healthcare-reforms-biggest-question.pngThe Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT) last week released a special report that addresses what may be the biggest concern about healthcare reform: that when full implementation starts in 2014 employers may quit sponsoring health benefits for their employees.

The argument that the healthcare reform tide might sweep away employer-sponsored coverage stems mainly from the so-called “employer shared responsibility” provision of the almost-two-year old law.

Also known as the “Play or Pay” mandate, it forces employers to either provide employee health coverage that meets government standards for both comprehensiveness and affordability or pay a hefty fine based on the number of employees that qualify for subsidized coverage from state exchanges. Read more.

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Healthcare Reform’s Biggest Question: Will Employers Drop Coverage?

Tue Mar 20, 2012

healthcare-reforms-biggest-question.pngThe Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT) last week released a special report that addresses what may be the biggest concern about healthcare reform: that when full implementation starts in 2014 employers may quit sponsoring health benefits for their employees.

The argument that the healthcare reform tide might sweep away employer-sponsored coverage stems mainly from the so-called “employer shared responsibility” provision of the almost-two-year old law.

Also known as the “Play or Pay” mandate, it forces employers to either provide employee health coverage that meets government standards for both comprehensiveness and affordability or pay a hefty fine based on the number of employees that qualify for subsidized coverage from state exchanges.

Obviously no one can guarantee how employers will respond when all the complexities and requirements of healthcare reform really kick in. Nevertheless, CBO and JCT believe on the basis of sophisticated computer modeling that the Affordable Care Act of 2010 will lead to only a “small reduction in the number of people receiving employment-based health insurance.”

Acknowledging a “tremendous amount of uncertainty” about how employers might respond, the two Congressional offices estimate that in the four years 2019 to 2022 some 3 to 5 million fewer people each year will obtain coverage through their employer as a result of the law.

While CBO and JCT provide alternative scenarios for the drop-off  in employer-provided coverage, it appears that some push-pull effect will be at work: pulling workers away from employer plans will be the availability of new alternatives to employer coverage, namely Medicaid expansion and state health insurance exchanges. On the other hand, some employers may respond to the “Play or Pay” compliance mandate by pushing some subsidy-eligible employees to a state exchange.

But looking beyond future binary employer choices, what may be of greatest interest to HR and benefits professionals in the CBO/JCT report is the idea that in a few years time employers may re-imagine how they configure employee health benefits.

More specifically, as employers survey the total health insurance landscape that will become available to employees and their dependents, including traditional PPO coverage options, consumer-directed, account based health plans, expanded Medicaid and state insurance exchanges, including with substantial government subsidies to pay premiums, some believe that employers may begin to compartmentalize health benefit offerings, perhaps even creating “off-ramps” for certain employee populations.

As the report puts it, “some firms might wish to provide health insurance only to those workers and dependents who would not be eligible for (new) programs, while allowing lower-income workers and dependents to obtain insurance through one of those channels.”

This idea of health benefits “restructuring,” as the CBO/JCT report calls it, suggests that the healthcare reform law may spawn a new era for employer-sponsored health coverage; a dramatically different environment where employers innovate not just in benefits design but in benefits availability, segmenting their workforces to the extent legally permissible not only to manage costs but to channel employees to newly viable alternatives.

Uncertainty is clearly an important word in any discussion of how employers may respond to the future demands of the healthcare reform law. Innovation is another important word as employers evaluate all the options and alternatives that will be available starting in 2014.

But for HR and benefits professionals, CEOs, CFOs and CHROs, indeed for everyone in senior management, there may be only one essential word: change. Assuming the U.S. Supreme Court upholds the law’s constitutionality, the reality is that healthcare reform has the potential to change everything we understand about traditional employee health benefits.

At the end of the day, therefore, perhaps a day in the year 2022, the Affordable Care Act may have revolutionized our concepts of employment-based health coverage.