Why the ACA replacement bill is missing the mark for employers, employees
Anyone curious enough to read the 123 pages of the recommendations relating to the replacement of the Affordable Care Act will quickly find that it’s as difficult to navigate as our healthcare system. A flurry of headlines and summaries immediately followed highlighting important provisions for both employers and employees. Many employers might breathe easier about the proposed postponement of Cadillac tax and change in taxes collected. And employees would have an opportunity to better prefund healthcare expenses through higher health savings account contributions, among other things.
But the devil is in the details, especially when it comes to how future funding will shape our country’s health. And one key, and often overlooked, aspect is one of the most telling signs of why the United States has such poor health relative to peer countries: the continued focus on healthcare rather than health.
The lack of transparency in healthcare spending — the largest expense for most businesses outside of payroll — continues to cause significant frustration. It remains one of the most difficult line items to manage — and for many, represents an open checkbook to hospitals, outpatient facilities, professional services and medications, with no or at best poor performance measures to guide decision making and control. At the same time, there is a growing realization that it is our day-to-day decisions that drive our health and paying for treatment is little different than just keeping a car on the road rather than optimized for performance. This is consistent with the World Health Organization’s definition of health as a state of complete physical, mental and social well-being and not merely the absence of disease or infirmity, which has remained unchanged since 1948.
If health is a priority, then eliminating The Prevention and Public Health Fund, as stated on page 1 of the proposed amendments, should grab our attention. The fund currently supports the Centers for Disease Control and Prevention and enables the agency to provide flexible funds to state health departments. Earlier this year, USA Today reported that one of the reasons for the fund was to make up for years of chronic underspending of public health. If these dollars are removed, it increases the need for and importance of community level private public collaboration.
Sustainable healthcare financing
Although the ACA has been successful in expanding coverage to millions of Americans, many health plans have already exited the public exchanges and many more plan to withdraw following periods of significant losses. Within a community rated environment (which limits the issuer’s ability to charge appropriately for different categories of risk, such as aging, existing conditions and many other factors), the sustainability of the system heavily depends on attracting both the healthy and unhealthy into the risk pools. In an environment where risk is not assessed upfront, such as that provided by the ACA, people with higher need for medical services are much more likely to obtain health coverage and a strong system of incentives (including penalties) is required to bring healthier people into the pool.
Instead of requiring people to buy insurance, as currently under the ACA, the proposed rules aim to address this mainly through the following measures:
· Creating the ability for issuers to charge larger premium differentials based on age, thereby ideally making the premiums more affordable for younger, and on average healthier, consumers.
· A requirement for continuous coverage, otherwise a 30% penalty applies. This is aimed at discouraging behaviors related to “shop only when you need “insurance.
· The establishment of a Patient and State Stability Fund that allows for promoting participation in the individual market and small group market in the state, but details on how those funds can be applied and how much will be available after allowing for the other possible applications of the funds remains unclear.
Although it sounds intuitive that healthy people are attracted to products that facilitate and reward healthy behaviors, it is mostly absent from proposals on how to create sustainable healthcare systems. In South Africa, a market where community rating — a rule that prevents health insurers from varying premiums within a geographic area based on age, gender, health status or other factors — is much stricter than the United States, we’ve played a critical role in sustaining the risk pool for our members over the last 20 years.
It requires significant incentives for healthy behaviors and we hope to see similar incentives incorporated for the United States. This will help make health a priority and create more sustainable healthcare financing.