Benefit Group president sees pros and cons in health bill
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By Jesse Roman
There’s so much in the federal health-care law passed last month that few people, even the experts, can explain it all.Robert Gaydos, president and founder of Benefit Group of New England (now called BGNE), may come the closest.
Gaydos, whose company helps more than 200 employers across New England figure out their health-care plans, has read all 2,700 pages of the bill and has designed and hosted webinars to explain the nuances of the new law and how it affects employers.
In 1999, Gaydos co-founded Choice Plus of New England, which was a plan manager for ERISA health plans. In 2001, Gaydos co-founded the Waterbury-based Choice Care Card, which administers health reimbursement accounts and flexible spending accounts.
Gaydos was a member of the Vermont Public Oversight Commission from 2001 to 2003, which reviews hospital budgets and certificates of need. Since 2006, Gaydos has been on the CIGNA National Producer Advisory Council, and in 2008 was appointed to the MVP Healthcare Broker Advisory Group.
The Stowe Reporter recently talked with Gaydos about the federal health-care law, and what it means for Vermont’s businesses and insurers.
Question: What immediate impacts do you foresee in Vermont from the new health-care law?
The only short-term effect for Vermont is the small-business tax credits. These tax credits are effective immediately, and available for businesses that employ 25 or fewer full-time equivalent employees with an average annual wage less than $50,000 (excluding the owners’ salaries). These tax credits are significant for employers with fewer than 10 employees, which is the majority of Vermont businesses. Information is available at www.irs.gov/newsroom/article/0,,id=220809,00.html.
Q. Are other states more affected?
Yes. In 1992, Vermont enacted significant small-group health-insurance reform with Act 52. This act implemented guarantee issue, community rating, and tight controls concerning limitations for pre-existing conditions.
In Vermont, small groups are not rated based on health status, age, sex, etc. Approximately 30 states never implemented these types of significant insurance reforms. For these states, adapting to immediate health-insurance reforms (the elimination of pre-existing conditions on children, increasing children age to 26, removing lifetime limits, etc.) will have premium impact. Later in 2014, when these states fully implement the insurance exchanges, they will have to comply with guarantee issue, community rating, and the elimination of pre-existing conditions. This will have significant rate impact for these states.
For example, community rating creates an average price rather than a varying price. Hence, younger workers will see their rates double, while older workers would see their rates drop slightly. Vermont moved to community rating 18 years ago.
Q. Do you think insurance premiums in Vermont will ultimately go down, up or stay the same as a result of this law?
The Vermont small-group health-insurance market (1 to 49 employees) functions well, especially in comparison to other states. We have the highest market penetration of consumer-driven health plans in the U.S. This has kept our average small-group premiums below the national average. Hence, there will be less trend and rate effect in Vermont than other states.
In fact, there is a chance that more carriers will enter the Vermont market, and this increased competition would be a good thing.
The law would change the small group insurance market from the current 1-49 employees to 1-100 employees. Employers with 50-99 employees are currently rated based on claims and demographics. Effective 2014, these groups would become guarantee issue and community rated, and would eliminate pre-existing conditions limitations.
The individual health-insurance market in Vermont is virtually nonexistent. Allowing individuals to purchase from the same insurance market as small business (which is one of the purposes of the insurance exchanges) will dramatically improve the plan choices and costs for individuals in Vermont.
Q. What are some of the primary concerns your clients express about this bill?
Concerning the new health reform law (PPACT), Vermont employers are lost. They do not understand PPACT. They are reaching out for guidance. They have little faith that anyone can solve their problem (the cost of health insurance is rising 2.5 times faster than inflation).
Over the past decade, I watched as business owners gave up and almost seem to resign themselves to this burden. They are very frustrated. We expect that now that this law is in place, they will learn and adjust.
Why do employers provide health insurance? The logic is to attract and retain employees. However, that is really not the case anymore. Over time, it has become somewhat an accepted moral obligation. We expect that employers will struggle over the next three years as they review this new law, learn the impact on their businesses, and adjust their business strategies appropriately.
Q. Has the reaction been positive or negative among businesses you work with?
Negative. For businesses owners, this is not conservative vs. liberal ideology. This is application, functionality, and fiscal impact.
Business owners have long understood that the state and federal governments place financial and administrative burdens on them. They are resigned to this fact.
Since the recession took root in late 2008, most business owners are living in a new world where credit is difficult and where the future is unknown. They have learned to operate on less. They have lost predictability.
While most business owners do believe that the worst of the financial crisis is over, they also believe that we are years away from full employment. They will act slowly, deliberately, cautiously, and with one eye over their shoulder, waiting for the next shoe to drop.
Q. What, in your mind, are the big questions or changes in this law that remain unanswered or ambiguous?
Functionality and financial projections. PPACT is perhaps the single largest government intervention in our history. The unintended consequences will be vast. There are many parts of this law that clearly do not function in the real world (premium subsidies, out-of-pocket subsidies, improved Medicare costs, improved utilization of medical procedures). If even one part of this law fails, then the entire fiscal projection falls apart.
This law projects that 32 million currently uninsured Americans will purchase insurance from the insurance exchange or access Medicaid. Under this law, we are banking on improved utilization and health status, and lower per-capita costs on these individuals. This is extremely unlikely. Economic predictions are based on rationality. Human behavior is never rational.
Then there is the basic idea of supply and demand. Under this new law, we are increasing demand immediately (adding 32 million Americans to insurance). However, it is not possible to increase supply (providers) at the same pace. It takes decades to increase the supply of medical providers. Once again, the unintended consequence of this will be vast.
Q. Who (patients, hospitals, businesses, insurance companies, or other) is the big winner in Vermont as a result of this legislation? Or is everyone a winner? Or loser? Or a little of both?
Very good question.
Small businesses benefit immediately with government subsidies.
Individuals without access to employer-subsidized insurance will benefit in 2014.
Large employers will only see increased costs and increased responsibility.
Hospitals and providers will see significant changes in compensation, and I believe that in five years, providers will see PPACT in a very negative light.
Concerning insurance carriers, the blame has been shifted. It is no longer their responsibility. They are being told what benefits to cover and not cover. They being told how much to spend on care and administration via the mandated loss ratios. They are being told who to cover and how to calculate the premiums. They are being told where to sell their products (exchanges). They are being told how much to compensate their executives (executive pay limits in the law). They are being told how much to compensate their agents and brokers.
Where is their responsibility? They have none, other than to administrate, which they are very good at. Citizens will learn that it is not the insurance company’s fault (or decision); it is the government’s decision (and fault).
http://www.stowetoday.com/articles/2010/04/16/stowe_reporter/news/local_news/doc4bc6fb11cb0d0371884108.txt
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