October 26, 2016
By Michael Jordan
MagnaCare Labor Bulletin: Is Affordable Healthcare Forever Out of Reach?
Today’s Topic: Nailing Down the Promise of Affordability
Expensive healthcare, combined with uneven distribution of cost and wealth, have made achieving affordable healthcare an increasingly elusive goal. The Affordable Care Act is the first step, but plan sponsors have options to grow reserves and maintain a healthy level of benefits going forward.
Will Healthcare Ever Be Affordable for Americans?
Unions and other plan sponsors recognize that one of the most serious healthcare issues facing Americans is affordability. In this issue of the MagnaCare Labor Bulletin, we break down the issues and examine how the Affordable Care Act (ACA) is only the first step towards making healthcare more affordable.
Three Key Issues
Expensive Healthcare – The Centers for Medicare and Medicaid Services state that in 2014 Americans spent on average $9,695 for every man, woman and child on healthcare. The average household of 2.54 persons spent on average over $24,625, with the median household income being $53,697.
Uneven Distribution of Costs – Healthcare costs are not evenly distributed. In fact, typically one percent of the population is responsible for over 21 percent of healthcare costs, and five percent for half.
Uneven Distribution of Wealth – Wealth is even more inequitable: the wealthiest three percent of the population own over half of the nation’s assets, while the wealthiest 10 percent owns over three quarters.
New Kaiser/New York Times Survey Finds One in Five Working-Age Americans With Health Insurance Report Problems Paying Medical Bills
Kaiser Family Foundation
National Health Expenditure Projections, 2014–24: Spending Growth Faster Than Recent Trends
ACA: The First Step
Clearly, healthcare will not be affordable until healthcare costs can be contained. At the moment, the ACA has brought about a number of changes for employer-based coverage without causing significant disruption for most participants.
Some plan sponsors report that they have modified job classifications in reaction to the employer requirement to offer benefits, but more report that they have increased the number of full-time jobs rather than decreasing it.
At the same time, concerns about the Cadillac tax have prompted plan sponors to look for savings. Competing pressures are likely to lead to tighter networks, stricter management and higher cost sharing in an effort to contain costs.
2015 Employer Health Benefits Survey
Kaiser Family Foundation
In order to fix the affordability issue, there needs to be discussion about broader approaches, including a larger role of government to rein in excesses of the free market.
For now, plan sponsors are turning to self-insurance, managed care, and competitive bidding of health insurers as effective ways to contain costs. They have also turned to defined-contribution plans and consumer-directed high-deductible plans (CDHPs) to encourage employees to make choices based on price and preference. Plan sponsors fix their contribution on the basis of a specific benefit design, and employees may “buy up or down” to purchase more or less insurance.
In the crucial year of 2016, plan sponsors competing for skilled labor are continuing to sponsor health benefits and not move employees to exchanges. The situation could change, however, if and when health plans begin hitting the Cadillac tax threshold.
How Employers Are Responding to the ACA
The New England Journal of Medicine
Can We Ever Achieve Affordable Health Care in the U.S.?
Click here to view Michael’s video on nailing down the promise of affordability in healthcare