Employers Blame Reform for Premium Rise -- but Maybe It's Just Politics

Some big employers are blaming healthcare reform for the 12 percent average rise in their workers' share of insurance costs for 2011. But the insurance industry trade association says it ain't so. The main reason for insurance cost growth, says a spokesman for America's Health Insurance Plans (AHIP), is, as usual, the continued increase in health spending. If that's the case, these corporations must have some political reason for attacking reform so close to an election in which health care is going to be a major issue.

What's truly remarkable about the statements coming from Boeing (BA), Verizon (VZ) and Caterpillar (CAT), among other companies, is that two of those three -- Verizon and Caterpillar -- were previously reported to be considering dumping health coverage and giving their employees money to buy insurance on the state insurance exchanges that will be launched in 2014. Even with the fines they'd have to pay the government, these firms stand to save a bundle if they take that approach. From that viewpoint, healthcare reform might be the best thing that ever happened to corporate America.

Nevertheless, a Towers Watson survey of employers found that the majority believed reform would drive up their healthcare costs. While no specific reason was cited, the report said that if costs did grow as a result of reform, most employers would either pass the increase on to employees or reduce their benefits.

In any case, few provisions of the Affordable Care Act have gone into effect yet. Those that have -- such as elimination of pre-existing condition exclusions for children, extending dependent coverage to age 26, and the first step toward eliminating lifetime coverage caps -- may account for 2.5 to 5 percentage points of the overall increase in insurance costs, according to one benefits consultant. But Helen Darling, president of the National Business Group on Health, says the reform-related portion of the increase is only about 1 percent.

AHIP spokesman Robert Zirkelbach denies that reform is driving premium growth in 2011 -- a change in tune from some insurance companies' earlier statements. "In fact, the evidence is very clear that the rise in medical costs is a key factor in driving up health insurance premiums," he says.

On the other hand, Zirkelbach notes that companies with low-benefit plans may be penalized if they have to buy more comprehensive policies to meet the government's minimum-benefit requirements. The Administration has already crossed that bridge by granting temporary waivers to companies that provide "mini-med plans" to low-wage workers. But the big corporations that blame reform for higher costs already meet the benefit standards. And their plans are self-funded, so most of the growth in their employees' costs can be attributed directly to the claims that they're paying out to healthcare providers.

Corporate executives may worry that, in the long run, their taxes will rise because of healthcare reform, or that the fines for dropping coverage will be increased. Some of them may be concerned about the new excise tax on "Cadillac plans," which begins in 2018. That's a legitimate fear, considering the rapid growth in costs, but it's still over seven years away.

So it's hard to escape the impression that the corporate chieftains are simply heaping abuse on the Affordable Care Act because they want the Republicans to win the election -- and equally important, to recapture the Presidency in 2012. As an added bonus, they can convince workers that it's not their fault that the employees' share of insurance costs is rising so fast.

Will it work? Hard to say. But methinks that some company men are talking out of both sides of their mouth.

Image supplied courtesy of Flickr.
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Ken Terry

Ken Terry, a former senior editor at Medical Economics Magazine, is the author of the book Rx For Health Care Reform.

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