Even non-math wizards recognize funny numbers when we see them.
Since the passing of health reform’s Affordable Care Act (ACA), the estimates of U.S. employees losing employer-sponsored health insurance have been all over the board.
- A McKinsey Survey reported 30% of employers will definitely or probably stop offering employer-sponsored insurance in the years after 2014
- The Congressional Budget Office (CBO) Report released this month gives a worse-case scenario estimate of 20 million people losing their employer-sponsored insurance in 2019 and best-case of three to five million
- The Robert Wood Foundation issued a brief that concludes thorough analysis…supports the conclusion that the ACA, as intended, leaves employer-coverage intact
Combine an election year and statistics, and often the result is funny math.
Too many moving parts are missing from the equation.
Health Insurance Exchanges
Much of the statistical rolling of the dice comes from the ACA’s provision on health insurance exchanges.
- Federal subsidy – based on income, certain individuals are eligible for federal subsidies when enrolling in a health insurance exchange
- Employer penalties - ACA does not require employers to provide health coverage; however penalties may apply if they don’t offer coverage or if it is “unaffordable”
- Higher coverage costs - Analysts speculate that (for certain employers) paying the penalty is less expensive than paying for insurance
Enter the funny math.
Reports indicate the CBO analysis assumes employers will increase wages when they no longer have the expense of sponsoring health coverage. I don’t know about you, but I find that assumption highly suspect.
Do you really think an employer will take the entire amount saved per employee and increase the employee’s wage by that amount?
Any discussion regarding projected rate increases ought to come with a dartboard. Who can really predict with any certainty how much rates will increase from health reform fallout.
The CBO report assumes a slower growth rate for premiums than projected in its January 2011 report. To me, it appears premature to predict slower rate growth.
By the time 2014 rolls around, insurers will have more data on the true costs of various ACA provisions, such as:
- Dependent coverage for adult children
- Preventive services covered at 100 percent
Those mandates will not come without a price.
Employees Share of Premium Cost – Towers Watson estimates 66 percent of employers will increase employees’ share for single coverage and 73 percent will increase the employees’ portion for dependent coverage.
The Willis survey reports that nearly two-thirds of the responding employers expect increased employee contributions.
Increasing Out-of-Pocket Costs
The Willis survey shares that many employers are taking a wait and see attitude regarding health care reform.
That may be true, but the high cost of providing health coverage continues to prompt cost-cutting strategy. One popular approach is a shift to consumer-directed health plans, like health savings accounts (HSAs) with High-Deductible Health Plans.
- A recent Bloomberg report shows Bank of America had a 34 percent increase in the number of HSAs
- JP Morgan reported servicing 900,000 HSA accounts in 2011 versus 700,000 in 2010
Employers may not drop health coverage, but there is a definite trend towards increased out-of-pocket costs for their employees.
Adding It All Up
One of my favorite Mark Twain quotes summarizes this discussion quite nicely.
There are three kinds of lies – lies, damn lies, and statistics.
You can create towering sandcastles with statistics, but I think I’ll weigh these reports as I would a grain of sand.
Notice of Disclaimer –Cathy Miller is not an attorney and cannot provide legal advice. The information provided is for your general background only, and is not intended to constitute legal advice as to your specific circumstances. We recommend you review legislation with legal counsel.