 percent of what we spend, that’s a problem.
To the other side, you can say there are a lot of procedures done in the United States that they don’t do in socialized medicine. That’s a fair argument, but somewhere in between lies the solution. This cannot be sustained.
Olson: Have any of you as employers considered not offering small-group insurance?
Ruggeri: As an employer, I would rather offer a defined contribution and let my employees go where they want. With no pre-existing conditions, people can get coverage. Some of the problem goes back to me not being able to allow my employees to pretax that deduction. The negatives outweigh the positives. To Trevor’s point, when the ACA model goes totally into effect, I think you will have employers look at it and say, “Well, I’m out of this business.” That is going to lead to more uninsured, not less.
Crist: It’s tough to compete. Employers never put these plans in place just to be good men and women. They did it to recruit and retain quality employees. Employee benefits have been a way to level the playing field or, in the best case stand out from your competitors. In this case, it’s becoming price prohibitive to include group health insurance. That used to be the first thing we would ask, almost before salary. Because of this conversation, it’s getting to the point where an employer says go out and get that on your own and the employer tries to find other benefits to invest in.
Olson: So, are any of your companies not offering insurance plans?
Ruggeri: We have to because the level of employee we need to recruit, one who is able to understand the complexity. Based on the wage base we have to support and our infrastructure, none of our employees would be eligible for a subsidy. We would be doing them a horrible disservice.
Olson: A New York Times article about Harvard professors who championed the legislation, advising the president’s council, are now experiencing the effects of higher costs. How do you view that? Is that as deep as irony goes or an oversight of implications?
Crist: Unfortunately, that is kind of a picture of the average consumer. A lot of people didn’t know how this was going to effect them and still don’t. There were a lot of companies that we go into who are shocked their benefits are going down and prices are going up in most places.
Olson: Who are the winners in this situation?
Ruggeri: Drug companies.
Crist: Nonprofit hospitals.
Ruggeri: That was Trevor.
Crist: Yeah, I’ll say it.
Ruggeri: There are no cost containments.
Crist: You want to talk about winners? Think about the amount of infrastructure this new system is going to demand. Anytime you add infrastructure, your costs don’t go down. This is a complicated, complex, large new branch of the government. There are a lot of additional people involved.
Some of the positives of it, No. 1, for the first time this has become a national conversation. This really has been an employer level frustration and conversation up until this point, and now, for the first time, it’s on the front page of the news good or bad. It’s good everybody starts to realize the implications of it.
Olson: What positive things do you see going forward with this as a national conversation?
Ruggeri: This may propel some real solutions going forward. We know nothing gets solved in this country unless we have a fiscal crisis. This is going to move us a lot closer to a fiscal crisis.
Olson: Anything else you want to speak to regarding ACA?
Crist: To Dan’s point and regarding this becoming a national conversation, there has been an issue here for a long time. The positive I hope comes out of it is we will actually get health care reform. To this point, I would argue all we have had is health insurance reform. This is a three-legged stool problem. Until they go after what is driving that expense, we are not going to see a savings.
Olson: Does your idea of reform repeal ACA? Or do you foresee a repeal?
Roberts: I don’t see it being repealed.
Ruggeri: I think the horse is out of the barn, and it’s not getting back in. Everybody has to have skin in the game. If we want the providers to become part of an accountable care organization and not manage the cost each time we come in like a turn style, but assume some risk, we need wellness plans with achievable goals. If I decide not to participate, I think my level of premium should be attributable to my willingness and outcomes.
Olson: Wellness has been a buzzword lately. What are the most effective programs you have seen?
Roberts: You have to have the culture in your organization to support it. We can’t just set a bowl of apples on the table and expect employees to buy in. We have to incent them and adapt that culture. Go from doughnuts to apples and continue.
Crist: The only lifestyle decision people can be discriminated against for is tobacco usage. You can charge him more than me for tobacco, but if I have a completely unhealthy lifestyle other than that, it doesn’t matter, we have the same rate. That doesn’t incentivize the wellness culture.
Roberts: We are on the edge of creating a wellness center to bring executives in from (human resources) all the way to the C level. It goes back to education. What do we need to do to change this culture and lifestyle? What’s the real reason behind creating a wellness program? Is it to improve the life of employees to drive rates down or is it the moral obligation of a company?
Olson: What’s one thing in the industry you would change?
Roberts: Transparency from the health care side. Negotiated pricing. What’s the true cost of health care?
Crist: That is a fuzzy area right now. It’s not even about them covering their costs. When you get an explanation of benefits back, you will see this fictitious, exorbitant number on the page. It can be anything they want to make it. Then it’s magically negotiated down based on the health insurance company’s contract. Health care is the only industry where you walk in and buy a service but have no idea until you get home how much it cost. It would be the equivalent of walking into a car lot, purchasing a car and 30 days later you get a bill. Nobody at this table would do that.
Ruggeri: Even with transparency, if you know Mercy has a lower price for a service, you can’t take your Anthem card over there and do the deal. It’s out of network. There is no negotiating power. If you are the end user, you are stuck on one side of the fence or the other. I’d like to see no networks. Compete on cost and quality of care. Create a value model. I’d bet a $100 bill we don’t get this thing fixed until we have a fiscal crisis.
Olson: You are talking about some foundational changes.
Ruggeri: It’s not working. Is Medicare working? Part of the reason the hospitals jumped on was because they knew they would have to take less in Medicare charges, but they would have a new patient population coming in. That’s called cost shifting. It’s a broken model.
Interview experts by Features Editor Emily Letterman, eletterman@sbj.net
