Around this time last year, the U.S. Supreme Court was deliberating the constitutionality of the Affordable Care Act aka ‘Obamacare’ and the presidential election was just more than six months away. Today, both issues have been settled and it appears ‘Obamacare’ will remain the law of the land. What does this mean for your clients and your business?
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As I’m writing this, the U.S. Department of Health and Human Services and Centers for Medicare and Medicaid Services are drafting thousands of pages of regulations (about 1,500 pages per week) that will forever change the way the individuals and small businesses (less than 50 in 2014 and less than 100 in 2016) pay for health insurance.
In the largest redistribution-of-wealth scheme this country has ever seen, ‘Obamacare’ will begin a series of annual assessments and taxes on insurers to the tune of over $14 billion in 2014 and $18 billion in 2018. Without getting too granular, the law will attempt to do what Massachusetts did in 1996 and 2006 all at once. It will materially change or eliminate underwriting provisions designed to manage risk in the individual and small group market —and it will pick winners and losers when it alters the methodology insurance companies use to properly assess risk and charge the appropriate premiums for that risk. In most markets across the country, individuals and small groups will see their premiums increase by 50 -200%.
Why? Because health insurers will be forced to assume more risk. They will be required to eliminate pre-existing condition limitations and offer guarantee issue coverage; eliminate medical underwriting and implement modified community rating; and, narrow the cost difference between the oldest and youngest down to three to one. As a result of these insurance market reforms, insurers will be forced to pass those added costs on to individuals, most small employers and their employees and it will essentially have the unintended consequence of raising premiums for almost everyone to pay for it.
There is general agreement that insuring the uninsured is a noble cause — the question is can we afford to do it the way ‘Obamacare’ and its one-size-fits-all construct has been designed and at the pace it is being dictated? And the bigger question for brokers and advisers all over this country is how can you help your clients mitigate the financial impact and in so doing, bolster your value proposition?
Success is often defined as the intersection of opportunity and preparation. Hopefully you did the hard work of preparing for this outcome and you are positioned to take advantage of the opportunities that are right in front of you. Identifying safe harbors for your small group clients will be essential to your success and in most cases, your survival.
As a trusted adviser to your clients, you will need to explore creative strategic alternatives like private insurance exchanges, self-funding and co-employment partnerships to name a few. You will also need to offer more value to your clients in the areas of risk management, compliance, health and wellness, communication and education, individual insurance and investments and even some basic human resources services.
‘Obamacare’ is forcing everyone in our business to answer the question: Do I look at my business like an ATM machine or an investment? I make no judgments about your choice and will just leave you with this thought — if you have an ATM mindset and you are servicing the individual and small group markets, time is short and the tsunami is coming. Seek higher ground as soon as possible.