Tag Archives: American Health Care Act

Employer Health Care Benefits — Preparing for 2018


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I last wrote about health care in late March, shortly after the House of Representatives failed to bring the American Health Care Act (AHCA) to a vote. Since then, after a few amendments, the House did pass the AHCA, but with all the other brouhahas in Washington over the last few weeks, it’s questionable whether the Senate will get to health care anytime soon.

There are some good provisions in the AHCA as passed by the House. Among other things, the AHCA makes the following changes to Obamacare:

  • The individual mandate was repealed, as was the employer mandate;
  • The 2.3% medical device tax was repealed;
  • The net investment tax was repealed, as was the .9% Medicare high earner tax;
  • The Cadillac tax for expensive plans was delayed (and will probably never be permitted to take effect, since neither Republicans nor Democrats like this provision); and
  • Health Savings Accounts were expanded, effective in 2018

All of these provisions provide less government control over the health care marketplace. In the long run, these changes would generally be helpful for employers.

Still, as most people recognize, without an individual mandate, some incentive is necessary to get healthy people to opt into health insurance before they get sick and to maintain that coverage. The AHCA continuous health insurance coverage incentive replaces the individual mandate penalty. This incentive operates much like HIPAA certificates of coverage. As long as they do not let their health insurance lapse for more than 63 days, individuals cannot be charged higher premiums because of preexisting conditions. Moreover, the premium penalty for the first plan year cannot exceed 30%.

There is an exception to this 30% limit, but the exception permits insurers to charge late enrollees with pre-existing condition higher premiums only if the state has waived the community rating rule and the state has established a high-risk pool to help people with preexisting conditions fund their coverage.

The AHCA is far from a perfect bill, and it is likely to face substantial amendments in the Senate before it comes to a vote in that chamber. And Congress has many other priorities this session as well. So what will happen with respect to health care legislation by the end of the year is anyone’s guess.

Nevertheless, we are at the time of year when many employers are examining their options for health plans for their employees for the year ahead. What should employers do in this time of uncertainty?

Obamacare, the Affordable Care Act, is still the law, so until Congress acts, employers must comply with the mandates and reporting requirements. With the individual mandate in place, employees will want to know their employer-provided health care options in a timely fashion.

Moreover, although the Cadillac tax has been kicked down the road and its ultimate implementation is uncertain, avoidance of the tax—or preparation for it—will take time to structure.

For 2018 at least, the current employer responsibilities are likely to remain in place. Employers must continue to manage their benefit plans, tweaking them as makes most sense for their workforce. There remain many reasons why employers should support their employees’ health and wellness if they want to be employers of choice.

Employers, what concerns you the most about health benefits in 2018?

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A Retrospective on Healthcare, and Where Do We Go from Here?


800px-Capitol_Building_Full_ViewRegular readers of this blog know that I am not a fan of Obamacare. It is overly prescriptive, too costly, and has been poorly implemented. Readers also know that I have said from the beginning that it needed corrections.

I have never been hung up on whether Congress called it repeal or replacement, as long as our healthcare system was fixed . . . or at least improved.

In November 2013, I recommended the following reforms:

  • Put all forms of health insurance (employer-based and other) on an equal footing
  • Permit a wide variety of insurance plans, from catastrophic plans to high-deductible plans to those with varying levels of coverage and exclusions
  • Provide direct subsidies to the poor and seriously ill so they can purchase healthcare coverage on the open market
  • Repeal the individual and employer mandates

I said,

“In short, the type of healthcare insurance to buy should become a decision that individuals make, not the government. Insurers should be free to design policies that consumers want, and to price them at levels that are profitable. We should abandon the notion that the federal government knows what one-size-fits-all insurance programs are ‘best’ for Americans.”

The Republican bill that Congress could not pass, the American Health Care Act (AHCA), was far from perfect in addressing my concerns, but it addressed some of them. I thought it was better than the Obamacare statute as it exists now. Frankly, the fact that no one liked it made me think the AHCA was as good as we were going to get.

But it went nowhere. Apparently, the split between the ultra-conservative and the establishment branches of the Republican Party is wider than 218 votes, and no bill could bridge the gap.

As the Wall Street Journal stated on March 24, 2017, in The ObamaCare Republicans:

“[The AHCA] worked off the reality that the U.S. health system has changed under ObamaCare and thus an orderly transition is necessary to get to a free-market system without throwing millions off insurance. The GOP also is a center-right coalition with competing views and priorities. The bill had flaws but was the largest entitlement reform and spending reduction in recent decades.”

So, given that Obamacare needs reform, where do we go from here?

I don’t know.

HHS sealHHS Secretary Tom Price can work on regulatory reforms, but only within the confines of the Obamacare language. Some of the most pressing issues are part of the statute and cannot be changed (though the Obama administration delayed some of them, or gave exceptions, and perhaps the Trump administration will do the same). Some of these issues include:

  • The tax on medical devices
  • The details of the mandated benefits (“essential health benefits”)
  • The Cadillac tax on employer healthcare plans, which, if implemented, will suck in more and more employers over time as the cost of mandated benefits rises

The fundamental problem with healthcare in the U.S. is that most Americans have not paid the full cost of their care since the 1930s, when employers began offering medical insurance as a benefit. As with all consumer goods and services, Americans want high quality, high quantity, and low prices on healthcare. Any economist can tell you that you can’t have all three—two of the three is the best you can hope for. The ideal system is often a compromise on all three. When healthcare prices are artificially lowered for the consumer, they make irrational decisions on quantity and quality—overusing the system and expecting Cadillac care for Fiat prices.

In my opinion, our healthcare system will not be fixed until employer-based plans are no longer the preferred way of covering the cost. Don’t get me wrong, many employers do an excellent job of managing their healthcare benefit plans. But the distortion in the market caused by these plans is increasing and is only made worse by Obamacare.

The different tax treatment of employer-based premiums and premiums for individual plans is unfair. The proposed AHCA would have helped in that regard, though it wouldn’t have fixed the problem entirely.

As the Wall Street Journal editorial said:

“An ideal free health-care market is never going to happen in one sweeping bill. The American political system is designed to make change slow and difficult, thank goodness. Republicans have to build their vision piece by piece, carefully gauging how to sustain their policy gains politically—the same way Democrats expanded the welfare and entitlement state over the last century.”

I suppose that’s where we go from here.

What do you think?

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