Category Archives: Unintended Consequences

How the Cadillac Tax will Affect all Makes and Models

I recently had a conversation with a Connecticut Congressional Representative staff member regarding the Affordable Care Act (ACA). Specifically, we were discussing the definition of small group employers, which currently means 2-49 employees, but beginning in 2016 will be expanded to 1-100. This change is receiving a lot of interest at the federal level as special interest groups look to postpone the change and/or push for the ability of each state to make their own decision. In our discussion, I shared with the staff member that I believe a greater concern, especially for Connecticut employers, will be the impact of the Cadillac Tax.

The Cadillac Tax is a 40 percent excise tax on high cost employer-sponsored health plans and is one of several financing elements of the Affordable Care Act. It is projected to generate $80-$120 billion in tax revenue and will take effect in 2018. The high cost thresholds have been set at $10,200 for individual coverage and $27,500 for family coverage. There is still final regulation work to be completed which is intended to include indexing of the thresholds in future years. Continue reading How the Cadillac Tax will Affect all Makes and Models

How Will Medicaid Expansion Affect Your Access To Healthcare And Who Will “Pay” For It?

The debate around Medicaid expansion is an amazing one which has been energized by the Supreme Court’s decision to allow each state to decide for themselves to allow for Medicaid expansion or not.

As the Social Security Administration explains in greater detail, Medicaid is a federally-state funded program administered by each state, which provides health care to impoverish, elderly and disabled citizens of the U.S. So, as a social issue, Medicaid expansion seems like a no-brainer…right? Expanding Medicaid will provide coverage for millions of uninsured American citizens who can’t afford to pay for their own care. Honestly, no one… and I mean NO one is against providing health care coverage for this uninsured population. The debate really focuses on how to do it.

Expanding Medicaid just happens to be one of the ways to accomplishing this goal. And it just happens to be the main element of funding for the President’s Affordable Care Act. But the consequences of increasing Medicaid without considering the program’s current structure and function might be more complicated than we now foresee.

Part of the fuel behind the partisan debate comes from how much Medicaid reimburses providers on a state by state basis (Please be aware that the chart below denotes data from 2008). In Connecticut Medicaid reimburses physicians at a rate of 63% of what private insurers pay whereas in our sister state of Rhode Island Medicaid reimburses at a rate of 29%. Increases in the number of people enrolled in Medicaid and lower reimbursement rates would result in a loss of revenue for the states. The President’s ACA will provide subsidies for those states that choose to accept Medicaid expansion to help make up for this lost revenue, however those subsidies will be substantially reduced after year two of the program.

Medicaid Reimbursement Rates by State
A map of Medicaid reimbursement rates across the country

Another concern is that if Medicaid is expanded and there are millions more suddenly seeking care, how will this affect access to primary care? On average less than 15% of a Primary Care Physician’s patients are enrolled in Medicaid, so most of the physician’s revenue is driven by reimbursements from patients enrolled in private insurance. As enrollment in Medicaid expands, the volume of Medicaid patients will increase. PCPs will be forced to make a very difficult decision about whether or not to accept these new Medicaid patients. Under this challenging economic scenario, many PCPs may choose to exit the market; which begs the question…Will there be enough Primary Care doctors to cover the millions of newly enrolled Medicaid patients? Many analysts agree that expanding Medicaid will put a tremendous amount of pressure on the Primary Care field, which will either drive PCPs out of business or force them not to accept or treat Medicaid patients.

If the Primary Care practices decide to treat Medicaid patients and accept their reimbursement rates, then they will most definitely have to find an alternative source of revenue in order to keep the doors open. The likely solution would be to seek higher reimbursements from those who have private insurance—which in turn would place pressure on health insurance companies to raise rates… once again.

Ron Theriault
Ron Theriault

Ron Theriault, Vice-President and Senior Practice Leader

Ronald Theriault specializes in the healthcare and public sector markets. Ron has more than 22 years of experience as a consultant in the insurance industry.  Elements of his work include managing RFP processes, developing annual budget projections, disciplined understanding of insurance underwriting, formulating progressive plan designs, creating collective bargaining strategies and providing expert testimony at arbitration hearings. Ron is an active member of the Connecticut Association of Boards of Education, Connecticut Association of School Board Officials, Connecticut Government Finance Officers Association and Connecticut Association of Healthcare Facilities.  He graduated with a B.A. in Mathematics from Bates College.


Will You Drop Your Coverage?

It’s the ultimate “unintended consequence”.

Beginning in 2014, the health reform law requires employers with more than 50 employees to pay a penalty if they do not offer health insurance coverage.  The penalty is:

(Total # of Full-time Employees – 30)  X $2,000 = Annual Penalty.

Additionally, employers who charge too much for coverage (defined as more than 9.5% of employees salary) and have employees who are thus eligible for a federal subsidy will pay a penalty that is the lesser of:

(Total # of Full-time Employees – 30)  X $2,000 = Annual Penalty, or

# of employees who purchase through Exchanges X $3,000 = Annual Penalty

Do the math on this for your organization.  Does this sound like a good deal for you?  How long do you thing the government can sustain this arrangement? What impact would dropping coverage have on your ability to recruit and retain employees?  What do you think your competition will do?  What will you do?

Age Wars: How Health Reform Pits “The Old” vs. “The Young”

First, kudos to the President and Congressional leaders for trying to fix the biggest public policy issue we have in America. Healthcare costs are up 131% over the past decade, while wages and CPI are up 28% to 31%. Thats a big problem. And with 78 million seniors getting ready to hit the Medicare sysyem, the problems will continue to worsen.

Their motivations to control cost, for the most part, are well intentioned and welcomed.  Or at least welcomed, for sure.

But like all things “health reform”, the devil is in the details.  And it is in these details that lurk the unintended consequences.

My beef today is with the fact that both the House and Senate bills shift enormous burdens on the younger generations. I’m not talking about taxes or deficits right now–that’s the down the line burden-I am talking about key provisions that limit the amount insurance companies can charge older Americans, and the ensuing cost shift to younger people.   Consider the 2 following provisions:

1. Both bills outlaw “preferred underwriting”; that is premium discounts for the young and healthy.

2. Both bills put limits on the premium ratio between age and demographic groups.  In the House it’s capped at 2 to 1, meaning a 64 year old can never be charged more than double what an 18 year old can be charged.  Actuarial estimates would put the actual cost differential at 5 or more to 1.

A study conducted by an evil insurance carrier (Blue Cross) calculated the premium effect to be more than 100% for younger healthier people.

Is it fair to shift this burden to the young in our workforce?  And how will this regulations make our older Americans feel? And what about businesses-is it fair to shift the burden from a restaurant owner with employees who average 30 years old to a machine shop that averages 55?  HOW MUCH OF YOUR PROBLEM IS MY PROBLEM?

If people–whether young or old—understood the impact of these regulations, they would be angry (young) and embarassed (old), I think.

What do you think about this? And what do you think your parents would have to say about it?