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Taking another look at the impact of health care reform
It has been a little over the 90-day mark since Congress passed the Patient Protection & Affordable Care Act. If you believe the frequent assessment of the American public, we have all forgotten what Congress did in March. It's a new business quarter starting July 1, so we are on to the next crisis. The media focus is now the BP oil spill. Therefore, it is to be expected that no one is thinking about health care any longer.
Maybe that is not quite right; after all, we just had the story of a Michigan woman who shot herself as a way to get doctors to look at her rotator cuff problem. She still sees the problem of inadequate health care coverage. There were some better solutions to her situation; she just opted out of the organized and longer term that may have gotten her help. I admit it is hard to do when the pain is constant — sort of a version of being “in the swamp with the alligators.”
However, with the phase-in of PPACA, the business owner and manager do have a little time to think and plan for draining the swamp — or in this case deciding on how best to prepare for the new health care environment.
Let's start with a basic strategy. Accept the fact that some form of PPACA is going to exist. Some specific regulations may be adjusted, but the underlying driver to get more people covered will be there.
More people covered means greater demand on the system, which is not geared to handle the influx of new patients. In our capitalist society, we know that more demand and no increase in supply means higher costs. As in any purchase of services, equipment or material, business needs to look at how to reduce costs.
Passing it on to the consumer is rarely a good idea for the long term. In this case the consumer is the employee. Why not adopt a cooperative strategy with the employee? In this scenario, it should be easy to get all the parties after the same objective: less money spent on health care.
The nice part of this discussion is that the cost of health care for an organization does not have to be hidden. Gather your numbers together and see what kind of a situation you have. Then decide on some basic ground rules: Coverage will not be reduced, unless agreed to; make some realistic assumptions about medical expense growth; and, finally, establish a hard, measurable objective, i.e. — "We will spend in total per employee no more than our current costs plus one-third of the annual average increase of health care costs in the region.”
In your cost figures, be sure to include appropriate administrative expenses for education, communication, etc. If you are a smaller organization, maybe it becomes necessary to link with other like organizations to have group power.
The real changes in the health care reform will occur in 2014. This gives organizations and employees three years to get their act together. The big shift for everyone is to make a change in attitude toward health care. Studies have proven that the vast majority of high-risk people can change to a low-risk status in three years. A lower-risk profile means less demand for medical services or, frequently, lower cost services. That can translate into design changes that can lower premiums and have less paid out of pocket. Consider setting aside a portion of the health care budget (think broadly — medical premiums and co-pays, workers comp, sick pay, safety programs, etc.) to focus on education, prevention and wellness. Then measure the change in the overall Health Risk Appraisal (HRA) of the participants.
As you are thinking broader in your strategic approach to managing your health care costs in the new business operating environment, perhaps you might consider other benefit plans. Is it better to have a 401(k) or an HSA? The latter can work exactly like a 401(k) but has a better tax value when employees have to spend money on medical care. There is also a lot less administration for the employer in the HSA. Maybe you can arrange to roll-over unpaid vacation or sick days into the HSA.
Getting into a "strategy mind-set" is the essential element. Involving critical partners is another key element. But once you've made the commitment, and started down the path, the opportunities will surface and wait for you and your team to grab them.
Ardon Schambers is a principal in P3HR Consulting & Services LLC. which addresses client, employee and business matters.