Those words from the insurer-in-chief were meant to calm the fears of opponents in the run-up to last year’s vote by Congress that mandated broad changes in the America’s health-insurance system.
Rhetoric is one thing; numbers are something altogether different. And Ed Fensholt, a senior vice president in health-care compliance for the Lockton Companies, has seen some numbers that call into
question whether millions of Americans may indeed be able to keep health-care that they “like.”
More than 2,500 businesses rely on Lockton to help design their employee insurance coverage benefits. After passage of health-reform legislation a year ago, Lockton began surveying them. What it found does not support the president’s optimistic assessment.
“On average, our clients would save about 41 to 44 percent off their curent health-care spend by simply terminating group coverage and sending their employees into these new federally subsidized insurance exchanges,” Fensholt said. “The only thing that I see that will hold employers in that game will be that, by and large, most of their employees would fare more poorly in the exchanges than they would in purchasing employer-based group coverage.
“It would cost them more out of pocket with after-tax dollars to purchase the equivalent coverage through the exchange, even with federal subsidies than they are getting now through their employer,” he said.
Can employees rely on the beneficence of their employers in that new insurance world order? Lynn Duncan, vice president of human resources at Layne Christensen Co., believes so.
“I think employer-provided insurance is not understood very well by employees,” she said. In the interests of maintaining work forces that keep many companies competitive, the bias, presumably, would be to retain company-paid insurance. The alternative, she said—cutting employees loose for their own health-insurance needs—“I think it would be terrifying, and I just don’t see it happening.”
Mark Avery, CEO of the Power Group, isn’t so sure.
“I think people will follow the money,” he said. The reason the health-care sector is in the shape it’s in, he said, is the players in the game had been unable to address the cost issues. “I think, employers, when the time comes, will weigh the cultural and corporate implications and the competitive implications of dropping coverage,” Avery said.
“But at the end of the day, if 44 percent think it’s cheaper to not have coverage, they won’t have coverage.”
Other Choices Ahead
The choice to keep or not to keep isn’t the only one facing corporate executives, Fensholt says. His dire analysis of changes to come portends even worse for people working in retail, restaurant or hospitality settings, a sector he said would “simply get destroyed” if health care reforms are implemented as scheduled through 2014.
Those businesses, he said, “cannot afford to extend robust coverage to their rank and file employees, nor can they afford the $2,000 per employee penalty per year to offer no coverage. The only way out for those folks is to move a whole lot of folks from full-time employees into part time”—an unintended consequence that did not consume much of the debate, limited as it was, over the 2,400-page bill that cleared Congress.
The bottom line for employers, said Greg Kline, human resources manager for Inland Truck Parts, is that costs of providing health care—whether you have a plan or pay the initial penalty of $2,000 per employee for not having one—are headed nowhere but up.
“I think you have to do the math,” Klein said, whose own calculations start with an average of $10,000 a year per employee for health insurance. “If we’re going to throw all of our employees into the exchanges,” he said, the government would “soon find out they can’t afford it.
Before long, that $2,000 penalty, he said, would “soon be $5,000 and $10,000 or more because the government doesn’t control costs like the private companies do.”
Far-Reaching Changes
That dynamic is just one way the cost structure will be affected for companies once health-care reform has been phased in three years from now, according to health-care providers, insurance executives and HR professionals.
Another cost driver will be reimbursement for health-care professionals. At a time when the nation is already under-served by primary-care physicians, at least 30 million more people are going to be brought into the new system. Something will have to give with both access to a physician—code word: rationing—and the compensation levels for health-care providers.
For businesses that retain coverage plans, the implications will be profound; the federal government will have to look to employers for additional cash to fund the new system, and to any taxpayer, workplace-insured or not, for increased payments to physicians and hospitals.
That’s one reason that Bruce Bagley, medical director for quality improvement at the American Academy of Physicians, says the debate over health-care reforms is omitting a critical focus: One on the cost of providing services.
“We need to pay doctors and hospitals in a different way,” Bagley said. “That’s the only thing that’s going to save us. As far as innovation, we also need to think about a different way to deliver care. Right now, care is all about doctor visits. The office visit or the procedure are the central commodities of health care. There are better ways to deliver care than everybody needing to be face to face with a doctor.”
Another Agenda?
The effort to reform health care, Fensholt said, was only partly about reform.
“It was mostly about wedding millions more Americans to federal entitlements,” he said. “At a time when we have $60 trillion in unfunded liabilities, we can’t afford as a nation to have had Congress miss the mark on the cost of this bill, and I think they missed the mark wildly.”
