Health changes to be historic, but gradual

For employers, here’s the good news: Daunting as health care reform may seem, it’s not going to affect you much for awhile, except perhaps to help a little.
Changes “are going to be gradual,” Health Insurance Commissioner Christopher F. Koller said at a summit April 28 hosted by Providence Business News. Family plans will now cover dependents up to age 26. There will be small-business tax credits and help with retiree plans.
The biggest changes, Koller said, won’t come until 2014: the individual mandate, the health insurance exchanges (plus penalties for employers with more than 50 workers who don’t offer coverage, and a requirement that groups of more than 200 automatically enroll workers in plans).
If you still feel overwhelmed, here’s more good news: There are extensive resources available to help explain the reform law – and to keep you abreast of new developments and the scores of regulations that must still be drafted by the government.
For starters, there’s Koller’s office and its website, www.ohic.ri.gov. There’s the Rhode Island Business Group on Health and its site, www.ribgh.org. There’s Lt. Gov. Elizabeth H. Roberts’ office – health care policy and small business are priorities for her.
Ready for the bad news now?
This is going to be a lot of work, at least if you hope that reform will reshape Rhode Island’s health care landscape and make it more efficient, equitable and affordable. Also, insurance premiums are going to keep rising. Some say reform will make them worse.
But before we go any farther, here’s one point on which all six panelists agreed: In laying the groundwork for near-universal health insurance coverage, the Patient Protection and Affordable Care Act is historic – a “watershed moment,” as Koller put it.
“A civilized country should take care of its own,” said James E. Purcell, president and CEO of Blue Cross & Blue Shield of Rhode Island. “Every man, woman and child should have access to quality health insurance.”
The three-hour summit, held at the Providence Marriott Downtown, drew more than 400 people. Moderated by PBN Editor Mark S. Murphy, the event focused on how reform will affect Rhode Island employers.
Along with Koller, Roberts and Purcell, the panel included Dr. Troyen Brennan, executive vice president and chief medical officer of CVS Caremark Corp.; Stephen Zubiago, a partner at Nixon Peabody who specializes in health care law; and Linda Lulli, assistant vice president for human resources at Bryant University, a local leader in the Society for Human Resource Management, and an executive board member of the Rhode Island Business Group on Health. Zubiago, who started by saying he supports the law’s goal of universal coverage, but worries about its cost, explained a crucial provision for employers, known as “pay or play.”
The law doesn’t technically require employers to provide insurance, but it does impose a penalty of $2,000 per year, or $167 per month, to employers with 50 or more workers who don’t offer insurance, with no penalty for the first 30 workers, starting in 2014. (For a company with 65 workers, for example, this would mean a penalty of $70,000 per year.)
“So if you’re a large employer with more than 50 employees and you don’t offer insurance, you can do that,” Zubiago said. “But you’re going to get taxed by the federal government.”
Zubiago noted the count applies only to “full-time” workers, working 30 or more hours per week. A Kaiser Family Foundation outline also notes that to be subject to the penalty, employers must have at least one worker receiving a tax credit for buying individual-market coverage; conversely, an employer that offers coverage but still has any workers getting that tax credit must pay $3,000 per worker getting the credit, or $2,000 per full-time employee.
A year before “pay or play,” Zubiago said, another employer provision will kick in: If an employer isn’t insuring a worker, it must provide a “free choice voucher,” of the same value as what the employer would pay toward group coverage, to help the worker buy insurance.
“The goal there, of course, is to try to create some competitiveness for insurers,” he said. “Are you going to be able to get a better deal through your employer, or go to the exchange and purchase the insurance there?”
As for how the exchange will work, Zubiago said, all the regulations must still be written, and Rhode Island will have to decide how to set up its exchange (or whether to opt out). Massachusetts’ Commonwealth Connector is a possible model, he said, “but none of this has been decided or finalized.”
