By Dave Gardner
America’s financial dilemma with health insurance is intensifying despite a national debate and reported behind-the-scenes wrangling to get the ACA repealed and replaced before the president’s 100 days in office on April 29.
According to the Medical Expenditure Panel Survey (MEPS), the average annual premium for a health insurance plan in 2001 was $2,889 per employee which would total $3,886 after being adjusted for inflation. By 2015, this per-employee premium total had reached $5,963.
Deductibles are another alarming issue. The MEPS reported that the average deductible for an individual health insurance plan in 2001 was $446, which would total $597 after inflation adjustment, and $602 for businesses with fewer than 50 employees. During 2015, this average deductible cost had soared to $1,541 for all businesses and $1,964 for businesses with fewer than 50 employees.
The National Federation of Independent Business (NFIB) Research Foundation has reported that companies with more than 50 employees offering health insurance has remained steady at approximately 96 percent over the past 15 years. However, the number of companies with fewer than 50 employees that offer insurance have declined significantly.
According to the Bureau of Labor Statistics, insurance is now a very costly component of employee compensation packages. Private sector employer costs for insurance benefits average $2.59 per hour worked, with as much as 70 percent of health care spending attributed to employee behavioral and lifestyle choices.
Gene Barr, president and CEO of the Pennsylvania Chamber of Business and Industry, referred to the unfolding national health insurance debate as both simple and complex, but also exhausting to business. According to Barr, insurance is a finance player but health care is a delivery system, creating differing situations and goals for each side as annual price increases, insurance carriers drop out, pharmacology use escalates, and litigation and defensive medicine litter the road.
“Extensive pharmacology use is increasingly not a cure, just alleviates symptoms,” Barr. “This involves the use of long-term maintenance drugs, which is very costly.”
According to Barr, the health insurance debate, in its current form, will find no easy answers. Congressional attention has often been fixed on abolishing mandates and the limited effects of the Accountable Care Act (ACA), while the business community cries out for help with premium costs.
“Despite these cries for help from business, we are not hearing demands for a single-payer system,” Barr said. “Business does not trust government.”
Medicaid expansion is another costly issue which deeply troubles Barr. He explained that this social service program was intended to temporarily assist the needy for a short period of time, but has expanded into a huge and costly entitlement that government has not figured out how to pay for.
“Annual increases for medical insurance are also a major player in the country’s wage stagnation,” Barr said. “When you have high increases in policy costs, year after year, that are not passed along to the employees, it appears that salaries are stable when total compensation actually is escalating.”
The mechanics of America’s health insurance situation are now placing employers in a very bad spot, according to Roger Howell, owner of Howell Benefits. The vast majority of employers are not in the health care business, but large amounts of time, resources and money are being drawn away from business operations to insure employees as uncertainty increases about costs increases and administrative burdens for government regulations.
“The ACA moved dollars to the insurance companies, which may have been the best idea,” said Howell. “In particular, older workers who are unemployed with no insurance are getting clobbered with ACA policies and may wind up dumped into pools with inferior products. Expanding Medicare or competitive government options for high-risk would have been a better idea for this group of uninsured people.”
Howell also cited how President Trump promised insurance for everyone, which Howell finds interesting because a single-payer national system would greatly decrease administrative costs. The ACA addressed high policy costs with premium subsidies for the internet-based exchange products, but did not inspire overall health care costs to decrease.
Howell added that wage increases versus payment for rising policy costs is a dilemma virtually every employer is facing. Because wages are taxed and insurance coverage is not, payment for premiums gives employers better compensation value, which then must be communicated to the employee base.
Other facets of the health insurance debate, according to Howell, are not receiving the attention they deserve. Only 20 percent of his clients take wellness seriously, despite the fact that poor lifestyles and obesity drives up claims as carriers pull out of the market because of cost problems.
“Mental illness and addiction and among the top line items we are paying for with claims, making employer-provided EAP programs very important,” said Howell. “Most employers don’t emphasize these benefits as they should.”
As the insurance business evolves, Howell is marketing a new software product that is being utilized by major carriers such as The Harford. He said this product reduces weeks of administrative work to a matter of hours, making carriers more efficient with lower costs.
“This software creates quick information compiling and transfer to the carriers” Howell said.
Michael Costello, MBA, J.D., assistant professor of online graduate health administration and program director at the University of Scranton, said the current health care system including the ACA guarantees conflict because Washington is attempting to demand insurance through a government mechanism, despite America’s historic promotion of personal freedom. Coverage mandates infringe upon this freedom, but to make insurance work the system needs as many people as possible to be insured.
