What will employers do when health reforms kick in? - East Valley Tribune: Nation / World

What will employers do when health reforms kick in?

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Posted: Sunday, June 26, 2011 11:00 am

Several studies have snaked across the health policy landscape in recent weeks making assorted predictions about what employers will do after health reforms kick in come 2014.

One early June report based on a consulting firm's survey of 1,300 firms found that 30 percent expected to stop sponsoring a health plan after the national system of health exchanges is begun.

That phone survey was denounced by many reform supporters in and out of Congress, who noted it was based on a survey taken after questioners "educated" the respondents on details of the health plan.

Other earlier surveys that relied on more detailed sampling have reported a much smaller response from employers, and the consulting firm later conceded its work was a survey of attitudes more than a predictive analysis of economic behavior.

The reform law actually penalizes larger firms that drop health plans for their workers -- if their workers get subsidized coverage from the health exchanges. And the new law also offers some tax incentives for small firms to provide coverage.

Several other reports issued in mid-June also looked at the employer coverage problem.

One study from the Robert Wood Johnson Foundation noted that only about 61 percent of non-elderly Americans got health care coverage through an employer in 2009, down from 69 percent in 2000, and suggested that many who lost workplace coverage either turned to public insurance programs or had no coverage as the country entered recession.

And a study from the Urban Institute concluded that the health insurance changes would result in significant savings for firms with fewer than 60 workers, and would likely lead to about a 10 percent increase in the share of firms with 100 or fewer employees offering such coverage.

But coverage numbers mask another problem with employer-sponsored plans that may not be resolved by the reform plan -- workers are paying a much bigger share of premium increases relative to the overall rise in health costs paid for employer-sponsored plants in the past decade.

Data released by the federal Agency for Healthcare Research and Quality showed that average annual premium shares for workers rose by as much as 121 percent between 2001 and 2009.

The worker share of the average annual premium for an employee-plus-one plan rose 121 percent, from $1,070 to $2,363 over the 8 years, while the total cost for the plans rose by 66 percent, from $5,463 to $9,053.

Workers' share for a family plan rose 100 percent, from $1,741 to $3,474, while the total cost went up 74 percent, from $7,509 to $13,027. And workers with single coverage saw their premium share go up 92 percent, from $498 to $957, while the total cost of the plan went up by 62 percent, from $2,889 to $4,669.

It's not clear how much the health reform law will be able to do toward holding down costs in employer-sponsored plans. The law sets up a review process for any "unreasonable" annual premium increase - defined excessive, unjustified or unfairly discriminatory, or as more than 10 percent for now, with some lower thresholds allowed state-by-state.

However, the law gives neither federal health regulators nor state insurance commissioners any specific powers to block any rate increase - only a pulpit that they can use to force insurers to publicly justify an increase.

If the Centers for Medicaid and Medicaid Services, which is administering the reforms, decides a rate increase is unreasonable, the insurer can withdraw it, reduce it (subject to further review) or move ahead with the "unreasonable" increase while submitting a final justification to regulators. CMS would post the decision on its website.

Some state insurance commissioners do have powers under state law to block rate increases, but employer-sponsored plans that are "self-insured" or self-funded, or that operate in multiple states under federal rules, may not be subject to this regulation.

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