Why we need to rethink and redesign small business employee health plans

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January 9, 2015 by Tony Novak

This past week we read a flood of news stories and research reports from different perspectives about a dramatic unintended effect of Obamacare on routine medical care for working-class Americans. Taken collectively, these findings are significant and will eventually influence employer behavior and employee benefit trends.

Prior to 2014 a typical doctor’s office in the U.S. would apparently see two middle income patients for every low income patient who was covered under some type of Medicaid program. Now doctors’ practices around the country report that the ratio has “flip flopped” due to the rapid expansion of Medicaid and middle income people learning what’s not covered by their health plan. Now two out of every three patients a typical doctor treats today are on Medicaid. Other research indicated that middle income patients are no longer making appointments with physicians for fear of the out of pocket costs not covered by insurance.

We already knew that a significant portion of working-class people avoid or delay medical care due to the cost. Doctors are simply seeing their patients covered by Obamacare less frequently than they did under earlier health plans. Some might even argue that this was an intended consequence of the law. But the millions of newly insured low income people are taking advantage of that new coverage to seek treatment since Medicaid patients do not face this risk and have quickly increased health care utilization.

The federal government says that more than half of us already have unpaid medical debt showing on our consumer credit reports and this problem appears to be getting worse. Medical debt has always been the leading cause of personal bankruptcy and that statistic seems destined to only get worse. We are only beginning to get a glimpse at the data indicating that an insured but chronically ill individual is more likely to face bankruptcy now than prior to Obamacare. Medical providers installed more aggressive debt collection procedures after the health reform law required all their patients to carry medical insurance but intentionally left the uncovered portion of the medical bills much larger than in the past

The underlying realization that the bulk of working class Americans can’t afford the Obamacare health care system is still building momentum and will eventually dominate the discussions about employee benefits and health care reform. As employers gain a better understanding of the realities of the health care law, more will move away from the primary health insurance business and focus on the more immediate problem of helping employees manage cash flow. Individual employees are better off buying their own insurance even as expensive and distasteful as the experience may be.

Employers will learn to focus on the small portion of the problem that they can control and avoid the larger health care crisis which is beyond their influence. The federal government apparently agrees and introduced new regulations designed to encourage employers to focus on supplemental insurance rather than primary health insurance. It is more clear than ever before that small business employers should not be in the primary health insurance business.

I predict that we will see evidence of this reaction in 2015 as a growing number of employers – especially those with under 50 employees – rethink and redesign their employee benefit plans.

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