The fact that the Patient Protection and Affordable Care Act provides health-care coverage to 30 million uninsured Americans is undeniably a good thing, agreed three experts during a panel discussion at the CFO Core Concerns conference in Baltimore on Monday. But the law comes at a price, they noted. Indeed, to pay for the cost of reform, panelist Thomas Mangan, CEO of Corporate Synergies Group, a health-care insurance broker, predicted there will be “a tax increase on everyone in this room, and every one of your employees by 2018.”
One major reason for coming health-care cost increases is a timing disconnect between when insurance companies must start covering people with preexisting conditions and eliminating coverage caps (which will increase insurers’ costs) and when individuals will be required to buy insurance (a boon for insurers). The disconnect means that in the interim, insurers are likely to pass premium increases on to corporate customers.
A big concern among corporate executives is the excise tax slated to take effect in 2018 — specifically, a 40% tax on annual premiums exceeding $10,200 for individuals or $27,500 for families. According to data from consultancy Towers Watson, more than 60% of large employers will hit those thresholds by 2018, assuming an 8% annual increase in health-care costs. There is also a significant administrative burden related to complying with the new law, which sets out various coverage thresholds and allowable cost-to-income ratios. For example, the “free rider” penalty imposes a fine on companies that make employees pay more than 9.5% of their income toward health care.
“At a fundamental level, you have to be creative” to cope with rising health-care costs, declared panelist Jeff Carter, CEO of Patients Without Borders, which works with companies to give employees a choice of overseas medical care. “Building in a 15% to 30% trend increase into your cost estimates is not very creative, and neither is asking your employees to pony up extra money to keep doing the same thing,” he said.
“There is a lot of opportunity for innovation” to keep health-care costs down, said the third panelist, Richard Grossi, CFO of Johns Hopkins Medicine, the teaching and research hospital affiliated with Johns Hopkins University. All three panelists urged businesses to start curbing costs now by implementing a mix of incentives, creative planning, and preventive care.
One practical innovation companies may want to consider is the return of work-site clinics staffed by company doctors or nurse practitioners, said the panelists. Having a primary-care physician at the work site usually encourages employees to seek care before conditions worsen and treatment costs and work absences rise. Smaller businesses that own or lease space in a large building may want to set up a shared clinic with the other tenants, suggested Grossi.
Similarly, Grossi said the best way to lower workers’-compensation costs is to put in place incentives that prompt employees to visit a doctor quickly before a condition or injury becomes more serious and workers are forced to seek long-term payments “on the indemnity side of the service.”