The health care reform legislation signed into law by President Barack Obama will have significant effects on providers, insurance agents, brokers, employers and consumers, but a panel of experts in the field recently disagreed about the scope and extent of that impact.
The law includes numerous provisions that either have or will take effect in the next four years, including expanding coverage to more individuals, eliminating denial of coverage due to pre-existing conditions and establishing health care exchanges in each state.
The Rauser Agency Inc., in partnership with the Metropolitan Milwaukee Association of Commerce (MMAC), recently convened a panel discussion to provide health care reform perspectives from the state of Wisconsin, health care providers, insurance companies and employers.
Karen Timberlake, secretary of the Wisconsin Department of Health & Family Services and Sean Dilweg, commissioner of insurance, were present to provide the state government perspective; Bill Petasnick, president of Froedtert Memorial Lutheran Hospital, offered the provider perspective; and Jim Riordan, president and chief executive officer of WPS Health Insurance, offered the insurance industry perspective. The employer perspectives were provided by John Torinus, chairman of Serigraph Inc.; Tim Nerenz, executive vice president of Oldenburg Group Inc; Ron Dix, board of directors at Badger Meter Inc.; Gerald Frye, president of Benefit Services Group; and Mark Krueger, partner at Wipfli LLP.
The discussion focused primarily on portions of the bill that will go into effect prior to January 2014.
While panelists each offered different perspectives on health care reform, often disagreeing with each other on different implementations, one thing was definitely clear: uncertainty looms and no one has a clear indication of how everything will play out.
The following are excerpts from some of the panelists’ presentations:
Secretary of Wisconsin Department of Health & Family Services
More than 125,000 Wisconsin citizens will gain access to health care through reform, and the legislation puts decision-making power in the hands of each individual state, which is why action must be taken now, Timberlake said.
“A lot of people may be wondering why a lame duck governor would be putting so much emphasis on reform,” Timberlake said. “It’s because the Affordable Care Act creates so many opportunities for states that action must be taken now in order to provide the best possible scenario for Wisconsin’s next governor.”
States must prove by Jan. 1, 2013, that they will be ready to successfully implement an exchange by Jan. 1, 2014, Timberlake said.
“For us, that is as good as tomorrow,” she said. “If states do not participate in setting up their own purchasing exchange, the federal government will implement an exchange in those states.”
For the most part, Wisconsin is ahead of the curve, she said. Wisconsin ranks first in quality of health care and second in the country as far as access to coverage.
Around 95 percent of large employers in Wisconsin offer health care coverage to their employees, but there is still room to improve, she said.
As the process moves forward, the state of Wisconsin will rely on brokers and community-based partners to engage employers and the workforce in their communities to educate them on the benefits of reform and the opportunities available to them, Timberlake said.
“There are questions that still need to be answered, and as we work those out, we are hoping we can create and drive improvement in health care quality and efficiency in the state of Wisconsin,” Timberlake said.
Wisconsin Insurance Commissioner
Under the Patient Protection and Affordable Care Act, the insurance market will undergo a variety of reforms before January 2014.
The state of Wisconsin needs to implement a web portal for individual consumers, Dilweg said.
“The portal needs to be live so individuals can see all plans available to them by zip code,” he said. “Another immediate requirement is to set up the Health Insurance Consumer Assistance Office where consumers can file complaints, ask questions and receive assistance.
According to Dilweg, the Office of the Commissioner has submitted an application for a $637,000 grant that would assist with those efforts for the first full year.
A series of rules became effective in September, including the consumer right to free preventative care, no preexisting condition exclusions for children and the coverage for young adults on their parents insurance until the age of 26.
“More than 46,000 young adults already had that option in our state for a year,” Dilweg said.
Froedtert Memorial Lutheran Hospital
“For many people on the provider side of things, health care really hasn’t been reformed,” Petasnick said. “There are some good, bad and ugly portions of this reform. From a good perspective coverage has been expanded, approximately 32 million more Americans have the potential to be covered.”
Significant insurance reform, the lack of a public option and money set aside for innovation to make health care more effective are also good portions of the bill, Petasnick said.
“The most important part of this law is that it is a starting point, not an end point,” he said. “There is a great opportunity to expand this framework over time. I think about the 1960’s when everyone was asking whether or not Medicare would survive, and I think we’re in the same position now.”
According to Petasnick, what reform doesn’t do is bend the cost curve associated with health care, or more in terms of changing the way the system functions.
“It doesn’t permanently change the problems associated with the physician payment model and has in fact established a regulatory quagmire that needs to be developed and managed effectively,” he said.
Petasnick represented provider organizations in initial discussion about health care reform as the former president of the Wisconsin Hospital Association.
“The ugliness from someone who was at the table in the development of this legislation was the incredible amount of partisanship that ensued as opposed to a nonpartisan dialogue,” he said. “There was no effective dialog, and I was at the table, and I regret the fact that we didn’t have an effective exchange of ideas.”
The confusion and misinformation that resulted as part of this legislation may mean some lost opportunities for actual reform, as well, Petasnick said.
The legislation does provide opportunities that providers welcome, Petasnick said.
“It does provide opportunity to change the business model in terms of how care is rendered, how care is organized and most importantly how care is paid for,” he said.
The legislation also could help align incentives which are currently misaligned in the current system and over time could also reduce the continued cost shifting that occurs in today’s system, he said.
“I feel like the efforts to repeal this bill will be a distraction from the real work ahead as opposed to working together. Democrats and Republicans, in terms of how we continue to enhance and improve what we all need and all feel is an unsustainable situation in this country in terms of the cost and the problems associated with that.”
