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North Bay Business Journal

Friday, July 6, 2012, 6:00 am

As dust settles on health care ruling, insurance industry reflects on impact

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    The Business Journal asked experts in the insurance industry to comment on the impact of the U.S. Supreme Court decision on the health care law:

    Chris ReiterChris Reiter

    Vice President, Employee Benefits, Woodruff-Sawyer & Co.

    So now that the verdict is in, what are your initial thoughts on the ruling?

    I am very surprised given how the proceedings went in March.  For Chief Justice John Roberts to be the deciding vote and writer of the majority opinion is probably the most compelling, given he was appointed by President George W. Bush and he is generally thought of as a more conservative voice.

    Will the Supreme Court’s decision to uphold the individual mandate do anything to stabilize employer sentiment on employee benefits?

    Woodruff-Sawyer hosted an employer seminar with about 30 wineries this morning and the general consensus:  I guess we really need to start planning for the major provisions to take effect in 2014.  Some were happy it was resolved and upheld just because there is now clarity and what has already been put in place will not be impacted.  Plus it will not throw the insurance markets in to disarray trying to adjust to any dramatic changes.  Others are still very concerned about how it will impact their businesses, especially in the winery/agricultural industry.  Yet another minority opinion was that they were ready to “throw in the towel” on providing health insurance and give cash to employees to “figure it out on their own.”

    Do you think the mandate, and the law in general, will do anything to help curb costs?

    Tough to say, but the overall sentiment is not much.  The way the legislation is designed, it seems like employers are going to be unfairly responsible for paying for a large portion of this country’s health care costs.  As written, it is very unlikely the gov’t can support the expansion of coverage and subsidies for individuals without having to increase the penalties for both employers and individuals.

    Now that the individual mandate is seemingly settled, what are employers looking to next as the Affordable Care Act plays out?

    As stated in the earlier answer, every one now needs to really dig in and better understand how this law will impact them starting in 2014.  18 months is not much time and the sooner you analyze its impact, you can try and be prepared.  2013 employee benefit program decisions should include a look ahead to how it plays out with provisions taking effect the following year.

    Shane Rogers

    Employee benefits consultant, Rogers & Young Insurance Services

    So now that the verdict is in, what are your initial thoughts on the ruling?

    I was a bit surprised, but not shocked with the ruling. There is still a level of uncertainty with the election, but employers will need to prepare for what lies ahead. Brokers will need to work closely with their clients to determine potential outcomes and how this may affect their benefits strategy.

    Will the Supreme Court’s decision to uphold the individual mandate do anything to stabilize employer sentiment on employee benefits? 

    If insurance carriers are forced to provide coverage for all adults in 2014, its very likely that rates will rise dramatically. There could be many employers that drop their health plan, but I think that employers competing for talent will need to maintain a comprehensive benefits package. 

    Do you think the mandate, and the law in general, will do anything to help curb costs?

    That’s a difficult question to answer and only time will tell if costs stabilize over the long-term. There could be a better effort by congress and employers to drive healthy behaviors. We are looking at ways to help our clients communicate with employees and focus on risk factors that affect their rates.  This can give them some level of control and improve costs over time. 

    Now that the individual mandate is seemingly settled, what are employers looking to next as the Affordable Care Act plays out?

    Now is the time for employers to focus on future changes and compliance requirements. They’ll have to assume the law will move ahead as planned and determine the direction of their benefits program.

    Victor McKnightVictor McKnight

    Principal, Edgewood Partners Insurance Center — EPIC

    So now that the verdict is in, what are your initial thoughts on the ruling?

    What a surprise. I sure didn’t see Roberts as the swing vote. The part of the ruling that provides the option for states to opt out of the Medicaid expansion will be problematic in states that choose not to implement it. It will mean more uninsured in those states. We will continue to see ACA as a highly politicized issue through the November elections and this won’t change. Repeal is a very slim possibility. The Republicans would need 60 senators, which is probably not realistic. However, if Romney is elected he could provide waivers for those states that do not want to implement the bill. California would not be included in this but there were 26 states involved in the lawsuit. 

    Will the Supreme Court’s decision to uphold the individual mandate do anything to stabilize employer sentiment on employee benefits?

    I think employers will continue to struggle with premium increases until we reform how we pay for health care and the overall health of our country. We really need to attack obesity like we attacked smoking in the ’70s. This single issue has the potential to cripple the system in the next 40 years. 

    Do you think the mandate, and the law in general, will do anything to help curb costs?

    The mandate is a key to the law but it may not have the impact we hoped. Many insurance experts feel that the tax is too small to motivate somebody to purchase health insurance. At 1 percent of income it may cost somebody only 10 percent to 20 percent of what health insurance would cost.

