Obamacare – It Is Here to Stay – Do You Know What to Do With It?
By now it’s old news: the Supreme Court upheld the constitutionality of the Patient Protection and Affordable Care Act (commonly called “Obamacare”). It was surprising, given the conservative majority on the Court.
More surprising was the opinion itself, for two reasons. First, Chief Justice Roberts, who was expected to side with the conservatives in striking down the law, authored the opinion himself. The second surprise was the logic Roberts used: the federal government, he decided, cannot force people to buy anything from the private sector, even something as necessary as health insurance. But, he went on to say, here the federal government is not forcing people to buy health insurance, it is simply imposing a tax on them if they don’t.
Note that the decision doesn’t mean that State governments can’t force people to buy something – compare auto insurance, where states force you to carry insurance as a condition of owning a car. The decision focused on what the federal government could do under its power to regulate interstate commerce.
What does this decision mean for employers? Nothing directly – it dealt only with the part of the law that requires individuals to buy health insurance if they aren’t otherwise covered. (The decision also dealt with a Medicaid issue, also not particularly relevant to employers.)
The important issue is the law itself was upheld and, absent repeal, which seems unlikely, will go into effect as planned. Effective in 2014 employers of over 50 employees will either have to provide employees with health insurance that provides a certain level of benefits or pay a penalty of $2,000 per employee. One task employers should schedule soon is to analyze the effect of the law on their own situation. Employers may well find that the new law may give them opportunities to lower their health insurance costs, because the new law will change health insurance pricing.
Although Americans spend more on health care, as a percentage of GDP, than any other developed country, much of this expense is due to the administrative complexity of our health care system.
One commentator has called it “an administrative monstrosity, a truly bizarre mélange of thousands of payers with payment systems that differ for no socially beneficial reason, as well as staggeringly complex public systems with mindboggling administered prices and other rules expressing distinctions that can only be regarded as weird.” (Health economist Henry Aaron as quoted in the online Motley Fool article “3 Health Insurance Misconceptions that Never Die.”)
Obamacare will create insurance “exchanges” – websites where individuals and employers can obtain and compare health insurance prices. Health insurance costs will no longer be a “black box” outside of the employer’s (especially a small employer’s) control. For example, one plan design being suggested is for employers to offer defined contribution health plans – the employer offers each employee a sum of money and the employee selects his own benefit by purchasing individual insurance on the exchange.
We’ll keep you posted as events develop. But in the meantime, start your analysis of what you are paying for health care and whether Obamacare offers a better alternative for you and/or your employees.