Facing thousands in extra insurance costs, smokers appear to be the Affordable Care Act’s (ACA) biggest losers. Employers are allowed charge smokers up to 50% more for their medical coverage than nonsmokers , starting in 2014.
On November 25, Fox News put it best: “Obamacare Policies Slam Smokers,” , noting that “smokers are the only group with a pre-existing condition that Obamacare penalizes.” THCB itself has headlined: Smokers Face Tough New Rules under Obamacare.
And these headlines are absolutely accurate — meaning that, with the possible exception of the e-cigarette, ACA is the best thing that has happened to employed smokers ever.
Here is how we arrive at this conclusion. The data is mixed on whether smokers incur much higher healthcare costs or just slightly higher healthcare costs during their working ages than non-smokers do. None of the data shows that their costs are lower, but let’s say there is no impact on health spending.
Nonetheless, the following is incontrovertible: smokers take smoking breaks.
Remarkably, there are no laws specifically governing smoking breaks, and like most other quantifiable human resources issues, no one has quantified them. But we all observe these breaks, and about a fifth of us participate in them. They reduce productivity. By definition, if you are outside smoking, you are not inside working.
Sure, some smokers make up the time by working harder when they aren’t smoking…but (1) many non-smokers work hard too and (2) some workplaces, such as inbound call centers, don’t offer the luxury of catching up later because they operate in real time. Lacking quantification, fall back on your imagination…and imagine what you would do if you ran a company in which non-smokers spent as much time mulling around outside as smokers do. That should give you an understanding of the impact of smoking breaks on productivity.
Continue reading “Are Smokers Really the ACA’s Biggest Losers?”
Filed Under: OP-ED, THCB
Tagged: Al Lewis, Employers, smoking, smoking cessation, The Affordable Care Act, Vik Khanna, Wellness
Dec 1, 2013
Obamacare is impacting the small group insurance market in many of the same ways as the individual health insurance market. While employers with less than 50 workers don’t have to provide coverage, if they do they are required to comply with the same essential benefit mandates, age rating changes, and pre-existing condition reforms the individual market faces.
That means essentially all small group policies cannot continue as they are––they have to be discontinued.
What makes things a bit easier, if not any less expensive, is that small employers typically have health insurance brokers to run interference for them and help them through this change where individual consumers often get that dreaded cancellation letter telling them they will not have health insurance after a certain date if they do not act quickly in what is a confusing marketplace in the best of times.
The first small group renewals are now occurring––the January 1 renewals that typically have to be delivered during the month of November under state law.
Many employers are facing significant changes in order to comply with Obamacare and therefore price increases. One Maryland broker I spoke to this week has 90 small group accounts and he reports his smallest increase was 15%, his largest was 69%, and most are in the 30% – 40% range.
(By comparison, Mercer just announced the average large employer health care cost increase for 2014 will be 5.2%, meaning small groups could have reasonably expected an increase under 10% without Obamacare.) The biggest rate increases are generally going to those employers with the youngest groups the most impacted by the new “age compression” rules.
Does this mean these small employers’ coverage has been outright cancelled and they will now send their workers to the exchanges, as I have heard some commentators argue?
No, at least not anytime soon.
But that does not mean that lots of these small employers aren’t angry and confused.
What are these small employers doing?
Continue reading “The Next Shoe to Drop: Small Group Health Insurance Cancellations”
Filed Under: THCB
Tagged: Employers, Health Insurance Exchanges, Health Plans, Robert Laszewski, Small Business, The Affordable Care Act
Nov 21, 2013
All eyes are on the hullaballoo created by the challenges at Healthcare.gov and several of the states’ public insurance exchanges. Yet all the while, like in a magic show, attention has been diverted from the real action going on elsewhere. Quietly and in a relatively drama-free way, the private health insurance exchanges are busily taking over the world of insurance and, in my opinion, portend a radical set of changes in how our health insurance system operates.
Several years back, a number of companies began building private health insurance exchanges to initially help companies offload the incredible burden of retiree benefits. Companies such as Extend Health (now owned by Towers Watson), Senior Educators (now owned by Aon), and several others provided a way for large employers to get themselves out of the business (and balance sheet liability) of providing group benefits for retirees, instead providing them with money to purchase their own individual health policies through then small, now large companies. The private exchanges went about the business of building websites that work, call centers that buzz and a wide array of insurance product offerings at various prices. Now, several years later, hundreds of thousands and possibly millions of individuals are out there shopping their little hearts out, choosing their own plans, and dealing with the consequences of high deductibles and the like.
