Op-ed: Health care reform – Coming to a checkbook near you
By Jim Wisdom
It’s been just over a year since some of the most significant mandates under the massive health care reform bill, dubbed Obamacare, went into effect. But, as the saying goes, “You ain’t seen nothing yet.”
The new rules, in place since Oct. 1, 2010, have proven thus far to be politically unpopular. Many Democrats are distancing themselves from health care reform, and many Republicans are calling for outright repeal. However, an outright repeal of the bill is unlikely. The only way an outright repeal would be possible is if Republicans retained the House, won the presidency and gained 13 Senate seats for a filibuster-proof majority of 60.
While the first few years of health care reform addressed the additional benefits offered by the law, much of the more adverse parts of this legislation (the costs) will be implemented in 2013 and 2014.
Here are the key provisions that are set to take effect in the next few years.
In 2012, The Supreme Court will hear five and a half hours of oral argument about health care reform, one of the longest sessions of its kind in court history. A decision should be rendered by June 2012. The Supreme Court will rule on the following key issues:
• Is the individual mandate constitutional? Note: Even if the federal mandate is ruled unconstitutional, states will still have the right to impose a mandate (e.g., Massachusetts)
• Does the required (and substantial) expansion of Medicaid as outlined by health care reform exceed the authority of the federal government?
• Regarding the legal concept of severability, if one component of health care reform is viewed as unconstitutional, does that mean the bill must be repealed in its entirety? Or, can the other components stand on their own?
In 2013, some of the taxes related to health care reform go into effect. Two tax provisions that will affect employers and employees are the 0.9 percent Medicare Hospital Insurance Tax (for individuals above $200,000 and joint filers above $250,000-not indexed) and the 3.8 percent Medicare contribution on certain unearned income (for the same income levels as noted above).
On Jan. 1, 2014, the major parts of the bill go into effect:
• The individual mandate takes effect. Assuming the Supreme Court doesn’t overturn this provision, annual penalties apply for those who don’t purchase health insurance coverage.
• The employer “pay or play” provision kicks in. “Pay or play” requires employers with greater than 50 employees to offer either a minimum level of health coverage and employer contribution level or pay a $2,000 per employee “shared responsibility” payment for failing to do so. The penalty increases to $3,000 per employee if the employee purchases health insurance with a premium subsidy through a state-based Heath Care Exchange.
Fees on pharmaceutical firms (2011), medical device firms (2013) and health insurers (2014) will be passed on to the consumer in the form of higher costs.
Two additional concerns about health care reform include:
• Adding about 20 million new insureds to Medicaid while Congress continues to cut provider reimbursement rates (both Medicare and Medicaid) could mean longer wait times for patients — and more “cost shifting” to private sector employers and employees.
Many believe health care costs will increase at a higher rate than if the law hadn’t passed. And, with 77 million baby boomers beginning to enter their senior years, it’s almost certain that the nation’s health care costs will accelerate due to this demographic shift.
For employers, health care reform will continue to have a major impact on their strategic planning in the years to come. It looks like some version of reform is here to stay. As a result, employers will need to be more proactive in order to control their future health care expenses.
Depending on a company’s size, there are a number of steps employers can take today to position their companies in the next several years. Alternative funding strategies, wellness programs, value-based plans and consumer-driven health plans are a few examples of what might work to hold down costs.
Conversely, employers who simply react to this legislation may find that their health care costs increase at a faster rate than before health care reform.
• Jim Wisdom holds a certified financial planner designation and is president of James L. Wisdom Insurance Services in Westlake Village.