Costello also said that since the birth of Medicare and Medicaid in 1965, spending levels for the programs have changed and today Medicaid has become the costlier of the two. This reality must be part of any effective changes to the nation’s insurance system, particularly since 65 to 70 percent of Medicaid’s spending pays for nursing home costs.
“Today, 21 percent of the national population is involved with Medicaid,” said Costello. “That is an enormous number of people. Many of the conservatives believe we can eliminate costly coverage like this and our problems will just go away, but Medicaid cannot simply be eliminated.”
Dan Day, regional vice president of sales with Highmark, noted that health insurance and government regulation are old partners. From Medicare’s creation in 1965 to managed care of the 1980s to the ACA, Washington has had an active hand with similarities that mirror the evolving regulatory mechanisms in banking.
“What has recently changed is how much of the ACA regulations often fall upon the employer,” Day said.
In view of the fact that 160 million people are now insured within group plans and another 60 million are in self-funded organizations, Day agrees that use is the true regulator for insurance costs. Within this system, the business community desires financial stability and accessibility, but cost increases lead back to insurance utilization levels.
Unfortunately, the historic metrics of health care costs appear to be unsustainable. According to Day, during 1989 healthcare costs totaled 9 percent of payroll dollars and employers were expressing fear that costs would rise to 15 percent. Today, health insurance costs are consuming 20 percent of compensation packages, with the total varying by geographical region and the specifics of business cash flow.
“Management of insurance costs in the future are going to require some big societal decisions, including how to pay for the American lifestyle,” Day said. “Technology, pharmacology and insurance usage are all prime factors in cost formulas.”
With questions about Medicaid’s future a vital part of the health insurance debate, Day explained that the program has a fluid population of insured recipients unlike the numerical stability of Medicare. In addition, Medicaid was never intended to be a lengthy entitlement program for a recipient, but it has evolved into such a system making proposals to finance the program with block grants to the states questionable.
“The states would then find themselves in a situation of how to capture enough block grants to finance their programs,” Day said. “Medicaid was never intended to be a permanent program, but in states such as West Virginia it has evolved into just that.”
The promotion of good health to drive down insurance costs is of prime importance with the Geisinger Health Plan, according to Allison Hess, director of wellness programs. She explained how her organization offers a variety of programs such as employer-based health fairs and classes, plus phone and on-line coaching.
Geisinger also works with programs such as Medicaid and through a community outreach.
“Yes, wellness is effective in reducing claims which lower costs,” said Hess. “Employers often will struggle with employee participation, but to some degree the effectiveness of a wellness program is tied to the amount of incentives it offers to those who are insured.”
According Hess, a steep employee incentive for wellness participation can achieve 70 percent employee participation. As more dollars become involved employee interest increases and specific facets such as health fairs have been proven to produce better clinical metrics that include a lowered risk for stroke, decreased diabetes, successful tobacco cessation, improved cholesterol levels and reduced body mass.
“Wellness that is sustainable is vital if we are to lower insurance costs,” Hess said.
Band aid debate
Michelle Grushinski, past president of the NEPA chapter of The Society of Human Resources Management, said that, despite its intense nature, the debate about health insurance and the specific conflict involving the ACA has been largely a distraction. The conversation should involve ways to drastically reduce costs for health care and Grushinski sees no value in the leadership of President Trump because he has “no clue” what he is actually doing.
“To understand this very complex situation with health care, a person must have detailed information, which Trump obviously doesn’t,” Grushinski said. “He should have created a task force and utilized the expertise of the various think tanks, which he didn’t.”
The stagnant situation in Washington, according to Grushinski, is leaving business with no new options. Human resource managers must continue to vigorously negotiate policy price carriers, despite the fact that the carriers have limited economic room to maneuver.
Specific types of business, such as the temporary agencies, will continue to be hit hard in the ongoing environment. Businesses of 50-plus employees also are considering changes in personnel from full-time to part-time.
Grushniski noted that when a job offer is made, the cost of health care is included in the compensation evaluation and annual benefit cost increases are recognized as part of these forecasts as employers, by nature, try to keep their labor costs as low as possible.
“The fundamental cost for health care is the root problem and thats what the national debate should be about,” Grushinski said. “Business wants to be able to purchase health insurance that is a good value with adequate coverage, affordable prices and decent benefits, but increasingly this is no longer available because of increasing costs.”