These various private exchanges are now poised and ready to begin serving active employees in 2014 as guaranteed issue (the requirement that all can be insured and no one turned away) goes into effect as a result of the Affordable Care Act. And lest you think this is a small marketplace, you are wrong. In 2008 there were about 120 million total employed workers and just over half of these worked for companies of 500 employees and above (39 million worked for companies with 5000 employees or more). In other words, we are talking about nearly half of American adults and that doesn’t even include the dependents they bring along into their insurance plan.
Interestingly, such large US employers as Walgreens and Petco and DineEquity (parent company of Applebee’s Neighborhood Grill & Bar® and IHOP® restaurants) are all-in on the private exchange program, committing to transfer all of their employees from group plans to the exchange to purchase individual plans come January 2014. The exchanges of Towers, Aon, Mercer, Buck Consultants and a plethora of others are alive and well and open for business at exactly the time when employers are trying to figure out how fast they can reasonably get out of the middle of health insurance administration and run for the hills.
Continue reading “While Healthcare.gov Struggles, A Different Story Plays Out On The Private Exchanges”
Filed Under: Tech, THCB, The Business of Health Care
Tagged: Employers, Extend Health, Health Insurance Exchanges, Lisa Suennen, Private Exchanges, The Affordable Care Act, Wal Mart, Walgreens
Nov 3, 2013
That past month of debate over the botched launch of the health care exchanges has brought the programming geeks, and their hired mouthpieces, out in the open to defend the indefensible. As painful as this has been for so many Americans, we cannot help but be amused to hear so many commentators doing their best impression of Captain Renault and expressing their shock that the federal procurement system could have produced such an outcome. Of course, most of this is a sideshow, the opening act to an even more serious drama in the making.
Let us be clear from the outset, the rollout of Healthcare.gov is an embarrassment. However, this only becomes a real problem if it dissuades enough people who were already marginal customers with respect to their purchase of health insurance on the exchanges to simply pay the penalty and avoid the hassle of staring at a computer screen, waiting on hold for hours, or refusing to try again once the geeks get this all sorted out.
While the self-appointed technology experts on both sides of the aisle have been debating the causes of the web site debacle, attention has been diverted away from the necessarily frank discussions we must have about the real potential benefits and looming costs of the exchanges.
In a valiant attempt to steer the conversation towards the benefits of the ACA, President Obama held a rose garden press event where he repeatedly claimed that the health insurance on the exchanges is good product. But as is all too often the case, the President talked about the benefits and side stepped the difficult conversation about the costs.
At least he is half right. If they can ever fix the web sites, people with pre-existing conditions who shop on the exchanges will gain access to insurance at a more affordable price. Enrollees may save thousands of dollars. But let’s not kid ourselves.
The exchanges do not reduce the cost of medical care; they only change who pays for it. And we all know who that is.
Continue reading “The Opening Act”
Filed Under: Economics, THCB
Tagged: business of healthcare, Craig Garthwaite, David Dranove, Economics, Employers, Health Insurance Exchanges, Healthcare.gov, Obama administration, The Affordable Care Act
Oct 28, 2013
Employers face a multitude of challenges under the Affordable Care Act (ACA). The ACA fundamentally changes the landscape for employer sponsored health insurance, forcing businesses to understand, navigate, and adapt to a quickly changing, highly complex, and still uncertain marketplace for health benefits. To illustrate this, here are 10 pain points employers face in dealing with Obamacare:
1. Explaining ACA to Employees, Dependents, and Retirees:
Effective internal communications is a strong indicator of a firm’s financial performance. Indeed, internal communications is an essential ingredient for an engaged, productive workforce with low turnover. This is all the more important under the dynamics and complexities of the ACA.
Every employer must be prepared to explain the ACA. Like it or not, employees will look to their employer to explain the Affordable Care Act, even if the employer is not changing benefits. Employees have friends and family who will need help understanding Obamacare. The airwaves, mail boxes, and street corners will be packed with messaging from all angles and interests – some pro, some con, some partisan, some factually wrong, some even fraudulent, much of it confusing, and all of it mind numbingly complex.