For small employers, meanwhile, Zubiago said, there is no coverage requirement, but effective this year, there are tax credits for employers with 25 or fewer workers (and average wages of less than $50,000) who choose to provide insurance. On the other end of the scale, starting in 2014, the largest employers – anyone with 200 or more workers – will be required both to offer insurance, and to automatically enroll workers in the company health plan, Zubiago said.
The individual mandate also kicks in that year, Zubiago noted, and to anyone wondering how people without jobs might afford coverage, the answer is that the government will subsidize premiums or provide coverage for those who can’t buy it.
Thus Zubiago’s concern about the ultimate price tag.
“The cost of this is absolutely crazy,” he said.
Purcell also spoke critically of that aspect of the law, but for different reasons. In his view, the penalty for individuals who forgo coverage – phased in to reach $695 a year or 2.5 percent of income, whichever is higher, by 2016 – is “too weak.”
“Some are still going to opt out and pay the penalty,” he said – specifically, the young and healthy, the “young men who think that a car or a Wii is more important than health care.”
Blue Cross expects the new people who do enter the individual market (which only Blue Cross now serves in this state) to be about 20 percent sicker than the average person, Purcell said. But there’s no way of knowing for sure, so “we can’t even rate for it.”
Add to this that premiums will only be able to vary by a three to one ratio, Purcell said, and that means the “young invincibles” will find their rates too high to be worthwhile.
Koller disagreed. Massachusetts’ experience, he said, shows that “you don’t need a strong individual mandate to get compliance.” Most people have gotten coverage despite the low penalties there. (The Bay State also created special Young Adult plans that cost as little as $136 per month for a 25-year-old, versus $216 for the cheapest regular plan on the Connector.)
Koller also disputed the notion that people who are now uninsured would be sicker than others; logic suggests that if they feel they can take that risk, it’s because they are less sick, he contended. However, in Massachusetts, there has been some “gaming” of the system, he acknowledged – joining a plan to get services, then dropping out.
Yet the hottest topic at the event wasn’t any mandate, but rather what Purcell called “the monster in the corner”: the rapid rate at which health care costs are rising. Purcell was the first to bring it up, justifying a recent remark he made that Blue Cross would need a 10 to 15 percent rate hike this year. Please understand, he said, that 87 to 91 percent of the bill is medical claims, and recent double-digit hikes have been driven “entirely” by claims.
“I view this as Exhibit A of the need for health care reform,” he said. “It is critically important that we take aggressive steps to do something.”
Part of the problem, Purcell said, is that providers are commanding price increases that far exceed inflation. “But if we raised providers’ pay by CPI only, that wouldn’t do it,” he added – because utilization is also rising rapidly, both in terms of volume and in terms of “relative” expense, such as the choice to do a PET scan instead of an X-ray.
How much will health care reform help?
Purcell wasn’t optimistic, but Roberts said the key is to seize opportunities created by the law to make bigger changes. Other industrialized countries care for all their citizens for “50 to 75 percent of what we pay now,” she noted.
“If we start from the concept that this will break our economic backs, it sells us short,” she said. Thus the key to making reform cut costs, not increase them, will be how we choose to implement the law locally.
Brennan said some of the greatest promise in the law involves efforts to move away from the fee-for-service system, which encourages providers to do as many billable procedures as possible. New models such as accountable-care organizations may help, and locally, efforts to revitalize primary care could make a big difference.
Changing health plans to reflect these new models, however, could be difficult, Koller and Purcell noted. Sending people to large, multispecialty practices has proven to reduce costs by about 20 percent, Koller said, but “your employees don’t like that” – they like to go to whichever doctor they want. Roberts disagreed, saying that if Rhode Islanders had that option, as they did when Harvard-Pilgrim Health Care was here, they’d happily use it.
Purcell said more innovations in health plans are ahead no matter what, and Zubiago noted that the cost of our current system will force people to accept cost-cutting changes.
“We’re on the edge of the precipice,” he said. “Most people can’t afford their current coverage … and over time, fewer and fewer will. I think we’re a lot closer to making these decisions than we think.” •