Reform Law Will Force Most Employers To Change Their Health Plan

One of the messages the Administration and Congressional leaders used to try to sell the reform bill to an anxious public was that if they were happy with their current health coverage, it wouldn’t change.  They also promised that reform would lower health and health insurance costs.  It has already become apparent that the reform act is driving costs up for 2010 and 2011 and now the Administration has released draft rules which mean that for most employees, their health plans will change, probably in ways that are not beneficial.   (Post Story) (IBD Story) (Sibelius Statement) (Draft Rule)

Partly in reaction to the premium increases that were already occurring, the proposed rule is designed to put employers between a rock and a hard place.  If an employer makes too many changes to its existing coverage, for example raising coinsurance at all or raising deductibles or copayments by any significant amount or increasing employee premium contributions or changing insurers, the plan loses its grandfathered status and is subject to all the requirements of the reform bill.  Employers who are experiencing the large premium increases are basically forced to eat the cost either way.  For many employers who now offer pretty good coverage, the best option may be to go under the new law and just offer the lowest possible benefits, which won’t help employees.

The new law is forcing the cost of insurance up because it did things like removing lifetime caps and requiring coverage of children up to age 26; provisions which may or may not be good policy but definitely have a price.  Employers already perceive the cost of providing health coverage to be too expensive, and one of their reactions has been to put more of the cost on employees, so that the company can remain competitive.  Having to spend more on insurance means that firms will hire fewer employees, and many will decide to just give up on providing coverage.  Employees don’t win in this scenario.  It may not be too conspiratorial to suggest that this is just what the Administration wants, so it can justify a public option plan and ultimately a single payer system.