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How Healthcare-Reform Ruling will Affect Play-or-Pay

Sunday, September 2, 2012
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The U.S. Supreme Court made up its mind on the Patient Protection and Affordable Care Act. Now, it's "play or pay" decision-time for employers.

The main questions are: What will employers do as the 2014 coverage deadline approaches? And what will the PPACA's real financial impact be on employer-subsidized healthcare? For example, a recent study by Truven Health Analytics, formerly the healthcare business of Thomson Reuters, reports that maintaining current plans will be the likely, and most cost-effective, choice for most employers in 2014 and beyond.

On the flip side, a controversial survey of 1,300 employers released by McKinsey in mid-2011 projects that 30 percent of employers "will definitely or probably" stop offering employer-subsidized healthcare insurance in 2014. McKinsey's study was met with a chorus of critics (and some supporters, too), so much so that it felt compelled to post a detailed explanation of its survey methodology.

Avalere Health, a Washington-based advisory services firm, posted a report in June 2011 saying the overall employer-subsidized insurance market will likely remain relatively stable after 2014.

Those widely differing views on what actually will happen in 2014, when the PPACA's healthcare exchanges are slated to be open for business, has fueled this hotly debated point-counterpoint scenario. Ray Fabius, Truven's chief medical officer, believes the debate is moot based on his company's recent research.

"Prior to this kind of modeling, most employers might have been under the impression that there is a real choice," Fabius says. "But our analytical modeling clearly shows there ... is a better option, and that is to maintain the status quo."

Mary Setter, senior vice president of employee benefits and carrier relations at RJF Agencies, a Marsh McLennan Agency company in Minneapolis, says her firm is coming to the same conclusion that Truven and Avalere have arrived at -- most large employers will be keeping their group plans in 2014.

"These types of employers have had health coverage plans in place for a very long time," she says. "They are going to continue, going forward." Setter predicts, the PPACA and its complexities will undoubtedly drive up healthcare costs for employers as insurance costs rise through PPACA provisions.

Jonathan Clarke, co-chair of the employee-benefits practice group at Pepper Hamilton, a Philadelphia-based law firm, says that, while the Truven analysis is well done, he hesitates to draw conclusions about how any one employer will decide whether to play or pay.

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"It's the age-old issue of aggregating data," he says, noting that such data does not always translate to a definitive result across all employers and market segments.

Another consideration, he adds, is that many workers in lower-paid sectors (retail, hospitality, etc.) who are already eligible for ESI benefits, but choose not to enroll (the working uninsured), will still have a choice: They can buy the coverage via the exchanges or pay the tax/penalty as set forth by the individual mandate.

"It would not surprise me [if] people choose to pay the penalty because they are not paying for employer-subsidized coverage already," he says.

Of course, for some employers, the decision to plan for PPACA-mandated actions will wait for another upcoming event, the November elections. According to a recent survey from Mercer, 16 percent of employers say they will wait until after November to start implementing any PPACA-mandated efforts in 2013 and the balance of 2012 -- regulations such as providing benefit summary disclosures, complying with new dollar limits on healthcare flexible spending arrangements, and increasing Medicare withholding for high earners. Forty percent of the 4,000 employers polled, however, said they will begin taking action now that the court has ruled.

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