This is an enormous new opportunity for employers to beef up their internal communications, demonstrate leadership, and support employees and their families. This will also serve to boost a company’s external reputation since the help and information provided to employees and retirees will be shared by them with a much wider audience - their parents, children, spouses, siblings, friends, and neighbors.
However, when communicating and educating, given the dynamics and contentious nature of Obamacare, employers must also take into consideration the political leanings of most employees and other key stakeholders, such as the board of directors and state and local leaders. This is not a factor in most employer benefit issues but the ACA is entirely different.
2. Making Tough Decisions on Coverage and Benefits:
While making tough decisions on benefits is nothing new for employers, the ACA presents a new set of decision points. Every business has their own starting point – what, if anything, they were already offering, who they were covering, and how much they were contributing financially to the cost of coverage.
For those employers that were not providing full-time workers with health coverage before, the ACA creates a new pay-or-play decision for those with more than 50 full-time workers. For every employer, the ACA creates a strong financial incentive to either drop coverage, dial-down employer contributions, or move to defined contribution.
Continue reading “What Your Employer Is Secretly Thinking As Obamacare Goes Live”
Filed Under: OP-ED, THCB, The Business of Health Care
Tagged: Employees, Employers, Health Insurance Exchanges, Kip Piper, The Affordable Care Act
Sep 25, 2013
I was a bit surprised by the front-page headline and accompanying article in the weekend Wall Street Journal (IBM to Move Retirees Off Its Health Rolls). The headline and subtext of the article are that IBM is ending health benefits for retirees, leaving them to fend for themselves. But as I read through the specifics that doesn’t appear to be at all what’s happening. Unfortunately, the article’s main impact is to leave an unduly negative impression of private health insurance exchanges.
Retiree health benefits are a big deal, especially for employees who retire before they reach the Medicare eligibility age of 65. A typical early retiree in his or her 50s will face high premiums in the individual market compared to a younger, and typically healthier, person. If they are among the few whose company provides generous coverage they are very lucky.
[On a side note, life is about to get easier for early retirees who have to buy their own insurance, thanks to Obamacare's banning of medical underwriting and limits on the ratio of premiums charged to older people versus younger ones.]
When a person turns 65 life gets a lot easier on the health insurance front as the federal government takes over the vast majority of costs. As a result, a retiree on Medicare is much cheaper for an employer to provide health care benefits to, since they are essentially just paying for supplemental coverage.
Continue reading “Health Exchange Confusion: Why We’re Getting the IBM Story Wrong”
Filed Under: Uncategorized
Tagged: David Williams, Employers, Health Insurance Exchanges, Health Plans, Medicare, retirees, WSJ
Sep 10, 2013
Last month, the Obama Administration announced that it would delay enforcement of the employer mandate component of the Affordable Care Act (ACA) in part due to opposition from the business community. Opponents of the ACA cited the delay as evidence that the law was collapsing under its own weight, while ACA proponents downplayed the importance of the employer mandate in realizing the primary objective of the law – extending affordable coverage to millions of uninsured Americans.
Will delaying the employer mandate lead to the ACA’s demise?
Using economic modeling, we have found that the primary goals of the ACA will not be impacted by the delay, but the delay may impact one of the law’s key revenue sources designed to offset the costs of the coverage provisions.
Under the ACA, only firms with 50 or more full-time employees can be assessed penalties for not offering coverage under the employer mandate; small businesses with fewer than 50 employees are exempt. Furthermore, more than 95% of large firms already offer insurance, implying that only a small pool of firms would need to alter their current benefit offerings to comply with the employer mandate. Our model estimates that less than 1% of firms, employing about 2% of the workforce, would be penalized for not offering insurance to their workers if the employer mandate is enforced.
In fact, only about 300,000 workers (approximately 0.2% of the workforce) would lose their employer’s health insurance as a result of the employer mandate delay, according to our economic analysis. And many of those losing coverage would be able to get affordable coverage through a spouse, the newly created health insurance exchanges, or Medicaid. Hence, delaying the employer mandate will have only a nominal impact on the ability of workers and their dependents to obtain health coverage.
Continue reading “Data Points: Why Delay of the Employer Mandate May Not Actually Mean That Much”
Filed Under: Health Plans, THCB
Tagged: Carter Price, Employees, Employer Mandate, Employers, Evan Saltzman, RAND study, The Affordable Care Act
Aug 29, 2013
It’s one thing to lead by example and quite another to be made an example of. The executive leaders of Penn State University, who have managed to generate quite enough terrible publicity over the past couple of years, have now gone boldly where no employer has gone before. By implementing a coercive, intrusive, and wasteful “wellness” program during the academic year’s summer doldrums and miscalculating that it would go unnoticed, they have invited the wrath of their own faculty.
