Obamacare: From ‘no way’ to ‘now what?’
Many Americans said “No!” to ObamaCare in polls and recent elections from Virginia to New Jersey to Massachusetts. But, now it has passed. The majority of citizens still want it repealed. The anger and frustrations are unlikely to subside as some politicians are hoping. ObamaCare is now the law of the land. That may change with the pending constitutional challenges, but the time has come to plan ahead and prepare for a very different future. While lawyers and politicians consider “repeal and replace” reform initiatives, employers and benefit managers must move to implement.
Americans are law abiding, so individuals and businesses must consider what this legislation means, discover what options they have, and what actions are required under the law. 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.
It will be hard to create a multi-year strategic plan. There are too many uncertainties. 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. The tactical day to day work efforts by benefit managers 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. In Washington, technical corrections are not limited to a layman’s understanding of the words “technical corrections.” Politicians and special interests can use a technical corrections bill to pass new provisions and mandates. A technical corrections bill could include entirely new provisions not a part of the original law. For example, the public option could return as a “technical correction.” Look for a technical corrections bill this summer. Stay alert, the devil is always in the details.
Regulations. The Departments of Labor and Health & Human Services (HHS) are hiring over 700 new staff to write the regulations for the 2700+ page law. Their interpretations will not necessarily match a layman’s understanding of the bill’s language. The regulatory process is likely to be a nightmare of delays, missed deadlines, and confusing interpretations. In the bill there are scores of references to decisions to be made by the Secretary of H.H.S. Major areas of implementation and coverage determinations for “essential benefits” are left to the discretion of the Secretary.
Lobbyists from every provider and self-interest group will converge on the bureaucrats to have their services included through regulation. Ultimate coverage mandates are likely to go beyond what employer plans typically consider as medical/surgical benefits. We saw this in 1993-94 as part of the ultimate demise of HillaryCare. Back then, the plan details were debated as part of the legislation. This time the Congress deferred to the Secretary those controversial decisions and the benefit cost implications. As of today, nobody knows what will be included as “essential benefits.” Therefore, no employer can know what the cost of coverage is ultimately going to be.
Look for added social welfare requirements, potentially including expanded transportation to/from office visits and daycare services for children while parents seek care. Areas of added coverage may include additional home health services, school health services, and personal care coverages. 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 (EPSDT) 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. The intent of the program is to enable providers to assess a child’s health needs through initial and periodic examinations and evaluations, and also to assure that the health problems found are diagnosed and treated early, before they become more complex and their treatment more costly. Look for these types of benefits to ultimately make their way into the essential benefits mandates.
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 coverages they market. They will need to assure their employer policyholders that the coverages provided are in compliance with the new laws and regulations. Employers not in compliance will be subject to large penalties and fines. Self-insured employers will require compliance audits to assure required essential coverages 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 must meet with compliance standards or employers will suffer penalties and fines.
Employers will need to continuously assess the financial alternatives of directly providing medical coverage versus shifting employees to the government exchange. 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 exchange may make it advantageous for employees to get coverage through an exchange, and financially attractive for employers to pay the penalty rather than provide medical benefits.
Already compliance issues are in play. By 3/31/2010 employers had to file any changes impacting their financial conditions with the Security & 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 ObamaCare 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 what the language of the laws 2700+ pages mean. 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 wanting to be included in the essential benefits package will push litigation to add or solidify their coverage demands. The never ending cycle will then repeat itself, as new laws will be passed to respond to court decisions and off it goes again to repeat the four phases of legislation, regulation, compliance and litigation.
The insights and warnings above are not intended to create more confusion regarding how to deal with implementing Patient Protection and Affordable Care Act (PPACA). It is to help HR executives and benefit managers understand the bigger picture and the importance of strategic and tactical decisions. During these periods of uncertainty, it is more important than ever for benefit managers to directly share insights and understandings with others. Consultants will have plenty to do, but those information channels are not broad enough to get the insights and timely information needed to benefit managers.
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 door step.
Ronald E. Bachman FSA, MAAA, is a Senior Fellow at the Center for Health Transformation, an organization founded by former U.S. House Speaker Newt Gingrich. Nothing written here is to be construed as necessarily reflecting the views of the Foundation or the Center for Health Transformation or as an attempt to aid or hinder regulations or the passage of any bill before the U.S. Congress.