Regardless of the various views on health care reform, one fact stands out for employers and employees: The Patient Protection and Affordable Care Act is now the law of the land.
The rules and costs of health coverage will change dramatically for employers, beginning this year. It is time now for employers to prepare for managing the effects of reform on employees – and their bottom lines.
Premiums have more than doubled in the past 10 years and are increasingly pressuring businesses, as they comprise more than 8 percent of compensation costs, according to the Bureau of Labor Statistics. The federal overhaul offers scant relief. Companies should develop a health care viewpoint, a management strategy and metrics for evaluating progress. What reform accomplishes – or not
A starting point in adapting a business strategy is to understand that, along the way, health care reform morphed into health insurance reform. Of the three major issues in health care – access, cost and quality – the 2010 overhaul really focuses only on access.
The major achievement of health reform is expanding access to care by bringing 32 million new Americans under the umbrella of health coverage by 2019.
One thing the health care overhaul does not accomplish is “bending the cost curve” to slow rising utilization and prices. Growth in spending will likely increase demand for health services and products and drive further cost increases. Higher insurance premiums, in a 5 percent to 30 percent range, are likely during the coming years.
Starting in 2010, it is probable that insurers who have been forced to eliminate lifetime limits, cover pre-existing conditions for children, etc., will begin tallying the costs of expanded coverage and passing them along in higher premiums for employers and individuals. Employers who currently have waiting periods of six or 12 months for health coverage also will face an immediate cost as the law imposes a 90-day maximum waiting period. The quality-cost relationship
The other issue is how to improve the quality of health outcomes. The 2010 round of reform gives mention to quality of care, but offers no major solutions. Yet quality and costs are intertwined.
Employers need to begin by understanding populations in their work forces and the related health care costs. In the overall U.S. work force, people who are generally well make up 26 percent of total head count but produce only 4 percent of the costs. At the high end, only 4 percent of people face catastrophic health issues, but those problems generate 36 percent of the costs. Together, employees with chronic or catastrophic conditions make up 39 percent of the work force but account for 73 percent of the total costs.
Many employers focus on plan costs, but it makes sense to develop goals and metrics to track health status and take actions to maintain and improve employees’ health. For example, employers can provide financial incentives to help well employees maintain their healthy, active lifestyles, and they also can provide preventive care and incentives for physical activity and other healthy behaviors for the at-risk employees who may be overweight, have high blood pressure or smoke.
The federal overhaul mostly preserves the traditional model of health insurance: Employers pay the premiums for coverage – with employees contributing – insurance companies pay for services and products, and the consumer has little incentive to monitor or manage the costs of care.
Consumer-directed plans, however, bring market forces to bear. A key element is responsibility, as employees have personal ownership of their health care accounts and decisions on how dollars are spent, supplanting the “someone else is paying” structure of fee-for-service plans.
Already, consumer-directed plans have grown in popularity. In January, more than 10 million Americans were covered by health savings accounts and high-deductible health plans, according to America’s Health Insurance Plans. Employer strategies
Each company needs to create a comprehensive strategy for employee health or revisit existing strategies in light of the new law.
Here’s an outlined process for thinking through those strategies:
• Establish a point of view. Create a picture of what the company wants to achieve through health care programs.
• Make employee health the primary objective. Focus internal communications on health rather than benefit selection, building an employee experience focused on enjoying better health.
• Base decisions on data. This requires metrics to measure the health status and needs of the work force, the economic risks to the organization and priorities for improvement.
• Incorporate well-designed wellness initiatives – not short-lived gimmicks – into plan designs.
Make wellness part of the culture.
The U.S. is still in the early days of health care reform. The complexity is daunting. Costs are still a question mark, and we are awaiting regulations to clarify many of the specifics. With a strategic focus, businesses can avoid being swamped by the coming waves of change.
Dennis Triplett is CEO of Kansas City-based UMB Healthcare Services. He may be reached at email@example.com.