Healthcare: Now what?


In polls and elections, a majority of Americans said “No!” to federal healthcare legislation, but it passed anyway. Most still want it repealed, but the time has come to plan ahead and prepare for a very different future.

Even as lawyers and politicians consider “repeal and replace” reform initiatives, individuals and business must consider the impact of the new law and employers and benefit managers must move to implement.

Employers have two major needs. First, senior management must be alert to the many changes that are still likely to happen that may alter their strategic benefit planning. Second, benefit managers need to know what to do tactically today and tomorrow in order to prepare for the next open enrollment.

With so many uncertainties, creating a multi-year strategic plan will be tough. The legislation, developing regulations and interpretations of the law will take years to write, understand, clarify and litigate.

Aspects of the law start in 2010 and go through 2018 and beyond. Benefit managers’ day-to-day work will be defined by senior management’s strategic decisions and a focus on the effective dates for the various initiatives as set by the law.

For flexible strategic planning, there are four major phases to consider: Legislation, regulation, compliance and litigation.

Legislation. The confusing and sometime contradictory language of the hastily drawn law will likely require a large “technical corrections” bill this summer. In Washington, “technical corrections” can translate into entirely new provisions and mandates that were not a part of the original law. For example, the public option could return as a “technical correction; the devil is always in the details.

Regulations. The departments of Labor and Health and Human Services are hiring more than 700 new staff to write the regulations for the 2,700-page law. Their interpretations will not necessarily match a layperson’s understanding of the language.

The regulatory process is likely to be a nightmare of delays, missed deadlines and confusing interpretations. Scores of references are made to decisions by the Secretary of Health and Human Services, who has the discretion in major areas of implementation and coverage determinations for “essential benefits.”

Lobbyists will converge on bureaucrats to have their services included through regulation. Mandates are likely to go beyond what employer plans typically consider as medical/surgical benefits.

This was part of the ultimate demise of HillaryCare in 1993-94, when the plan details were debated as part of the legislation. This time the Congress deferred to the Secretary on those controversial decisions and the benefit-cost implications.

Nobody knows yet what will be included as “essential benefits,” therefore no employer can know the ultimate cost of coverage.

Expect added social welfare requirements, perhaps expanded transportation between office visits and daycare services for children while parents seek care.

New coverage may include additional home health services, school health services and personal care coverage.

Mandated preventive care may be expanded to include medications, tests, diagnostics and lab work beyond anything employer health plans previously considered medically necessary or appropriate.

For example, the Early and Periodic Screening, Diagnostic and Treatment service is Medicaid’s comprehensive and preventive child health program for individuals under age 21. Federal Medicaid regulations provide for early and periodic screening and diagnosis of recipients under age 21 to ascertain physical and mental defects, and provide coverable services to correct or ameliorate defects and chronic conditions found even if the service is not otherwise provided under the medical plan.

Compliance. Consultants and lawyers will find an expanded need for their services. Insurers will need to determine if they are in compliance with the products, pricing and coverage they market, then assure their employer policyholders that the coverage provided is in compliance with the new laws and regulations.

Self-insured employers will require compliance audits to assure required essential coverage and mandates are included. Each employee contribution will need to be measured against the government affordability standard. Each year will likely produce new regulations and changes that threaten employers with penalties and fines.

The employer penalty for not providing coverage in 2014 is $2,000 per full-time worker and is indexed in future years. Employee subsidies available in the government exchange may make it advantageous for employees to get coverage through an exchange; employers may opt to pay the penalty rather than provide costlier medical benefits.

Already, compliance issues are in play. By March 31, employers had to file any changes impacting their financial conditions with the Securities and Exchange Commission.

Employers providing retiree prescription drug benefits with a government subsidy (subsidies from the 1993 Medicare Modernization Act) to support continuation of retiree drug benefits were immediately impacted by the new law’s removal of that subsidy. At least 15 companies have announced non-cash charges of $2.8 billion as required by the Federal Standards Accounting Board ruling 106 (FASB 106).

More hits to employers providing retiree coverage may be on the way. If the required essential benefits package is richer than existing benefits and those benefits are carried into retirement, employers will face additional FASB 106 charges. Those charges must be posted as a liability as soon as the change is known.

Litigation. In the end, courts will decide. New laws require a period of adjustment that can take decades to sort out the meanings and conflicts of legal interpretations. Given the national impact and financial consequence of any single coverage requirement, every self-interest group seeking inclusion in the essential benefits package will push litigation to add or solidify their coverage demands, producing a vicious cycle of legislation, regulation, compliance and litigation.

It is only by working together and sharing experiences that these next years of change may even be manageable. The stress and strain on organizations and individuals will be significant.

This is an enormous undertaking of trying to effectively and efficiently move forward towards compliance. No one wants a team from the additional 16,000 Internal Revenue Service agents, who are being hired to monitor compliance with health reform, to show up on their doorstep.

[Ronald E. Bachman FSA, MAAA, is a Senior Fellow at the Georgia Public Policy Foundation, an independent think tank that proposes practical, market-oriented approaches to public policy to improve the lives of Georgians. He is also a Senior Fellow at the Center for Health Transformation, an organization founded by former U.S. House Speaker Newt Gingrich. Mr. Bachman worked as an outside expert with members of Congress and the Clinton administration during the 1993-94 health reform.]