As business owners, we already know that our health care costs are going to increase next year. And probably the year after that too.
As I write this, rate requests from insurance companies to their state’s regulators are coming in and the numbers don’t look good. A recent story in the New York Times reports: In Texas, Blue Cross and Blue Shield is requesting rate increases of nearly 60 percent for 2017. In Oklahoma, Blue Cross and Blue Shield has proposed increases that average 49 percent. And in Missouri, Humana has filed for a 34 percent increase. All three carriers say they have lost money on many policies sold to individuals and families under the Affordable Care Act. Other reports are showing huge increases proposed for Maine (14-24%), Maryland (12-16%), Washington (7-20%) and Florida (18% average). And there’s still more to come.
Why? Many reasons are given. The health care exchanges are not attracting enough people, particularly the younger demographic, to pay for the old. Reinsurance schemes to subsidize the industry, like the risk corridor program have not worked. Big insurance companies, like United Healthcare, Humana, and Aetna are losing money and threatening to pull out of the exchanges. Medical loss ratios are just too high.
It’s our job as business owners to know this. And it’s our job to plan for the future, minimize surprises, and figure out how to manage through this. We have people that rely on our decisions. Health care is a significant expense to our companies and not preparing for what’s to come could be costly, even catastrophic. So, with the upcoming elections looming in November, what can we expect? It’s not as complicated as some may think. In fact, there will only be three outcomes for us to consider.
Outcome 1: The Democrats Win
In this scenario, Hillary Clinton wins the Presidency and the Democrats take control of both Houses of Congress. Plenty of experts feel Clinton has a good chance of beating Donald Trump and many pundits believe the Senate is in play. However, most of those same pundits see the House staying in Republican hands. But if the Democrats do win it all in November, you can expect the Affordable Care to live for at least another five years, if not permanently. This will be Clinton’s chance to clean things up and fix problems caused by the law. She’ll stay the course. And double down on Obamacare.
Clinton has promised to defend and expand the Affordable Care Act. She will also support letting people over 55 years old buy into Medicare. She wants to bring down out-of-pocket costs like copays and deductibles and reduce the cost of prescription drugs. She will want to incentivize states to expand Medicaid—and make enrollment through Medicaid and the Affordable Care Act easier. She will also move to expand access to affordable health care to families regardless of their immigration status. She has also promised to expand access to rural Americans and defend access to reproductive health care. She will also propose more funding for community health centers and the health care workforce.
How could this impact your business? The good news is that there will be more certainty. You may not support Obamacare or Clinton, but you’ll definitely know what’s ahead – an expansion of it – and you can evaluate your health plans and self-insurance options with this in mind. If she’s right, the costs of health care may stabilize with more government commitment and funding. If not, then higher taxes may be required to fund these initiatives and its assumed bureaucracy unless savings can be found elsewhere.
Outcome 2: The Republicans Win
In this scenario, Trump wins the White House and the Republicans have dominant majorities in both the House and Senate. No one knows for sure if this outcome is realistic, given the unpredictability of this year’s elections. But it could very well happen. So what then?
Trump and the Republicans would immediately move to completely repeal Obamacare, which includes the employer mandate to provide health care. He will want to free-up insurance companies to sell their products across state lines. He wants individuals to be able to deduct the cost of health care on their tax returns and to put money into individualized Health Savings Accounts, which have become enormously popular for employers. He will require price transparency from all health care providers, especially doctors and health care organizations like clinics and hospitals. He will provide block grants to states for their Medicaid expenses and leave those decisions at the local levels. He promises more opportunities for drug companies to get their products to market faster too.
Whether or not you agree with this plan, you can be sure that if the Republicans control Washington you can expect uncertainty over the next few years. Unwinding a law that’s been in place since 2010 and which affects 20% of the U.S. economy will not happen overnight or without a lot of yelling and screaming. Health insurers will be scrambling to adjust. On the upside, unencumbered by regulations, look for insurers to come up with many new and innovative plans for businesses like ours. Regardless, you can expect to be spending a lot of time becoming a health care expert in order to keep up with the changes. No one knows if the Republicans’ plans will reduce our health care expenses over the long term, but with uncertainty comes opportunity.
Outcome 3: Stalemate
Given the last eight years, this seems the more likely outcome. Clinton may win but face a Republican Congress (even a Republican-controlled House would be enough to throttle most of her plans). Trump could win but will need to battle either a Democratic-controlled Congress or a Congress made up of enough people that oppose him where moving forward with his plans is difficult at best.
For business owners, this stalemate scenario would mean more of the same. The Affordable Care Act would survive without anything significant being done to address its weaknesses. Sure, small adjustments may happen, but for the most part we would continue to face a health care system riddled with inefficiencies and unpredictably rising costs. Which is exactly what we’ve been dealing with for decades.
No matter what happens, and in the short term, we can expect a continuation of premium increases between 10-20% for at least the next two years. That’s because it’s going to take at least that long, and probably longer, for any change in Washington to trickle down to our bank statements.