With Speaker of the House Paul Ryan's concession that "Obamacare is the law of the land," Republican plans for health care reform appear to be on pause, at least for the time being—leaving businesses to reckon once again with the status quo, unless rumors about renewed party efforts materialize.
Yet, for many businesses, the state of the 'status quo' remains an open question. Many are concerned about the state of the individual health insurance marketplace instituted by the Affordable Care Act (ACA or "Obamacare")—some, including the president, have predicted its imminent collapse—as well as about the rising costs of health care, in general.
With relative normalcy returning to health care, here's what businesses may want to know about the ACA, as well as other health care changes that may warrant a closer look in the months ahead.
How are ACA marketplaces actually faring?
The ACA's individual health insurance exchanges—which help provide health insurance plans for, according to the Department of Health and Human Services, roughly 11.4 million people who don't receive coverage from their employer or the government—have been publicly described as rapidly deteriorating. The truth, as always, appears to be more complicated.
The Congressional Budget Office (CBO), for one, recently predicted that the individual market will be stable under current law. Financial intelligence company Standard & Poor's (S&P) similarly estimated that ACA markets will have been stronger in 2016 than in 2015, and that in 2017, a number of participating insurers will begin to break even or see profitability.
—Mary Wilson, MD, executive medical director and president, The Southeast Permanente Medical Group
"As with any newly created benefit or program, it takes time for insurers to get comfortable operating in different markets and a modified regulatory environment," explains Mary Wilson, MD, executive medical director and president of The Southeast Permanente Medical Group. "But recently, insurers participating in these insurance exchanges have begun to really understand their ACA membership and price appropriately. The markets are stabilizing, and as the ACA matures, it will continue to become more predictable. This year, it looks like the ACA marketplaces are, in large part, stable when it comes to premium and choice. And from a clinical perspective, one of the most effective things we can do to reduce costs and encourage a high-functioning health care system is to ensure continuous coverage, particularly for the chronically ill and those with complex conditions."
For businesses, this may be heartening news. Even so, there are genuine concerns. As the American Academy of Actuaries observes, affordability remains an issue for many individuals, due in part to lower-than-expected enrollment in certain areas, causing insurers to hike premium prices in response to unhealthier, costlier insurance pools. Especially hard hit have been individuals with incomes above or near 400 percent of the federal poverty level, the qualifying limit for federal health subsidies, notes the Harvard Business Review.
In other areas, a lack of participating insurance companies had left both scant optionality for insurance shoppers and reduced market competition, further contributing to market unpredictability, reports the New York Times. Adding to concerns, Humana recently announced its exit from individual insurance entirely, according to Forbes, while other large payors, such as Anthem, have to yet commit to participating in ACA exchanges in 2018, notes Consumer Reports.
"Still," says Wilson, "the assumption among insurers who still play in the ACA is that it won't implode in 2018."
How are employer-sponsored health markets doing?
The small group market, including the ACA's SHOP marketplace, where businesses with fewer than 50 full-time equivalent employees (it varies in some states) can purchase health plans, appears to be faring better.
"There just aren't a lot of complaints about the small market, especially compared to the individual market—it's been doing reasonably well," observes Timothy Jost, J.D., a leading scholar on the ACA and professor emeritus at the Washington and Lee University School of Law. “There was the expectation that small employers, in particular, would drop coverage. Some have, but not nearly to the extent that was expected."
In general, premium prices for employer-sponsored care have advanced more slowly during ACA years (after 2010, essentially), than in years prior. For example, while premiums for family plans grew 63 percent from 1999 to 2005, and 31 percent from 2006 to 2011, they grew just 20 percent from 2011 to 2016, according to Kaiser. Last year, employer-sponsored premiums were up 3 percent from 2015. In general, premium increases tend to outpace both inflation and wage growth, as Kaiser notes.
While the current state of slowed premium hikes is likely due to a variety of factors, it can be another reason for businesses to maintain their current course and encourage employee enrollment. "If people are not incented to sign up for employer coverage, then the employer risk pool starts to look like the individual risk pool," says Jost, referring to overall costlier membership. "That's not where employers want to be."
Two Other Changes to Keep an Eye On
Still, providing health coverage to employees can be quite expensive, especially for small businesses. Below are two recent health care changes that could come to affect costs for some businesses—regardless of Republican plans to legislate health care reform.
1. Qualified Small Employer Health Reimbursement Arrangements
One point of relief may come in the form of Health Reimbursement Arrangements (HRAs), which, originally banned under the ACA, were recently revived with the passage of the bipartisan 21st Century Cures Act, which passed in late 2016. HRAs essentially allow businesses with fewer than 50 employers to allocate funding for employees' individual health coverage or medical costs.
"For businesses that are in that 10, 15, 20 employee range, it's something they should take a hard look at," says Marcus Wilbers, J.D., vice president of compliance consulting at J.W. Terrill. "It's a way to offer a benefit to employees without offering a health and welfare plan and taking on the obligations that come with that, such as providing required notices, summary plan descriptions or COBRA continuation."
2. The Shift Towards Value-Based Payment Models
As a longer-term trend, there is a shift away from current fee-for-service payments in U.S. health care, which could eventually come to reduce the costs passed on to employers. While current models reward volume, on a cost-per-drink-type basis, value-based payments reward a higher quality or value of care delivered by health care providers. Medicare is leading the charge on this front, having just changed its Part B payments this year, following the bipartisan passage of MACRA, a comprehensive but little-known health care law, in 2015.
"Fee-for-service payment models can sometimes incentivize the use of more health services than necessary, which doesn't always add value for the patient or the system, but can significantly drive up costs," explains Wilson. "If the trend towards value-based care really takes hold, it could lower costs, while improving overall quality."
Trends like these remind us that there are numerous factors involved in the overall costs of health care—beyond the strict manner in which health insurance is bought and sold. Still, the primary way that Americans are insured isn't likely to change soon, even if politicians take action on reform. Says Jost: "For the foreseeable future, we're going to continue to depend on employer coverage as the bedrock of health care coverage in this country."