Take cautious approach on new health care landscape

May 3, 2010
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“The Health Care ------, Part 1”

You can fill in the above blank with a word to describe your thoughts about where things stand. There will be many people who will like your word and probably just as many who would choose a different one.  

Last August, I wrote an article about "common sense in health care reform." The legislators who wrote and passed the reform bill obviously didn't read my article. They overlooked many opportunities that I so wisely pointed out, which would imply I should be against the new legislation.

Regardless of the word chosen above, you can find fault with the legislation.

Instead of taking a position and spending effort to get people to see your point of view, let me suggest a different strategy: Forget the position you held in the past or the opinion you hold now about the reforms or about those who worked for or against the legislation. Use your energy and creativity to deal with what is in place or expected to be in place down the road. The smart people will certainly follow the old adage “Out of change comes opportunity.”

There are a few people who are likely to do everything they can to reverse the law and try to bring things back where they were before. I believe this is wishful thinking and chances of it happening are slim to none. Having said that, I do believe there will be change or evolution to the regulations. It will come in the form of regulatory clarification, some amendments to the recently passed law, a few court cases that will eventually work their way through the systems, and maybe some budget issues that will force changes here and there.

The bigger changes will come about because we live in a dynamic society. With elections occurring in the fall and a new Congress coming in January 2011, it will take a few months for the new teams to get organized, and then how long will the next health care debate take?

This assumes that our legislators have the wherewithal to step up to this issue again. A year or more has passed. All the players with a vested interested in our complex health care system are not going to sit on the sidelines and see what will happen in Washington or Lansing. They will be making decisions, creating market forces, acting in their own best interests. This will change the environment. The evolving economic climate will continue as another dimension to the health care picture.

It will be easy to get caught up in the swirl of media coverage on the latest initiatives, new seminars to learn what to do next, or engaging consultants and lawyers to make sure you don't take a wrong turn. (In full disclosure, I have to tell you I like the idea of engaging certain consultants.)

Now let me suggest my second strategic recommendation: Take a conservative approach to your decision making. Let things evolve. See what changes are offered by the insurance companies. Wait to see what the insurance exchanges really look like. Recognize that many of the provisions in the legislation occur over a long period and by the time they are scheduled to take effect they may be quite different from what is perceived today.

Even some of the provisions that are near-term changes, such as coverage for dependents up to age 26, will not be devastating. It is most likely not to become part of your plan until 2011. By that time the economics may have improved to the extent that a number of these people will be employed and not looking toward their parents’ plan. The available parents’ plans may continue to raise deductibles. And since these young people are not the typical high claims type, chances are they may not exceed the deductible and may actually improve the claims-to-premium ratio.

As I meet with many of the more experienced insurance agents and brokers, as well as the knowledgeable benefits managers in the community, I find they are just now beginning to develop strategies for dealing with the new health care plan. No one believes there will be a single one-size-fits-all approach to addressing the various matters.

As an example, a recent poll conducted among national medium-to-large employers asked the question: “Will the legislation encourage you to drop your employee coverage?” This is a group that could save millions if they just paid the penalties for dropping coverage. More than 70 percent said “No.” 

So the first strategy is: Don't panic, don’t overreact, expect the rules and the environment to change, and take it slow. Assume that prudent incremental changes will be your best approach. Align yourself with knowledgeable professionals who will advise and give you feedback on what you should work toward, not high-priced solutions that just tell you what the law says now. Make changes that can be modified easily as the rules shift. 

As a second strategy: Make sure your compensation philosophy reflects how rewarding your employees fits into your business operating strategic plan. Then you will have the tools and the guidance to develop appropriate health care design strategies. 

Part two of this discussion will focus on what strategies you might adopt in the next plan year.

Ardon Schambers is a principal with P3HR Consulting & Services LLC.

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