BOCA RATON, FLA. -- Employers should not expect health care reform to curtail spending on health care or to slow the escalating cost curve, advised George Duczak, president of The American Worker Plans Inc., a provider of health insurance plans for working Americans, speaking at the 23rd Annual Benefits Forum & Expo here on Sept. 26, 2010.
The health care reform law mandates that preventive services (as defined by the U.S. Department of Health and Human Services) be covered on a first-dollar basis, outside of the deductible. But Duczak urged employers to put in place high deductibles covering non-preventive health care. "First-dollar benefits create no deterrent to over-utilization and isolate consumers from costs," he noted, adding "few employees have any conception of the true cost of their health insurance and how much it costs their employers."
While health care reform will limit deductibles to $2,000/individuals and $4,000/family in the small group market beginning in 2014, Duczak believes there will be waivers for plans that have higher deductibles in place at that time, if the deductible limit isn’t repealed outright. He advised employers to move now to offer higher deductibles, even if it means losing grandfathered status.
Ideally, he proposed that employers provide major medical protection with deductibles of $5,000/individual or higher, with 100 percent in-network co-insurance thereafter, along with unlimited lifetime benefits and required first-dollar preventive coverage. "That approach can reduce costs 20-40 percent right out of the gate," he explained.
Higher deductibles "can reduce costs
20-40 percent right out of the gate."
Employers could offer employees the option of supplemental gap plans, he noted, to cover the front-end of the deductible (with benefits available from $500 to $10,000). Alternatively, employers could provide access to multipanel cafeteria-style fully insured indemnity plans, including critical illness plans that would cover the front-end of the deductibles in those cases.
Expect Reform Law to Change
Duczak urged benefit managers not to expect that health care reform will remain as it is. While it won’t likely be repealed, "there is no question that it will be substantially amended," he noted. While that might not be much help in terms of long-range planning, it’s a caveat to bear in mind.
Duczak, for instance, expects Congress to revisit the 40 percent excise tax on high-value plans, scheduled to take effect in 2018, which many analysts believe will hit a growing number of non-"Cadillac" plans since the formula for determining "high value" is not indexed to inflation.
Among other predictions: "Congress has not and will not reduce medical payments for Medicaid or Medicare," Duczak said.
In summary, he said, health care reform will "have absolutely no effect on reducing medical spending," but high-deductible plans, including those that promote consumerism with health savings accounts and health reimbursement arrangements, can.
Stephen Miller is an online editor/manager for SHRM.
Open Enrollment Brings Higher Premiums, Plan Design Changes, SHRM Online Benefits Discipline, October 2010
Projection: 2011 Health Plan Cost Trend to Far Outpace Inflation, Again, SHRM Online Benefits Discipline, October 2010
Future Bright for Health Savings Accounts, Says Policy Analyst, SHRM Online Benefits Discipline, September 2010
Steps to Hold Down Health Reform's Cost Increases, SHRM Online Benefits Discipline, September 2010
Enrollees in Health Reimbursement Arrangements Spend Less, GAO Finds, SHRM Online Benefits Discipline, August 2010
SHRM Online Benefits Discipline
SHRM Online Health Care Reform web page