Employers and Health Plans: Panelists Don’t See ACA Exodus

The jury’s still out on the impact of health care reform on employment‐based health benefits, but predictions of mass instability are certainly not materializing, reform experts said May 15 at a policy forum sponsored by the Employee Benefits Research Institute in Washington, D.C.

The Affordable Care Act will not trigger a rapid exodus from employer-sponsored health plans, panelists agreed, because large employers still see value in continuing to offer health benefits. Millions will not be dumped from employer coverage, even though some cash savings could be gleaned from doing so: Employers don’t see the cash savings as the sole factor.

On the other hand, health care reform could weaken employer commitment to health plans, former White House health care adviser Chris Jennings said, in sectors where firms pay low wages, have high worker turnover, and where workers prefer cash in hand. Those companies are more likely to send workers to state-based health insurance exchanges, he said.

Also, certain factors could weaken even large employer plan sponsorship, depending on how events shake out and markets react. Factors that could weaken large employer plan enrollment include: (1) rates of health inflation; (2) the continuation of tax-free health benefits; (3) the impact of the so-called Cadillac tax (on expensive health plans); (4) employees’ continued desire for coverage from firms; and (5) customer satisfaction (or dissatisfaction) with exchange coverage.

Increased Choices

The employer option of giving workers salary raises to help them buy exchange coverage is good because it increases choices; and not bad because it won’t hurt enrollment in employer plans nationally in the aggregate more than one-tenth of a percentage point, Jennings asserted.

And worker access to a whole market full of new options available on exchanges is an improvement over getting a limited number of similar choices through an employer, he added.

AEI: Repeal the Employer Mandate

American Enterprise Institute Scholar Joe Antos (formerly with the Congressional Budget Office) questioned why the employer mandate should not be repealed. He said it was: (1) a budget gimmick to generate phantom revenues that would mask the budget impacts of reform’s other mandates; (2) a penalty designed to force employers into offering benefits, with the intention of keeping workers from flooding exchanges; (3) a misguided attempt to force employers to “do the right thing;” and (4) “a bad idea.”

The employer mandate’s play-or-pay provisions are not going to be enforced, Antos predicted, because that would be highly unpopular. The Obama administration sees that, as observers can tell by thinking about how it postponed enforcement of the mandate not once, but twice.

While limited or no enforcement of the mandate is good, Antos said the mandate should be removed entirely and unambiguously, to stop the uncertainty of having it on the books without being enforced. The result is less pain and confusion, Antos said.

While agreeing on the virtues of employee choice, Antos said miscomprehension could become a source of problems for some of the workers who aren’t equipped to make insurance choices or understand coverage options.

Furthermore, Antos said, reform could harm lower wage-earners and workers at smaller companies. Their jobs could become less secure and their salaries could get cut. If an employer drops hours to 29 hours a week to avoid having to deal with the employer mandate, this would impact the very workers who are least able to handle it.

Will Providers Opt Out of Networks?

A potential problem brought on by health care reform might be narrower provider networks, Los Angeles Times reporter Noam Levey said. In Los Angeles, the Cedar Sinai Hospital has refused to join the networks of all but one exchange carriers. The hospital is out-of-network with all other carriers on the exchanges, he said.

Admittedly, narrow provider networks are not a problem all over the country. It depends on the state markets and how providers react to insurers in them. While California providers may decide not to participate, providers in post-reform Washington D.C. and Maryland appear not to have the same problem, because the region’s dominant insurer CareFirst BlueCross BlueShield has most or all local providers under its belt, he said.

Levey also predicted that public backlash against managed care won’t result from the ACA, as happened in the 1990s when HMOs became the norm, because network inclusion today is more based on provider price, quality, transparency and value; and less based on insurers’ quest for cost-cutting in the name of profit, he said.

Employer Clout in Health System Change

On a related point, Antos and Jennings concurred: the ACA enhances employer ability to influence provider behavior, which is a role that Medicare only used to be able to take on: curbing wasteful utilization, fostering transparency, basing care decisions and reimbursement on quality ratings, etc. Medicare’s traditional role — as a brake and influencer through pay for performance, quality initiatives and curbs on cost inflation — is now an employer’s purview with increased affect, either thanks to ACA or in tandem with it.

Antos added that good communications about the comings and goings of network members is important, but non-institutional rollovers, by physicians and therapists and vendors are tougher to track. And none of those changes take place on a set schedule; they’re out of step with the handbooks the insurers put out.

Taxable Health Benefits?

Jennings said the concept of taxing health benefits offered by employers may be endorsed by think tanks, but it’s a third rail for politicians. If instituted, it would disrupt the marketplace, so if it’s done it will be gradually. He also predicted that if health benefits ever became taxable, it would not be done in the ACA context but in the context of tax reform.