While many people who buy health insurance in the individual market, and their advocates, are seething over the Senate’s proposed health-care bill, those representing corporate interests are mostly pleased with it.
The Senate is scheduled to vote on the bill next Friday, June 30. If it passes, the House could then decide to support the Senate health bill or force the creation of a conference committee to reach a compromise between that bill and its own version of the proposed law. While the legislation wouldn’t repeal the Affordable Care Act (ACA), it would largely render it moot.
Passage in the Senate is up in the air, as at least four Republican senators have said they are not ready to support the bill. The bill will fail if just two of them decide not to vote for it if, as expected, Democrats remain fully united in their opposition.
Notably, the bill would roll back the expansion of Medicaid provided for under the ACA and further cut funding below pre-ACA levels. Factoring in those cuts, plus the loss of insurance by many lower-income people who would lose subsidies that currently allow them to buy coverage from the federal or state-run exchanges, the Congressional Budget Office has projected that the House version of the bill would cause 23 million people to become uninsured over the next decade. The CBO’s score of the Senate version is expected next week.
Former President Barack Obama expressed the essence of the individual-market objections to the Senate proposal in a Facebook post on Thursday: “The [bill] is not a health care bill. It’s a massive transfer of wealth from middle-class and poor families to the richest people in America. It hands enormous tax cuts to the rich and to the drug and insurance industries, paid for by cutting health care for everybody else…. Small tweaks … under the guise of making these [House and Senate] bills easier to stomach cannot change the fundamental meanness at the core of this legislation.”
Those on the corporate side indicate that they, too, are worried about the individual market. “There are definite concerns for employers who have retirees, because a lot of people on the [federal and state-run] exchanges, which are collapsing before our eyes, are early retirees,” says Steve Wojcik, vice president of public policy for the National Business Group on Health, a coalition of about 425 large employers. “The concern is also for part-time workers and any full-timers who don’t have access to coverage.”
To answer that concern, the Senate bill includes an allocation (some may call it a bailout) of some $112 billion through 2026 to stabilize insurance markets. “We want a healthy individual market because of the potential for cost-shifting to employer plans if it stays unhealthy,” says Geoff Manville, government relations principal at Mercer, which provides benefits consultation to employers.
On the other hand, a Mercer blog released on Thursday notes that the Medicaid cuts themselves provide reason to anticipate cost shifting to group plans “as the number of uninsured rises and federal spending contracts.”
Indeed, there are aspects of the bill — rendering the individual mandate moot by eliminating the penalties for noncompliance, as well as the lack of a continuous-coverage provision — that could destabilize the individual market to some extent. “If people aren’t required to buy insurance, that potentially gives rise to fewer people having coverage and creates a risk-pool issue as well,” Manville says.
Also of potential concern, he adds, is a provision that would let state governors set health-care reforms without the need for laws passed by state legislatures. States might then find ways to tax multi-state employer plans or mandate certain elements of plan designs. “Those would be problems for employers, and I think some states may well move in those directions,” says Manville.
Still, from an employer’s viewpoint, the bill’s advantages outweigh all such considerations, according to both Manville and Wojcik. “On balance, I think it’s fairly positive for employers,” Manville says.
Like the House bill, the Senate proposal would delay for five years, until 2026, the implementation of a huge excise tax on employer health plans provided for under the Affordable Care Act.
That so-called “Cadillac tax” would “raise costs for employers and the 178 million employees and dependents that rely on employers for their coverage,” Wojcik says. “For those people and their employers, the excise tax doesn’t improve the effectiveness or efficiency of health-care delivery. It just throws more money into an ineffective system.”
The lengthy delay for the tax was a relief, Manville notes, as there had been concern that its implementation date might actually be moved up to help pay for the bill’s costs.
The bill also eliminates a number of other taxes that employers say have been thorns in their sides. These include taxes on fully insured health plans, prescription drugs, and medical devices, as well as the health insurance tax that was scheduled to take effect in 2018. Some of those taxes are levied on insurers but generally are passed through to group plans.
“Ultimately it is consumers, including employers, who pay taxes on health-care products and services, and on average, businesses pay about 80% of health care costs for their employees and dependents,” says James Gelfand, senior vice president of health policy for the ERISA Industry Committee, an affiliation of about 100 companies. “Thus, elimination of taxes on fully insured health plans, medical devices, and prescription drugs will reduce costs for employers.”
Further, employers would no longer face penalties for not providing affordable or minimum-value coverage, as stipulated under the ACA.
Also, the bill includes no limit on the tax exclusion for employer-provided health benefits, which was an element of an early version of the House bill.
Other company- and employee-friendly provisions of the bill:
- An increase in the allowable amount contributions to health savings accounts (HSAs), to almost double their current levels. That would be especially good for employees nearing retirement, as unused contributions can still be used to pay for health costs in retirement.
- An allowance for spouses to make catch-up contributions to HSAs.
- Support for coverage of over-the-counter drugs under group plans.
- Elimination of the ACA’s cap on flexible spending arrangements.
The bill retains popular ACA market reforms like dependent coverage to age 26, no annual or lifetime dollar limits, and no pre-existing conditions limitation. Under the House bill, however, states can get permission to let insurers charge more for some pre-existing conditions and to exclude some people altogether, according to NPR. The Senate bill would enable states to ask permission to reduce required coverage for pre-existing conditions.
But for Wojcik’s part, the new legislation, like the ACA, does not address the most important issues with regard to employers’ health-care costs.
“Real health reform has never been the focus of either the ACA, and it’s not the focus of this new bill,” he says. “Both focus on coverage and how to pay for it, which means taxing some to pay for coverage of others. There is more than enough money flowing through the system to cover everybody. It just needs to be allocated better. This should not be solely about expanding coverage and then figuring out how to pay for it by taxing people.”
For now the big targets should be “driving out the inefficiencies that arise from the fact that we largely still have a legacy fee-for-service system that encourages waste and redundancy, as well as the high and ever-rising prescription drug prices,” says Wojcik.