Reacting to Reform

In the voluminous health-care reform law, CFOs see hope, uncertainty, and – above all – a giant omission.

For legislators, the long process of reforming the nation’s health-care system has finally come to an end. On Thursday Congress passed the reconciliation bill containing the final changes to the landmark Patient Protection and Affordable Care Act, which President Obama signed into law on Tuesday. But for finance chiefs, the process of determining what health reform means for their companies is only beginning.

Joel Quall, corporate controller at publicly traded Knight Capital Group, a New Jersey–based electronic trading services firm, says he has been talking with employees about how health-care reform is going to affect them. Some of the firm’s 800 U.S. employees are positive about the change. “People are relieved about being able to cover children up to age 26 on their plan,” says Quall. And the lifting of lifetime caps on insurance coverage resonates personally with Quall, who says he saw his late father worry about that issue through a wrenching series of cancer treatments.

But other employees are concerned that their premiums will go up, or worry about new individual taxes they may face. And when it comes to specifics, Quall, like most people, is at a loss to predict the future.

Action items are few and far between. “People have asked me, ‘Do we have a Cadillac plan?’” says Quall, referring to the high-value health plans that will eventually incur a 40% excise tax. “I’ve looked and I can’t tell if we do or not.” He says the company would likely adjust the plan’s benefits to fall below the trigger levels for the tax if the plan turns out to be a Cadillac plan. Beyond that, however, he’s planning to wait a few months before calling in a health-care consultant to assess next steps.

Meanwhile, even finance chiefs who are in favor of the reform say a key issue was left unaddressed: the rising cost of health care. “I can certainly see the benefits of making health-care insurance more readily available to everyone, and as a U.S. citizen, I’m glad to see that,” says Cal Stuart, CFO of water and air treatment equipment maker Rainsoft. But he adds that while the new law “addresses the area of availability, it doesn’t seem like it’s really addressed the issue we’re facing, which is the continued increase in health-care costs.”

When Rainsoft renegotiated its health-care insurance late last year, the Chicago-area private-equity-backed firm ended up with a 20% increase in costs to cover its 175 employees — and that was after negotiations. Stuart has scrimped on other areas of spending, including the company’s 401(k) match, in order to keep premium contribution costs flat for the company’s lowest-paid employees. Still, some of those employees have opted out of the plan, apparently going without insurance at all because it was too expensive.

Stuart sees the cost increase as a preemptive strike on the part of the insurance companies. “We feel that to a certain extent, we’ve already felt some of the impact of this reform,” he says.

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