Posted: March 01, 2011
Obama-Care’s here, for better or worse
Businesses seek clarity on landmark legislationDebra Melani
A year after President Obama's health-care reform was signed into law, frustration still reigns among many Colorado businesspeople. Pending lawsuits. Political bullying. Tenuous guidelines. These are just some of the reasons cited for their aggravation, with many in the state's work force saying the unknown distracts from focusing on the business at hand.
Despite the worries, many business and health-reform leaders report the first year under the Affordable Care Act in Colorado went fairly well. And some state officials (including Gov. John Hickenlooper in his inaugural address) have a plea for all the business folks out there: Ignore the rhetoric, accept the inevitability of some change, and join efforts in making the landmark legislation work best for the state and its businesses.
"Until the Congress or the courts decide otherwise, we have a responsibility to implement this and implement this well," said Lorez Meinhold, health policy director for Hickenlooper. "The current system doesn't work that well for small businesses, and this is a step in the right direction."
For the ranks in the business trenches, however, putting the distractions of political rhetoric and slow-motion bureaucracy aside isn't that easy.
Time of uncertainty
At Keller Bros. Auto in Littleton, executives consider insuring their 23 employees and their families a key to attracting and retaining a quality work force. But they are weary of the exaggerations, misinformation and stalemates resulting from political posturing, as the Republicans now set their sights on crippling the reform act by denying funding.
"We believe that it's very important for Congress to work these things through and decide what they are and aren't going to fund," said Keller Bros. COO David Rogers. "We really fear that things are not being revealed in a transparent way to those of us who are going to end up funding this. We were promised transparency and bipartisanship, and we aren't seeing any of that. Do I know what the truth is? No, ma'am, I wish I did."
Rogers' frustrations run deep in the business community, especially the fear of the unknown, according to William Lindsay, chairman for the Denver Metro Chamber of Commerce and an executive with Lockton Cos.
"There's a great deal of angst out there in terms of understanding what the rules are, when they apply, and what they will mean," Lindsay said.
Some reforms slated for this year and 2012 - such as complicated notice-to-employee requirements for employers and a controversial no-discrimination in coverage provision - have been postponed, he said. A 1099 reporting mandate set for 2012 requiring businesses to report all transactions of $600 or more has spurred much criticism because of the predicted cost and red tape it would create for businesses. Many industry experts predict a repeal of the provision, citing bipartisan support.
Few tears are being shed because the provisions are not in place. The no-discrimination provision, for instance, which would prevent the common practice of "carving out" lower-paid, often-transient employees from coverage in such businesses as hotels and restaurants, could halt some employers' ability to provide insurance at all, Lindsay said. But the uncertainty still looms, making it hard for businesses to plan.
"Putting it on hold doesn't mean the concern goes away. In many cases for people in business, uncertainty is even worse than certainty, even when the certainty isn't positive."
But becoming mired in the negatives of the 2,000-plus-page act is not a proactive stance for business owners to take, Meinhold said. "The law's not perfect." Community forums held across Colorado, so far focused largely on the insurance exchanges slated for 2014, will continue, she said. "My plea would be that businesses stay engaged so that we can help work through these issues."
Cost worries persist
For critics of the reform law, cost was an immediate top-button issue, and anxieties remain in the business community. "Employers had a hope and an expectation that health reform might help from a cost standpoint, and obviously, we're not seeing that at all," Lindsay said. "If anything, costs will be increasing over the next two years."
Lindsay cites cost-shifting as the federal government begins reducing reimbursement to doctors and hospitals for Medicare patients as one price booster. But Meinhold argues that won't be an issue in Colorado, where a provider fee, generating federally matched funds, helps increase reimbursements and prevent cost-shifting.
In response to widespread cost concerns, Colorado's insurance commissioner ordered a review of all 2010 premium increases. The review found that reform accounted for no more than 5 percent of the increase for any plan, with most reform-related hikes falling in the 2-percent-to-3-percent range.
Colorado already had many of the provisions required by the federal law in place last year, said Steve Roper, president of Roper Insurance and Financial Services. So the premium increases were minimal this time. That doesn't mean it will hold true in the future, said Roper, who does business in other states, which he said saw "a tremendous impact."
Still, some would argue it's a price worth paying. Colorado employers face premium hikes every year, often hefty hikes spurred largely by medical inflation. But for last year's relatively minimal reform-related increases, employees actually received something, said Denise de Percin, executive director for the Colorado Consumer Health Initiative. For instance, provisions now implemented in all health-care plans include no lifetime limits, 100-percent coverage for preventive care and no pre-existing condition restrictions for children.
