The bottom line for business owners is that the health care reform law will cost them more money, according to Ryan Mahoney, director of Public Policy for the Georgia Chamber of Commerce.
For more than an hour, Mahoney discussed the possible effects of the new law and painted a grim picture for business owners and patients alike. The Covington-Newton County Chamber of Commerce hosted the event at Georgia Perimeter College Tuesday morning as parts of its renewed effort to educate local businesses.
After the meeting, when Mahoney was asked if he expected any positive changes to come out of the new law, he said even the aspects that appear positive are expected to only increase costs in the long run.
Mahoney admitted he had not read the entire version of the final bill, but he said he read much of previous versions, read more summaries of the bill than he would care to count and has spoken to several experts who have read the whole thing.
History of Employer-Sponsored Health Care
Businesses are concerned about health care because they are the traditional health care providers and health insurance is often a leading cost, Mahoney said. He briefly delved into the history of employer-sponsored health insurance, tracing its prominent rise following World War II, when businesses began to try to compete for workers by increasing benefits instead of wages. This was done in large part because businesses that offered these benefits would get preferential tax treatment
Those first health insurance plans were simpler, covering fewer procedures and treatments. As rapid technological advances occurred existing procedures became more effective and expensive, and demand grew for an ever expanding range of optional procedures, including surgeries like Lasik. As these advances occurred, various groups would ask the state governments to mandate that these procedures be included in health insurance plans.
In recent days this phenomenon has seen the addition of treatments like physical therapy. Mahoney said the question becomes "Where does coverage stop?" Should personal trainers and other preventative steps be covered?
According to the Council for Affordable Health Insurance, there are more than 1,800 mandates nationwide.
A Broken System
He said the state chamber supports some type of reform, considering the fact that employer-sponsored health care costs have more doubled in the past decade. Double digit percentage premium increases have outpaced inflation, he said.
He said the chamber has lobbied state politicians to reduce mandates and return to a simpler, basic level of coverage. According to the CAHI, "While mandates make health insurance more comprehensive, they also make it more expensive because insurers are required to pay for care consumers previously funded out of their own pocket."
Mahoney illustrated the problem by giving the example of the celebrant monks at the Monastery of the Holy Spirit in Conyers, being required to pay for birth control and breast cancer coverage.
At the same time, Mahoney said federally-sponsored Medicare and Medicaid programs have also experienced significant growth. This is problematic for hospitals and other providers because the federal government typically reimburses providers for between 70 cents and 80 cents for every $1 of care given. The hospitals have to make up that cost by charging private insurers more money — private insurance essentially subsidizes government insurance.
Affordable Care Act
Congress’ goal was to make health care universal in the U.S. Mahoney said estimates put the number of uninsured Americans at 46 million, but he said of those, 10 million are illegal immigrants and 10 million could afford private insurance but simply choose to spend money elsewhere. These are the "20-something invincibles." Another 10 million people or so qualify for government coverage, but either don’t know it or have had a bad experience in the past.
He said that leaves about 10 million citizens who are too poor to afford coverage. He said the states could dedicate a high-risk pool to cover these individuals, but the new federal law does not do that. It continues to shift the cost to private insurers, by adding even more mandates and making everyone eligible for federal programs.
Mahoney said the plan will do this by setting up a health insurance exchange, which is a good concept. He said free market examples of this are sites that compare hotel and car insurance rates. Under the law, either the individual state or the federal government will set up the exchange. Georgia’s Insurance Commissioner John Oxendine has publicly stated his office will not set up an exchange.
Therefore the federal government will set up Georgia’s plan and will decide which insurance plans can be offered on the exchange. He said there are different levels of coverage that will be offered but they all have a fair amount of minimum coverage requirements.
A problem is that health savings accounts and flexible savings accounts, HSAs and FSAs, will likely not be allowed on the exchange despite their increased popularities. These plans have high deductible payments and lower premiums.
Once exchanges are set up in 2014, the same year most measures go into effect, employees will be required to purchase an approved plan — this is in the individual mandate. Otherwise, individuals will have to pay a fine. The government will provide short-term subsidies for many people, and this will tempt many people to switch from company-provided insurance to public coverage.
Effect on Employers
Mahoney said employers are not likely to be able to keep their current plan because the plans will become ineligible due to new regulations. This is despite the fact Congress said citizens could keep plans they like, he said. Plans would have to get rid of annual and lifetime caps on coverage and extend coverage to dependent children up to the age of 26.
The Caterpillar Company estimated that increasing coverage to dependents up the age of 26 would increase its costs by $20 million in the first year.
Businesses with more than 50 workers either have to offer coverage or pay a $2,000 fine per employee — the employer mandate. Mahoney said the Georgia companies on average pay $8,000 for family coverage, so the $2,000 penalty looks pretty attractive. Companies could even raise every employee’s wages by a couple thousand and still come out ahead.
"It’s a pretty harsh political calculus but one a lot of (larger) employers are looking at," he said.
Particularly the employees in the 50 to 250 employee range. The companies larger than that could have some exemptions, particularly those with existing union coverage, and smaller businesses will receive some subsidies. However, he said the $2,000 fine could increase or taxes could increase as the public pool increases.
Businesses under 50 employees can receive subsidies for 50 percent of coverage, but it’s a sliding scale, so the larger business the smaller the subsidy. Mahoney said it could be a detriment to expansion. In addition, the subsidies may not last forever, and health care costs may increase with the new plans, erasing the effect of subsidies.
Mahoney said the former director of congressional budget office estimated that 35 million of the 170 million people with employer-sponsored coverage could lose it over the next several years. Part of this is because very large companies like AT&T and John Deere have publically stated that they could lose from $100 million to $1 billion a piece.
As more people switch to government-sponsored programs, Mahoney said the best estimate he’s seen says costs could increase by $4 trillion to $6 trillion during the next decade. He said this would result in insurance companies being forced to limit coverage, because they couldn’t increase rates past a certain point. In addition, hospitals and doctors would continue to lose profits because they get less than $1 for every $1 of services to government patients. This could lead to a decrease in doctors he said.
According to Mahoney, much of the above won’t be fully determined until the 30,000 to 50,000 pages of regulations are written by the state and federal agencies that will be enforcing the law. These are expected to only increase administrative costs and potential fraud, Mahoney said.
He said the Georgia chamber agrees that changes need to be made, and he brought the conversation back to mandates. He said the state of Idaho had only 13 mandates. Maybe an exchange should be focused on that kind of system, he said. The success of health-savings accounts shows that these seem to be working as well, he added.
Newton Medical Center Administrator Jim Weadick said he believed the plan will erase citizen’s disposable income and cost them more than the health care is worth. He asked if it could be reversed and Mahoney said the results of 2010 and 2012 elections will answer that question. If the composition stays similar, Mahoney said he expected no changes would occur.
For more information on the effects of the health care reform bill and links to bill summaries from other sites visit gachamber.com/healthcarereform. The official government website, healthcare.gov, also contains a wealth of information.