WPS Health Insurance
Several reforms on the health insurance market have already gone into effect, said Jim Riordan, president and chief executive officer of WPS Health Insurance.
Provisions that became effective in late September, including the expanded coverage for young adults and the removal of lifetime limits, are expected to have less than a 1 percent effect on individual or family plan costs, Riordan said.
“Wisconsin already passed a law regarding coverage for adults until the age of 27. Wisconsin will reconcile with the federal law and we might see a slight increase in costs early on, but not significant,” he said.
According to Riordan, the provision that provides free preventive care to those covered could have a significant effect on coverage costs.
“It removes the barriers to preventative purchases,” he said. “Depending on the purchases we could see a significant cost increase on traditional individual and family plans.”
Oldenburg Group Inc.
Oldenburg Group is a Milwaukee-based supplier and manufacturer of defense, mining and lighting solutions. The company has approximately 100 employees and is a self-insured employer.
“Companies don’t comply with laws,” Tim Nerenz, executive vice president of Oldenburg Group said. “We comply with regulations and even more specifically regulations as they are interpreted by regulators. We feel there is a lot of uncertainty around these regulations, and that a lot is going to change before 2014.”
Over the last five years, Oldenburg Group employees have seen a 3.5-percent annual increase in their healthy care costs, Nerenz said. “For the past two years our employee premiums have been stable, so we weren’t crying out for help.”
Nerenz added, “When the legislation was passed I knew four things were going to happen. Costs were going to go up, it was going to hurt jobs, hurt productivity and when the public option becomes available we are going to drop coverage.”
According to Nerenz, the requirements in the insurance reform market and some of the additional provisions surrounding coverage could end up costing his company $500,000 by 2014, which in a manufacturing setting equates to roughly 10 jobs.
“Fortunately for us, we’re growing, so, for us, that means 10 people we won’t hire rather than having to resort to laying people off,” he said.
Doing simple math also means that in the legislation’s current form, it would be more economical for Oldenburg Group, like many other companies, to drop the coverage and pay a penalty than continue with the rising costs of a self-insured plan.
“Right now, the penalty we pay is $2,000 per employee,” he said. “Right now, we pay around $7,500 per employee for coverage. I love my employees. I don’t want them to be uninsured, but from a rational business standpoint, we need to look at the options. As the penalty goes up, we run the numbers again on our entire workforce. We will continue to do that quarterly so that when we are forced to make that decision we can from a rational business standpoint. Right now that’s where we stand, but we watch every day to see if we will change our minds.”
Serigraph Inc. is a West Bend-based self-insured manufacturing company with 900 employees.
“We decided to get very aggressive in controlling our health care costs back in 2003,” John Torinus said. “We decided to take the leap into consumer driven health care and began implementing some innovative techniques other firms were using around the world.”
In 2010, the company’s cost for health care per employee was around $6,800, Torinus said.
“The national average is around $11,400, and so we are operating at 40 percent less than the national average.”
Torinus is convinced the new bill will have very little impact on Serigraph, and his company will continue to manage its own health costs without a lot regard for the national bill, he said.
Despite the obvious attraction of comparing the $2,000 penalty for not offering its employees coverage vs. the $6,800 the company is paying to keep employees covered; Serigraph will continue to offer its employees coverage, Torinus said.
“We have a very talented workforce here,” he said. “Offering health care coverage makes us more competitive in recruiting that top talent here.”
Badger Meter Inc.
“This is quite a period of time in our country,” said Ron Dix, member of the board of directors for Badger Meter Inc. “If you go to other various countries around the world that offer national health plan, you see a two-tier system. You have a governmental plan and then employers pay extra so your employees have good health insurance. I don’t know how long it’s going to take, but I think we might see that evolve here as well.”
The health care system has always been a master at cost-shifting, Dix said. “That game has to end,” he said. “What employees want more than anything, other than their job, is good health care coverage.”
Dix called health care reform good for government employees and consultants who need to explain the massive amounts of rules and regulations to employers.
“Someone knowledgeable is going to need to do this for you,” he said. “No matter who you are or what business you are in, this effects you and you have to figure it out somehow,” Dix said. “Look at the alternatives and figure out the best option for your employees, it’s a challenging situation but you have to address it.”
Benefit Services Group
Information for interpretation of the health care reform bill comes from the Senate-passed bill, the manager’s amendment and the reconciliation bill, Gerald Frye said.
“Then add on the comments and guidelines from the department of health and human services, the department of labor, the internal revenue service and more than 100 new federal boards agencies and commissions and you have a lot of confusion and a massive health reform labyrinth we need to navigate through,” he said.
According to Frye, the way costs are now, more than 60 percent of employer health plans will be subject to the Cadillac Tax provision by 2018.
The Cadillac Tax provision sets a threshold value that a traditional health insurance plan should cost per individual and per family. Insurers or self-insured employers who exceed that threshold when paying for health insurance coverage would be taxed 40 percent on the amount over the threshold, Frye said.
“The provision was created to help offset the cost of overall reform, but at the end of the day it sets that ceiling and doesn’t care why your costs are high, so many employers will simply refuse to exceed that threshold,” he said. “Many employers will change benefits and design plans with lower premiums and higher deductibles and co-payments.”
The good news, according to Frye, is that employers and insurance companies have a while before the Cadillac tax goes into effect.
“There is some time for employers to really take a look at mitigating their company’s health care costs through a more significant focus on wellness components and preventative care,” he said.