Michael Enright, whose son has Type 1 diabetes, has no complaints about reform changes. "Imagine my concerns for his health later in life, if there's a lifetime limit on his coverage," said Enright, president of AAA Service Plumbing, Heating & Electric Inc. in Arvada. "Just his medications are $950 a month," said Enright, who provides "generous" health-insurance coverage to his 60 employees and their families.
A self-proclaimed contrarian, Enright criticizes his peers' cost complaints and their calls for tax breaks. "These fund things that are important to society - things that are going to help us thrive. If a business has to have all kinds of breaks to survive, they have no business being in business."
Breaking the broker?
Of the new reform provisions being implemented this year, only one is creating a big stir in the business community: the Medical Loss Ratio. The provision requires that 80 percent of premiums for individual and small group and 85 percent for large group go toward medical, not administrative, expenses. The National Association of Insurance Commissioners then ruled that broker fees must be calculated as administrative costs.
One feared response, which Roper said is already becoming reality in the individual market, is that companies will cut broker commissions, putting the future of that profession in question. For the National Federation of Independent Business, the first point of contention with the MLR provision is ideological: "We don't believe it's the government's job to be telling people how much they can spend in administration," said Tony Gagliardi, NFIB Colorado/Wyoming state director.
The NFIB and more than 25 states, including Colorado, joined a lawsuit claiming the individual mandate - which requires all Americans have insurance - is unconstitutional. A Jan. 31 ruling by a federal judge in Florida evened the score to 2-2, siding with a fellow judge in Virginia, who agreed Congress had overstepped its constitutional bounds. Two other lower-court rulings dismissed the constitutionality claims. The Florida judge went further than his colleague, however, ruling the entire law should be repealed. The case appears headed for the U.S. Supreme Court.
But more importantly, Gagliardi said, now is not the time, in the midst of this massive reform, to run the brokers out of business. "I have members who have told me: If it weren't for the broker, I would have no clue even knowing where to begin."
Roper predicts many brokers will close shop, unable to provide the level of service consumers want with lower pay. "It's going to be 1-800-GOODLUCK. I foresee a lot of self-service models, which are not effective. Try getting help from Microsoft."
For his business, staying apprised of the reform rules has already required assigning one employee to the task full time. It's costly, time-consuming and requiring him to change his business model, which he says many of his baby-boomer colleagues are not willing to do. "They've spent their whole careers getting to this point, and now with all of the changes, they aren't willing to make that leap," Roper said.
Some brokers might turn to a customer-fee-based model, but that places another burden on small businesses, many of whom won't be able to afford it, Roper said.
Rather than focus on the unknowns, businesses should look at what is happening right now (see sidebar) and decide how it affects them, Meinhold said. Then, have patience and take part in the process, she said. "It's going to take us time to get it right."
Obama-Care Issues and Answers
Exchanges: Armed with stakeholders' suggestions that it start with a Colorado-only exchange with quasi-governmental oversight, the state Legislature is forming the governance body, which will outline recommendations for creating the exchange (or exchanges). Chief business issues to watch: Will "small employer" (eligible for exchanges in 2014) be defined as 50 or fewer, or 100 or fewer, and will there be two separate exchanges, or one combined exchange for individual and group plans?
Small-business tax credit: While many brokers contend the credit is too small to make a difference, the state says insurers are reporting an increase in the number of small businesses buying policies, and that many companies could be saving thousands of dollars, but don't know it.
At-risk pools: Many states have reported low participation in the high-risk pools, aimed at sole proprietors and individuals unable to find insurance because of pre-existing conditions. But the state says, with more than 450 Coloradans signed up as of January, its program is on track. Launched in July, the state estimated 4,000 people could benefit.
For more information: www.Colorado.gov/healthreform
• Medical Loss Ratio (MLR) requirements for health plans
• HSA and FSA limits on nonprescribed items
• Employers can participate in CLASS, federally subsidized long-term care
• Penalty for nonqualified HSA expenses increases to 20 percent
• Small groups can adopt a simple cafeteria plan
• Small group wellness credit available
• 1099 reporting for business transactions of $600 or more
• Annual reports to HHS on improving quality of care and wellness
• W-2 reporting of employer and employee share of premium (reported 2012)
• Uniform explanation of coverage