Curmudgeon's Corner

A Bit 'Inside Baseball', But...

Posted by Al Campbell on May 2, 2012

U.S., Healthcare, Economy, Political, Quality of Life

As we wait for the United States Supreme Court to render its decision concerning the constitutionality of the Patient Protection and Affordable Care Act (a/k/a ObamaCare), a couple of studies have been done dealing with the aftermath of ObamaCare if it is permitted to continue largely as is.

The Fortune 100 companies were polled to determine what their response to PPACA would likely be over the course of the next few years.  There is a penalty assessed on employers who decide to drop their providing of health care coverage.  That penalty is basically a $2,000 per full-time equivalent (FTE) employee per year.  I have blogged before about the relative puny fine as contrasted with what employers are paying to provide health care coverage.

71 of these Fortune companies responded to requests of the Chairman of the House Ways and Means Committee and these were the take-aways:

#  these 71 companies, in the aggregate, could end the health care coverage and pay fines of $2,000 per FTE; this would result in savings to the 71 companies of a total of $28.6 billion in 2014, and a combined $422 billion over the period from 2014 through 2023.

#  ending these plans would throw some 10.2 million employees and dependents into ObamaCare through the ‘exchanges’ that have been touted as the way people would find their health care plans in the future.

The idea that something costing an employer in the range of $10,000 per FTE per year, or more in many cases, would be continued when the employer could reduce that expense to $2,000 per FTE per year is not something we’d want to bet against occurring.  It is true that some of those employers would resist such a move, but the building momentum of these changes happening would likely make the remaining employers react similarly just to stay competitive.

I seem to recall that our President said that if we had health care coverage we liked, we could continue to have that plan.  It doesn’t track with the realities that are created by the way in which this Act was written; and, those who wrote it are bright enough to have known what was contained even though Rep. Pelosi’s soon-to-be infamous plaint that “we have to pass it so we can find out what’s in it” still rings in my ears.

An alternative existing today would be the use of what is called ‘self-funding’ meaning that the employer actually has responsibility for a level of its own claims rather than an insurance company having that risk in exchange for the premiums paid by the employer.  Many, if not most, large employers have used self-funding for quite some time, but the use of that approach by smaller employers has been more sporadic.  That has been changing in the past few years as stop loss insurers have been more and more willing to write their policies in a way to limit the employer’s risk to a lower level of claims cost thus making self-funding a better arrangement for that group of employers.

These self-funded plans are regulated under a law put into place in the early-1970s called ERISA (Employee Retirement Income Security Act) and, as it stands today, would not be subject to ObamaCare.  Thus, these ERISA plans would be very attractive as an alternative to ObamaCare.  We should have known, though.  There are now reports of people exploring the possibility of requiring that stop loss insurers be prevented from establishing the lower ‘attachment points’ that would make self-funding attractive to smaller employers, thus compelling them to stick with ObamaCare requirements.  If that were to happen, then many smaller employers would be forced to drop their plans and pay the fines which would keep them in better financial positions.

When one considers that the provision of health care plans is often the second or third most costly item in a company’s budget, we can better understand the decisions confronting employers no matter how much they would dislike needing to make such decisions.

All of this would serve to bring us closer and closer to a ‘single-payer’ plan such as our President said he wanted while he was campaigning for his first term.

Shame on us if we select him for a second term.