Implications for the Future of the Affordable Care Act as the Supreme Court Considers Its Fate
There has been much speculation during the last month regarding how the US Supreme Court will ultimately rule on the constitutionality and survival of the 2010 Affordable Care Act (ACA). At issue is the requirement for all citizens to “buy” healthcare insurance (and consequently be included in the experience pool), and the overall survival of the law—as written—if citizens are not compelled to participate in the plan by “buying” insurance.
We will not speculate on Supreme Court decisions or intent, but when their decision is announced there will surely be a predictable outcry from one side or the other. When that smoke clears, what should an employer do? We say focus upon 3 permanent market changes or trends that ACA has now created—win or lose in court. In fact, start doing so now. Let’s talk about each.
Some new rights (entitlements) will not go away, so you must plan to deal with them going forward.
One such prominent example will be the right to insurance coverage for citizens or potential employees with pre-existing conditions without denial of coverage. This was one of the foundational reasons stated for the passage of ACA.
Why do I think this provision will stick around? Let me tell you a story. A friend has a 3-year old grandson who was born with a chronic disease that will need attention and intervention for the remainder of his life. He currently has healthcare coverage through a parent’s group insurance plan offered by a large public institution. But, if his parent were to lose their job, try to move to another insurance plan or contemplate starting their own business, their son’s condition could create coverage difficulty in the pre-ACA world. Not so with ACA. In theory, he will always have healthcare coverage.
My friend does not care about the rest of ACA, nor does she care about what ACA opponents think—all she knows is that her grandson will now (under ACA) never lack for needed medical care because of resources or coverage. There are a lot of grandparents and parents out there with similar stories and I think there will be a massive uproar if someone (anyone) tries to rescind this promised benefit. When she first told me her story last year, it was clear to me that an unstoppable force had been loosed.
What does a company do? This can be a complex question. The correct answer will depend upon your current health policy and coverage practices. However, we believe that most employers will not be impacted directly by a pre-existing condition mandate or requirement. This is because we believe many, if not most, employers will employee the talent they require and their healthcare insurance coverage will be adapted to meet the needs and requirements of hiring.
The pre-existing condition issue will more likely impact self-employed professionals or workers or the currently uninsured. In that case, the Federal government will become the insurer (payer) of last resort. This will also probably impact very difficult and uninsurable cases an employer (providing group insurance coverage) may encounter. But someone must pay for this last-resort coverage. It will surely result in higher healthcare costs for everyone who pays for insurance or coverage through a variety of premiums, fees, fines or taxes. You can be sure that your year-over-year healthcare costs will rapidly increase. How do you plan to deal with this threat to profit and cash flow?
Employees do not know what is going on with ACA.
I have sat through a couple of meetings and seminars listening (predominately) to lawyers explain the impact of ACA on employers and its recent legal challenges. During those sessions I have never heard anyone speak about its impact upon employees. In general, I believe that all of the dialogue about ACA has predominately ignored its prime stated recipient—the employee, or other users of the healthcare system. Why? In short, the decisions will generally be made well above their pay grades. Ah yes, another top-down solution.
As a result, we believe most employees and users are in the dark about ACA and what is about to happen to them. We further believe this provides an opportunity for your company to:
- Reach out to your employees and educate them about ACA,
- Tell them what your company plans to do about it; and
- Talk about what they can expect to see in the next 1-2 years.
You may even want to find a way to involve them in company health-insurance decision making, once your requirements and course(s) of action become clearer this summer.
As an employer, ACA may create an opportunity for employer and employee to form a stronger relationship. What a novel idea and unintended consequence.
Get out in front of THE inevitable change.
While the future of ACA remains unclear at this writing, we believe that parts and select benefits will survive and become part of healthcare landscape and permanently impact the traditional relationship between employer and employee. As mentioned above, we would start by accepting the inevitability of healthcare change and the fact that it will impact your company in the next 1-2 years. But how can you get out in front of an outcome that is unknown?
A good way to do this is by using a proactive and focused approach to the issue. We suggest that you appoint a company Executive-In-Charge (EIC) for employee-healthcare coverage and change. You can make it a top Finance or HR executive, or you might also select a top operating or business-development executive to provide a 3rd-party perspective to this more traditional Finance & HR issue.
What should the EIC do first? We would begin by creating a company ACA impact statement and a 5-year supporting strategy to deal with this impact by October 31st of this year, or within 120 days after the Supreme Court’s decision. This will include tasking your current health insurance supplier and their broker with providing an ACA-compliant and cost-effective solution for 2012-2013. [i.e.: What will the company have to do? What options exist?]
Then the EIC should prepare an implementation plan to support the above strategy by December 31st including steps to communicate with all of your employees and engage them in the change. Again, this is a great opportunity to help the employee get through this potentially tough transition.
Lastly, the EIC and the top HR executive should create a report for the CEO and Board before yearend regarding the impact of ACA on current company compensation and benefit practices and costs. Companies must recognize that the cost of compensation and healthcare benefits may be increasingly coming out of the same pocket and the distinction between the two will be blurred in the future. You will likely have new choices to consider.
The above prescription is based on what we believe are the inevitable changes and impacts that ACA is going to cause for employer (and employee)—win or lose in the Supreme Court this summer. If you plan ahead and do not become a victim of events—as we believe many will—you can greatly benefit your business and its employees.
If you like to add to or expand upon our observations and prescriptions, please contact us. I would be glad to share other ACA ideas in future articles. I cannot think of a more important issue for businesses to address this coming year. And, we will continue to follow this issue for our readers.