That failure, he said, is a chicken that will come home to roost in the executive suites of the nation’s private insurance companies. Congress will look to fund its missed mark “by just levying taxes on insurance companies for no other reason than they are insurance companies,” Fensholt said, to the tune of roughly $20 billion for 2014 alone
“The numbers I’ve seen suggest that the largest carriers in America made as profit last year about $12 billion,” he said. “So you’re talking about levying a $20 billion charge on an industry that made profit-wise, about half of that in 2010. Anybody with a brain would recognize those carriers have to let those costs pass on through to the purchasers and the price of their products.”
Lockton is already seeing the groundwork laid for that, he said.
Can Accountability Work?
Recent changes have compelled insurers to reconstruct business models, said David Gentile, chief executive for Blue Cross and Blue Shield of KC, the region’s largest insurer. “We can’t be in a mode where its about reducing the unit cost and the actual outlays to physicians or to hospitals; it’s about reducing the actual use of costs, of services, so that we can get people from chronic care into a more healthy stage or stay in that healthy stage.”
That, he said, would drive down overall costs. “We clearly want to move away from fee-for-service reimbursement,” he said, “and move into more incentive-based types of programs and sharing in the savings along the way with physicians.” That means major change for consumers, who are about to be challenged to care for their own health in ways most never have.
“The way we pay in the future is going to be significantly different,” Gentile said. “It’s not going to be the discounts, it’s going to be how do we incentivize physicians and work with physicians on a collaborative level to pay differently for outcomes and quality of care.”
Accountability also involves companies that offer insurance programs. They’ll be faced with taking a greater role in promoting a healthier work force, or bear the costs. Stick-and-carrot approaches to smoking cessation, weight loss and controlling medical conditions that arise from individual choice are about to become part of company policy for organizations that haven’t trod that road in the past.
Duncan said that, even before the enactment of the reforms, Layne Christensen’s CEO, Andrew Schmitt, had made it a corporate goal to control costs of health care. “To do that, we all had to get in the game and be healthier,” she said. Schmitt has promised that Layne will retain insurance if employees stay healthy, and he backed that up with change in
process.
“We brought in a wellness director, and it’s been great,” Duncan said. “There’s a culture of wellness at Layne Christensen. … We haven’t really seen the dollar savings yet, it’s too early to tell, but this culture, it’s part of our offices all over the United States.
“We’ve talked to our employees and I think the nutrition, the exercise, all of those programs that we’re supporting the employees with—it’s making a difference.”
It is a transformation, Gentile said, “from employer accountability to individual accountability. And it’s a shift from how we provide benefits today on more of a commodity basis to a retail basis.” The success of that retailing effort, he said, would determine the success of health-care reform itself, “because we have to be able to reach multiple people differently, whether they are inside a group or whether they’re on the exchanges.”
Fensholt’s concern about accountability is grounded in studies like a recent one he’s seen in Nevada, where 40 percent of the respondents said they would rather pay the federal penalty for not buying insurance—right up to the point where they got sick.
“What’s going to go on here in terms of the price of coverage?” he said. “What would your homeowner’s policy cost if you could buy it when your house is on fire? Because that’s not even insurance at that point.”
Nonetheless, the accountability message must get though, Gentile said—from employers, brokers, carriers, and providers.
“We have to be much more clear about what we’re willing to pay for and what we’re not willing to pay for,” he said. “There are some sticks out there that have to come into play here as a part of the new world order of accountability. But we also have to give them the tools to allow them to be successful.”
A Grand Experiment
Bill Bruning, a physician who is soon to retire as head of the MidAmerica Coalition on Healthcare, said the free market was about to be tested in this country. And a great number of questions are about to be raised.
“There will be significant disruptions and unpleasant things happening” as reforms phase in, he said. “But if people were dumped out there, would they pretty quickly become knowledgeable consumers? Could the system work here if the government just got back out of the way, and made people pay for their health care and made people accountable for it? Would physicians respond with services they’re not providing now? Would hospitals have fewer infections? Would carriers figure out new products that would play to educating consumers? Could it work?”
Making it work, said the Power Group’s Avery, is the challenge. Individual responsibility and individual engagement, he said, is “a total mind-shift change that coverage begins with the consumer and doesn’t begin with the insurance carrier or with the provider.”
If nothing else, the health-care market’s gyrations over the past year had provided a great deal for every stakeholder to ponder, Avery said. “I think we have the best hospitals, the best doctors, the best research in the world, and yet clearly, we have a problem,” he said, but “we have costs we can’t control, and more and more uninsured all the time. So I think [reform] will drive innovation in delivery, and innovation in more integrated, effective care that ultimately will drive down costs.
“It spurred necessary change, as painful as it is.” 