Benefits Consultants, Insurers Guide Clients through Reform

Congressional leaders are working to pass one major bill in each house that aims to remake the country’s healthcare system, particularly expanding insurance coverage to a good portion of the nearly 47 million Americans who don’t have it.

Although details need to be worked out, reform could include a requirement for individuals to buy health insurance, subsidies for people who can’t afford it or a ban on certain industry practices such as denying coverage based on pre-existing conditions.

Irvine-based professional employer organization Emplicity Inc. will focus “squarely on guiding” its clients, which have an average of 15 to 20 workers per business, “through the whirlwind of change” as reform works its way through Congress, Chief Executive Vic Tanon said.

But “we are not going to predict” what will happen with reform, Tanon said. His company provides health benefits to its customers through what’s called master insurance policies with Kaiser Permanente and Health Net Inc. Emplicity pays for an overarching healthcare coverage plan—which is just one option for clients—that smaller businesses can join, oftentimes for less than creating their own policies would cost. Tanon called it a “Costco effect—the more you buy, the better your price is.”

Reactions to the Reform

Ron Mason, a principal in the Irvine office of Stamford, Conn.-based consulting firm Towers Perrin, said his clients’ reactions to healthcare reform have ranged from “passive ignorance” to a “more aggressive, ‘I’m going to try to take control of my destiny here’ (attitude).”

Negotiators for insurers are falling more on the passive side as many predict the reforms will have little impact on their industries.

“If there’s anything in there for healthcare reform, it’s pretty small,” said Lee Reichenbach, a Newport Beach-based principal at Hewitt Associates Inc., a Chicago-based human resources service consulting company.

There’s still “a long way to go” before anyone knows what reform will look like, Reichenbach said.

On the other side of the spectrum, some employers are bracing actively for higher costs resulting from any kind of healthcare reform.

A September survey of 160 employers by consulting firm Wat-son Wyatt Worldwide Inc. said that 73% of them felt that costs would rise with reform.

If businesses are mandated to provide health insurance for their workers and pay a major portion of the costs, it could substantially raise costs for a subset of companies (many larger and midsize employers already are required to provide health insurance).

Late last month, published reports said a merged bill being worked out in the Senate would not require businesses to provide health insurance, also known as employer mandated insurance, but large companies would owe significant penalties if their workers needed government subsidies to buy coverage on their own.

Businesses have been wary of employer mandates. The Watson Wyatt study showed that only 20% of respondents would support an employer mandate, while 60% were in favor of mandates on individuals to buy health insurance.

Individual Mandates

Businesses tend to look favorably on individual mandates because they can push insurers to reduce healthcare costs if everyone is required to carry insurance. And insurers say if healthcare reform bans them from practices such as the denial of coverage for pre-existing medical conditions, it would be more cost-effective to spread insurance risks among a larger pool of people.

“If you’re just going to say to the insurers, ‘we want you to pick up everybody,’ then you can’t do that unless you have an individual mandate and you really enforce it,” said Paul Feldstein, a professor of healthcare management at the University of California, Irvine’s Merage School of Business.

No matter what happens, employer-sponsored insurance coverage should continue, Feldstein said.

“I don’t see the employer system going away for quite a while,” he said.

Emplicity’s Tanon said he still expects that employers will be able to offer healthcare to their workers, but said he also sees “a possible government solution on the horizon, and I never thought I’d ever say that.”