With an estimated 46 million uninsured people, reduced employee coverage, increased deductibles and inadequate reimbursement, America’s health care is a subject of great debate.
Research estimates that in 1970, U.S. health care spending totaled about $75 billion, or $356 per resident. Contrasted with projections suggesting that by 2018, U.S. health care spending will total more than $4.3 trillion dollars – or $13,100 per individual – it’s clear that the current pace of health care cost increases isn’t sustainable. (See the graph to the right for per-capita health care costs.) Since 1970, health care costs have risen 2.4% faster annually than the gross domestic product (GDP), and employer health care costs are expected to rise about 9% in 2010.
Clearly, something must be done. While the need for action is obvious to all constituents – including the government, insurance companies, hospitals and doctors, employers, employees and consumers – the complexity of the health care reform puzzle makes creating a resolution very difficult. The Senate Health, Education, Labor and Pensions (HELP) Committee, the Senate Finance committee and the House of Representatives Tri-Committee are all attempting to piece together a solution to our health care problem.
One of the primary points of contention is whether a health care overhaul should include a public option. A public option would enable the federal government to offer its own health insurance plan, which would compete with the plans offered by private insurers in an effort to expand insurance coverage to more Americans. If a public health care plan is created, its premiums could be approximately 10% less than those of private insurance carriers for similar plans. While some feel a public option would be a positive change and could stimulate competition among insurance companies, others feel it could undercut private insurers and burden the federal government with unsupportable cost.
Other ideas under consideration are being watched even more closely by American employers. While “socialized medicine” – a complete overhaul of the U.S. health care system – is essentially off the table pending legislation includes requirements for all individuals to procure health insurance coverage or face tax penalties. The flip side of the same coin offers tax credits to individuals to purchase coverage. Other key provisions include minimum standards that all plans must meet, and restrictions preventing health insurance companies from excluding individuals with pre-existing conditions.
Employer responsibility is a notable part of each of the main proposals currently under consideration. The House and Senate proposals (as compared by the Kaiser Family Foundation) all include employer “play or pay” mandates that require employers to provide health coverage for employees or pay “assessments,” or penalties. These mandates would also require employers to subsidize 50-72.5% of employee-only premiums. Only the Senate Finance Committee’s proposal offers an option without a “play or pay” provision. According to these mandates, companies not providing workers with coverage would be required to contribute as much as 8% of their payroll toward government-administered funds designed to help employees purchase insurance, with exemptions or reduced penalties for some small businesses. Unsurprisingly, many employers are not in favor of this part of the legislation currently offered.
In fact, according to a 2009 Aon Consulting poll of over 1,000 benefit managers, compensation and benefit leaders and senior HR representatives, 63% of employers oppose an employer mandate that requires them to sponsor group health insurance, a clear indicator that employers want the freedom to design their own health and benefits program. In addition, if Congress modifies the ERISA preemption, health benefits could become more costly and difficult for many employers to provide to their employees, since it would limit or prevent the ability of multi-state employers to offer a single health plan to all of its employees.
The proposals under consideration also include subsidies for small employers offering employee health coverage, based on the number of employees in the company and their average earnings. The subsidies could match the required 50% minimum employer premium contribution in the Senate Finance Committee’s proposal, or up to $1,000 per employee with single coverage in the Senate HELP bill. They would offset some of the costs of required coverage to small businesses, but would, like the employer-mandate penalties, be phased out as employer size and average salary increases. The Senate HELP and House Tri-Committee bills also include reinsurance for employers offering coverage to employees ages 55-64. The ultimate cost or benefit to small employers will be difficult to predict accurately until the proposals’ details are solidified.
However, the results from Aon’s survey also indicated that the majority of employers surveyed agree with lawmakers that small businesses need a better way to buy health insurance. As it stands now, small companies may be given an option to “shop around” for affordable plans through a Health Insurance Exchange, aimed at reducing administrative costs and offering a variety of plan options that meet the soon-to-be-set minimum benefit standards.
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