    If the mandate does prove to be ineffective, then individual rates could increase significantly. The subsidies will probably do more to stabilize rates as they will hopefully drive more young and healthy people into the system. A subsidy calculator can be found at kff.org.

    Now that the individual mandate is seemingly settled, what are employers looking to next as the Affordable Care Act plays out? . 

    It is now time for businesses to move forward on implementation. The DOL is auditing companies of all sizes and business owners need to make sure they have provided the required disclosures and kept accurate records. They will also have decisions to make, do we offer coverage at all or do we send our employees to the exchanges and if they are over 50 employees they would pay a fine of $2,000.

    I feel the vast majority of employers will continue to offer coverage, only those with a very high percentage of very low income employees will seriously consider canceling their coverage. 

    John FradelizioJohn Fradelizio

    Managing director, North Bay Employee Benefits at Wells Fargo Insurance Services USA, Inc.

    So now that the verdict is in, what are your initial thoughts on the ruling? 

    The outcome is not completely unexpected, but it was a bit of a surprise that the court used the taxing clause as the basis for upholding the validity of the individual mandate. While the decision has removed the legal uncertainty from health care reform, the political uncertainty remains, so I am sure that there will be changes in the months and years to come.

    Will the Supreme Court’s decision to uphold the individual mandate do anything to stabilize employer sentiment on employee benefits?

    As indicated above, it definitely removes some of the uncertainty for employers. But the fundamental questions surrounding employee benefits remain the same. And those are: “what, if any, group health benefits does an employer need to provide in order to attract and retain the employees they need to be successful as a business? And secondly, how do they do this in a way that is affordable, both for the employees and for the business?”

    Do you think the mandate, and the law in general, will do anything to help curb costs?

    Unfortunately, I am not very optimistic on this front. Health care reform was intended to:

    1. improve access to health care, and
    2. also assist in reducing costs.

    When it is fully implemented, it is projected to reduce the number of uninsured by 31 million or so (from approximately 54 million currently, but still leaving 23 million uninsured).

    So on the improving access front, it may be moderately successful. However, in terms of reducing costs, what we have seen thus far is that the legislation has actually increased costs, both for health insurance companies, as well as for employers in terms of increased premiums and administrative costs.

    Now that the individual mandate is seemingly settled, what are employers looking to next as the Affordable Care Act plays out?

    Now that the law has been upheld, it is pretty much “business as usual” for most employers. We have been preparing our clients for this law over the past 2-plus years, and we are encouraging them to be deliberate about things, not to over-react, and to develop strategies that will have the best possible impact on their company as well as their benefits programs.

    Jordan Shields

    Managing broker, Jordan Shields Insurance

    What are your initial thoughts on the ruling?

    We have long been preparing our clients for the eventuality of the final, formal rules supporting the Affordable Care Act. Neither the federal nor the state government have let up in reviewing, upgrading, clarifying and issuing formal procedures for following the rules that were laid out originally.

    All the Supreme Court has done is to validate the work the various committees, departments, and legislative analysts have already undertaken

    Will the Supreme Court decision to uphold the individual mandate to do anything to stabilize employer sentiment on employee benefits?

    The sentiment shouldn’t change, but it may if the costs devolve to the employer mandates may increase demand and may require higher employer subsidies of employee premiums. There is also a question of whether the Affordable Care Act will actually reduce costs, as being claimed by the government.

    There is considerable sentiment, based on both analysis and the initial changes, that costs under the ACA will cause health insurance premiums to rise. Further increases do not make employers happy.

    Do you think the mandate, and the law in general, will do anything to help curb costs?

    The short answer is no. There are many reasons, but as an illustration you have a number of economists pointing to the underlying internal costs of uncompensated care, which is supposed to be alleviated by the addition of so many people into the overall “pool.”

    The problem is that additional people also bring additional costs, both in general and due to the release of pent up demand. We learned this in 1966, a year after Medicare was instituted. More remarkably, the five-year estimate for the expected increased cost of health expenses due to Medicare was well below the actual increase — by over 1,000 percent.

    Now that the individual mandate is seemingly settled, what are employers looking to next as the Affordable Care Act plays out?

    They are looking to what was already in the schedule … perhaps not looking forward to it, but the timetables have not changed.

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    Comments

    1 Comment

    1. July 6, 2012, 10:58 pm

      by Frank Mayhew

      Contrary to the insurance company views there should be some reduction in hospital and physician costs. Palm Drive hospital, for instance budgets over $300,000 a month for charity care and bad debts. If these patients are insured, the hospital will not have to make up for these losses by charging other patients and insurance companies more. The same people that use the hospital emergency rooms for health care will see primary care physicians instead. The health of the currently uninsured will improve further reducing burdens to the system.

      What’s not to like, improved income, improved, improved health and lower total costs.


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