Cornerstone Blog« Back the Blog Home
March 08, 2016 | Leave a Comment
March 23, 2016 will be the 6th anniversary of the passage of the PPACA, aka. ACA, aka. Obamacare, aka. Healthcare Reform. In those six years, many of the provisions have been implements, delayed or removed. It has survived two Supreme Court challenges and there have been many attempts to repeal the entire law. Let’s take a look back and see where we are today and the changes that have taken place.
Has health care reform lowered the cost of health insurance? According to the Kaiser Family Foundation’s 2015 Annual Survey, the average annual single premium is $6,251, family $17,545. Since the passage of ACA in 2010, that is a 24% single, 27% family increase. The five year period prior to the passage of ACA, 2005 – 2010, rates increased 25% single, 27% family. But looking at a one year period, rates only increased 4%.
High deductible health plans (HDHP) are lower in cost than the overall average for all plan types (PPO, POS & HMO). Participation in HDHP (H.S.A. qualified) has increase every year since 2006. In 2015, 24% of covered workers are enrolled in an HDHP. Since the passage of ACA in 2010, participation has increased 13%, with 20% of employers offering HDHP. I believe this trend will continue to increase, especially if premiums continue to rise.
Many were worried that ACA would cause employers to move more employees to part-time status to avoid the mandate and not have to offer health coverage. The survey found that employers with 50 or more full-time employees reported 4% switched employees from full-time to part-time status, & 10% changed part-time workers to full-time.
In the employer sponsored market, there have been changes for both larger and small groups.
There are a large number of small employers that are within the “transitional relief” period, which allows employers to stay on their pre-ACA plans and not be forced on to an ACA compliant, Obamacare, plan, yet. The main reason an employer would want to do this is because the ACA compliant plans are more costly. In one instance, the cost difference was over 130%! The “transitional relief” is scheduled to expire for renewal dates after October 1, 2017. At that time, small employers will have to decide if they will provide their employees an ACA compliant medical plan, or try to avoid the costly community rating by considering a partially self-funded model, or another type of arrangement, such as participating in a PEO.
This past October, the PACE Act was signed by President Obama to amend ACA allowing individual states to determine their own definition of a small group. In Missouri, as in many states, kept the small group definition up 50 employees. As a result, groups with 50 or more employees are still medically underwritten by the insurers to determine premiums. This was a significant change that helps stabilize the large group market.
Another change from the original bill is the dreaded “Cadillac Tax” has been delayed two years. This tax is a 40% excise tax on high-cost employer-sponsored health plans. It was scheduled to take effect in 2018 and according to a recent analysis by the Kaiser Family Foundation, about 1 in 4 employers could have offered health plans in 2018 that are expensive enough to be affected by the Cadillac Tax. This delay was part the year-end government funding package last year and changes the effective date from 2018 to 2020. There was talk about completely removing this tax, but it was only delayed for now.
Regarding individual health insurance market, the state and federal exchanges, or marketplaces, have been operational since October, 2013 and the individual mandate to have qualified health insurance became effective January 1, 2014. Many insurers have chosen to offer plan in these exchanges. There is no medical underwriting, no pre-existing condition limitations, and for those who qualify, some individuals receive government subsidies to help pay premiums. As a result, more people have medical insurance that were not able to obtain it before, either due to a pre-existing medical condition, or could afford the premiums.
Even with the individual mandate requiring everybody maintain health insurance, the insurance companies are still facing the challenge of getting young & healthy individuals to purchase coverage. Many individuals have still chosen to go without coverage, or they only purchase coverage in the year that they have a medical instance requiring care and cancelling the coverage when they are healed. As a result, some insurers are losing money by participating in the exchanges/marketplace. As a result, many of the plans available in the exchanges are more managed care. The plans have narrow networks, require primary care doctors and referrals to see specialists, and the prescription formularies have been paired down. If the insurers are not able to evaluate the risk, they need to take steps to control their costs. United Healthcare reported they lost $1 billion and is considering dropping out of the exchanges in 2017. Other insurers have pulled out of specific markets, or limit the types of plans that are available, some going as far as to only offering HMO plans, such as happened in Texas with Blue Cross of Texas. The big question is, is this model sustainable?
So all of this has been within the last 6 years. I have a feeling there are more changes to come…
written by: Brad Snitzer, Vice President, The Cornerstone Insurance Group