The PSU wellness initiative like so many before it relies on the hydra of preventive medical care, which is both clinically and fiscally ineffective; a personally intrusive health risk appraisal; and, a whopping incentive/penalty of up to $1,200 per year if you don’t play ball, which is double the national average. Penn State faculty, led by political science professor Matthew Woessner of their Harrisburg campus, have responded with outrage and a petition for withdrawal of the program, which now has 1,500 digital signatures. Penn State’s HR team, led by VP Susan Basso, has doubled down on its own ignorance claiming that the opposition is “unfortunate and sad.” What’s unfortunate and sad is that employees of a college can’t do math or read .
Penn State faculty are right to oppose the wellness program on both ethical grounds and economic grounds. Their creativity on how affected faculty and staff should respond is applause-worthy. Entering bogus data on the HRAs (both legal and harmless to employees because HRAs are anonymous) and refusing to get any of the preventive care recommended are useful guerilla steps. They are also discussing a blanket refusal to participate, which means either everyone gets hit with the penalty or no one does.
Continue reading “The Other Penn State Scandal”
Filed Under: OP-ED, THCB
Tagged: Al Lewis, Employees, Employers, PSU Wellness Initiative, The Affordable Care Act, Vik Khanna, Wellness
Aug 12, 2013
The U.S. Bureau of Labor Statistics came out with its June jobs report this week and, consistent with usual trends, healthcare jobs are booming. In June 2013 there were approximately 20,000 new healthcare jobs in the U.S., ¾ of which were in the ambulatory care sector and ¼ of which were in hospitals. Healthcare jobs represented 10% of all new jobs created this month.
The June growth in healthcare jobs matches up to the average 19,000 new healthcare jobs we have seen created in each of the prior months of 2013 and the 12% job growth we have seen over the last five years. In a country where new jobs are viewed as even better than baseball, apple pie and mom herself, these new jobs should elicit a huge round of applause, or at least a stadium style wave, right?
Or should they?
Change the channel and a different set of policy makers, employers and industry experts will tell you that the only way to save our economy from ruin is to cut healthcare costs. Cutting healthcare costs means making the people who work within the system vastly more efficient, eliminating unnecessary medical care (and thus reducing the labor that goes along with it), and helping empower consumers to do things for themselves, including taking a more active role in reducing their own demand for healthcare services and, in some cases, doing at home what they might previously have used the healthcare system to do (e.g., diagnostics, home care, etc).
Continue reading “It’s the Jobs, Stupid. No, Wait. It’s the Stupid Jobs.”
Filed Under: Hospitals, OP-ED, THCB
Tagged: Costs, Employers, Employment, health care jobs, Hospitals, Lisa Suennen, spending
Jul 8, 2013
The administration suddenly announced last night that the requirement that all employers with 50 or more workers offer health insurance has been delayed until 2015.
If an employer with 50 or more workers did not provide health insurance to their full time workers in 2014, they would have been subject to a fine of $2,000 per worker. The employer would have also been subject to a $3,000 fine for each worker that went to the insurance exchanges if the employer package was not affordable.
Why did the administration delay the large employer mandate?
Because many employers have been in the early stages of planning to cut back the hours of workers in order to avoid having to offer insurance to those customarily considered part time, those who work at least the 30 hours per week the law established for defining a full time worker––and they haven’t been bashful in telling their employees why. In addition, there has been growing evidence that some employers were holding back on hiring in order to avoid more of the mandate costs at a time of high unemployment.
While the administration cited employer administration issues with mandate reporting as the reason for the delay, the bottom line is that the Affordable Care Act (“Obamacare”) was looking like it was about to be successfully labeled a job killer and the administration wanted to avoid that.
You also have to wonder if all of the reporting challenges were just with employers or was the administration also having trouble with the complex employer mandate information systems they will ultimately have to build?
Continue reading “White House Delays Employer Mandate-But What About Small Employers?”
Filed Under: OP-ED, THCB, The Business of Health Care
Tagged: Employers, Insurance, large employer mandate, Robert Laszewski, Small Business, The Affordable Care Act
Jul 3, 2013