The Future of Health Insurance
Representatives from two top local insurance firms talk about how they see things playing out and what that means for business.
President Trump commented last month that healthcare is “an unbelievably complex subject. Nobody knew that healthcare could be so complicated.”
He was right on the first part — the nation’s health laws are extremely complicated. As for the second part, ask anyone who makes a career out of deciphering health insurance law, making sure businesses are in compliance with health insurance law, or an employee trying to select the best plan for their family — they know how complicated health insurance can be.
Those complex health insurance laws have undergone more changes in the last five years than in the last 20. From the rollout and implementation of the Affordable Care Act, to the pending changes under the Trump administration, it’s a tumultuous landscape. Biz New Orleans reached out to Scott Moak, executive vice president of Ross and Yerger, and Catherine Hales, producer for the Life Health and Benefits division of Gillis, Ellis and Baker, to help readers navigate the uncharted territory of health insurance changes in 2017.
As President Trump follows through on his campaign pledge to repeal and replace the Affordable Care Act, (a.k.a. Obamacare) the health insurance landscape is beginning to come into focus. “With the President’s address to a joint session of Congress [last month] things begin to take a bit better shape,” says Moak. “Albeit the law is the law, and nothing has changed to this point.”
Catherine Hales agrees. “The first draft of the legislation from the House to replace Obamacare was leaked to the press, so we sort of have an outline of what they would like to change. Some of these things were tried in the past, but were vetoed by the president [Obama]. So we think now that there’s a Republican in office, a lot of those things will get passed.”
If he had to guess, Moak says he’d predict the most likely changes to health insurance in 2017 to include the addition of a tax credit system to help individuals without access to employer coverage, an emphasis on higher deductible plans to include health savings accounts (HSAs), pressure to eliminate the employer and individual mandate (including a repeal of Affordable Care Act penalty taxes) and a rollback of the Medicaid expansion.
The Affordable Care Act includes tax credits for individuals who don’t have access to employer coverage. These credits are designed to help individuals and families with low-to moderate-incomes afford health insurance purchased through the Health Insurance Marketplace. Currently, you have to file a tax return to be eligible for the tax credits. Moak says he could see this changing.
“In the future, potentially, one option would be to make these tax credits or subsidies based on age,” he says. “The older you are, the more subsidy you would be eligible for, because healthcare becomes more expensive the older you get,” he says. “They could expand on that even further to include pre-existing conditions or high-dollar claims.”
Expansion of Health Savings Accounts
A health savings account is essentially a tax-free way to fund medical expenses, Moak says. Unlike a flexible spending account or FSA, which has an annual contribution limit, and a “use or lose” caveat, an HSA has an annual contribution limit, but not a limit on how much you can accumulate. The funds roll over at the end of the year, and the accounts are only available to those enrollees with qualified high deductible health plans — a trifecta of high deductibles, high out-of-pocket payments and a high maximum out-of-pocket requirement.
“I think you’ll see some of that loosened up, and see an emphasis put on employers and employees creating health savings accounts — even funding them for, or on behalf of employees, to free up dollars,” Moak says. “The benefit of a health savings account is you hopefully make wise healthcare decisions on how you spend your dollars: For example you would stay out of the emergency room for non-emergency situations. You would use generic drugs when they’re available. All of these things promote better healthcare decisions and if you’re paying for it with your money through an HSA, rather than a co-pay, then you hopefully become a better consumer of healthcare because they become your dollars you’re spending.”
Restrictions on eligible medical expenses for HSAs are likely to relax too, according to Hales. “They’re going to bring back over-the-counter medication as an eligible expense,” she says. “So where for a few years you couldn’t buy Tylenol with your HSA account, now you would be able to do that.”
The goal for HSA changes, Hales says, would be to drive down premiums through less spending. “Funding of the HSA — which has a built-in tax incentive — would help an individual be able to save for, and afford, a higher out-of-pocket cost in the event they had unexpectedly high claims.”
Eliminating the Mandate
The ACA requires any business with two or more employees to offer an employer-sponsored healthcare plan; enrollment in the marketplace is mandatory for individuals who don’t have employer-sponsored insurance. Those who don’t comply are hit with a tax penalty. Republicans in Washington have targeted this requirement from the beginning; it was one of the key components of Obama’s legislation.
“Before the mandate, employers chose to provide group health insurance as a benefit of employment, not as a mandate,” says Moak. “When it’s mandated, with all of the essential health benefits that are included with offering coverage, it becomes very expensive. No employer wants to be subject to an IRS penalty for not doing it, so they provide the insurance and the cost of everything they do goes up.”
Hales agrees. “The penalty was not a deductible business expense, like an employer health plan is, but oftentimes the cost of having an employer health plan to cover your employees was more expensive than the penalty.”
Both Hales and Moak say eliminating the mandate will be a welcome change for employers who will again have the option of purchasing health insurance because they want to, not because they have to. But eliminating the mandate will likely leave many workers unsure of their options, and eliminating the tax penalty means less money for programs.
One of the most controversial aspects of the ACA was the Medicaid expansion, which gives states the option to make Medicaid available to a larger population and receive federal funds in return. This plan was designed to bridge the so-called “Medicaid gap” — those who made too much money for Medicaid, but not enough money to qualify for an ACA subsidy, and therefore unable to bear the financial burden of health insurance.
Thirty-two states and the District of Columbia expanded Medicaid under the ACA. According to the Kaiser Family Foundation, about 11 million Medicaid enrollees in 2015 were newly eligible adults in the expansion group. Louisiana accepted the expansion, taking advantage of the federal contribution, when Gov. John Bel Edwards was sworn into office in January 2016.
The implications in Louisiana are unclear at this point, but so-called “safety net” hospitals in Louisiana stand to lose millions in state and federal funding if the Medicaid expansion is rolled back.
Navigating the Waters
Even though the health insurance industry is wading through uncertain times, Moak says many insurance brokers and business owners are optimistic that changes to the ACA will be pro-business. He says partnering with a consultative broker will help steer your company in the right direction when it comes to accomplishing three key health insurance goals: cost containment, liability reduction and improvement in operational efficiencies.
Did You Know?
Combating the High Cost of Insurance through Workplace Wellness
According to Rhonda Bagby, market vice president for Humana, insurance costs account for 7.6 percent, on average, of an organization’s budget.
“Employers struggle with rising healthcare costs, and there is a correlation between employee well-being and employee productivity, so we continue to see increasing interest from employers in workplace wellness programs,” Bagby says.
More than two-thirds of U.S. employers offer some kind of workplace wellness program, and according to the 2017 Medical Plan Trends and Observations Report, 58 percent of health plans in 2017 offer some type of wellness incentives — up from 50 percent in 2016.
The Centers for Disease Control reports that productivity losses related to personal and family health problems cost U.S. employers $226 billion annually.
“Employers understand there is a connection between productivity and business results and the health of their workforce,” Bagby says.
Humana recently concluded a three-year impact study of its own wellness program, Go365, and found that members engaged in the program had less absenteeism, lower health claim costs, and less emergency healthcare consumption than employees not involved in the program.
“Our return on investment study with the Go365 program has produced a really good story around the positive results that employees and employers can get from the program,” Bagby says.
There’s also a direct financial impact. Companies can save money on insurance premiums when their employees are actively involved in workplace wellness programs, lowering costs and making it more likely that employers can keep good, affordable benefit packages in place for their employees.