Obamacare- One Year Later

It’s been just over a year since the first mandates of Obamacare ( also known as Health Care Reform or HCR ) were passed on October 1, 2010. But, as the old saying goes, “You ain’t seen nothing yet.”
HCR has proven thus far to be politically unpopular. Many Democrats are distancing themselves from HCR, and many Republicans are calling for its outright repeal. However, an outright repeal of HCR is unlikely. The only way an outright repeal would be possible is if Republicans retained the House, won the Presidency, and gained thirteen Senate seats for a filibuster proof majority of sixty.
While the first few years of HCR 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 of HCR 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 HCR ( one of the longest in history). A decision should be rendered by June, 2012. The key rulings by the Supreme Court will be the following:
1. Is the individual mandate constitutional? Note: Even if the federal mandate is ruled unconstitutional, states will still have the right to impose a mandate (i.e. Massachusetts)
2. Does the required ( and substantial ) expansion of Medicaid as outlined by HCR exceed the authority of the Federal Government?
3. Regarding the legal concept of severability, if one component of HCR is viewed as unconstitutional, does that mean HCR must be repealed in its entirety? Or, can the other components of HCR stand on their own?
In 2013, some of the taxes of HCR go into effect. Two tax provisions that will affect employers and employees are the .9% Medicare Hospital Insurance Tax ( for individuals above $200,000 and joint filers above $250,000-not indexed ) and the 3.8% Medicare contribution on certain unearned income (for the same income levels as noted above).
On January 1, 2014, the major parts of HCR go into effect as noted below:
• The Individual mandate takes effect ( assuming the Supreme Court doesn’t overturn this provision). Annual penalties apply for those that don’t purchase health insurance coverage.
• The Employer “Pay or Play” provision kicks in. “Pay or Play” requires employers with greater than fifty employees to either offer 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 ( starts in 2011 ), medical device firms ( starts in 2013) and health insurers ( starts in 2014 ) will be passed on to the consumer in the form of higher costs.
Three additional concerns about HCR are the following:
1. 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.
2. Many believe health care costs due to HCR will increase more 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.
3. Certain medical providers ( i.e. neurosurgeons ) have reported that HCR removes their decision-making authority in emergencies and transfers that authority to an unelected board ( which is not comprised of doctors). If these charges prove to be true, there could be a backlash against this controversial feature of HCR.
For employers, HCR will continue to have a major impact on their strategic planning in the years to come. It looks like some form of HCR 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 most effectively for HCR in the next several years ( alternative funding strategies, wellness programs, value-based plans and consumer driven health plans are a few examples).
Conversely, individuals and employers who simply react to this legislation may find that their health care costs increase at a faster rate than before Health Care Reform. This is because many project that some of the more innovative plans will be selected by a healthier employee population. As a result, the remaining employees in the traditional health plans ( HMO, PPO ) could make up a more adverse risk of employees, thereby driving up health care costs faster than normal.