Dan Foster: ACA will benefit business
CHARLESTON, W.Va. -- In 1942, Congress passed a law that, unknowingly at the time, redefined American society. In addition to many other provisions, the Stabilization Act made it clear that wartime wage and price controls did not apply to fringe benefits, such as health insurance.
In a rush to compete for the best employees, many employers began to offer medical coverage as part of total compensation. This historical accident propelled the United States to become the only industrialized country in which employer-sponsored health insurance continues to play a major role. Statistics indicate that nearly 60 percent of insured Americans still get coverage through their employers, a rate that has decreased only slightly over the years with some state-to-state variability.
What will happen after Jan. 1, 2014, with full implementation of the Affordable Care Act and health insurance exchanges? Many companies are concerned that the ACA will increase their overall costs and suggest that they might just stop offering employee health benefits. They may then encourage their employees to get insurance through the new exchanges, believing that this strategy will be a better business model. There is also a threat that employers will lay off workers or shift more people to part-time status in hope of saving money.
The ACA law is complicated, and since many of the provisions do not go into effect for a year, federal officials are still tweaking the fine print, including the definition of full-time work. The simple facts, though, are that businesses with fewer than 50 full-time employees will not be required to provide insurance, while those with 50 or more who fail to offer "adequate" health coverage could be responsible for significant financial penalties.
Not surprisingly, the hospitality industry is likely to be greatly affected because its many low-wage employees don't have coverage. Yet, in contrast to the fears of hotels and restaurants, many other small business owners acknowledge that the ACA has at least led to lower premiums. For instance, Lisa Goodbee, owner of a Denver engineering firm, claimed that the health-reform law was the major reason she decided to offer health coverage to her 15 employees for the first time in the firm's 20-year history. In the past, she said, quotes she got from insurers were "ridiculous" - but, this year, they were far more reasonable. Meanwhile, Ron Nelson, who operates a five-employee Las Vegas garage-door company, has already received tax credits the law makes available to certain small businesses that provide health benefits.
Because of the previously implemented provision limiting administrative costs for group health plans, a Commonwealth Fund study shows that businesses have saved money, while insurance companies have grown leaner and boosted profits. Specifically, nationwide data indicates that groups with up to 50 employees received $321 million in rebates due to the new regulation, while their insurers reduced overhead by $190 million and increased their bottom lines by $226 million.
Although for some it might seem like an easy decision to forgo providing coverage, companies should consider the following reasons to continue doing so:
• The benefit is a useful recruitment tool.
• Workers stay healthier and are more productive.
• There is potential loss of loyal and experienced employees because of an expected increase in their out-of-pocket costs or of their conversion from full to part-time employment.
• While health coverage is tax-deductible for employers, the large penalties are not.
• Workers who are forced to find their own health plan might expect additional compensation, and wages also are not tax-deductible.
These dynamics presumably came into play with unfolding of the similarly structured 2006 Massachusetts healthcare act. Despite the same concern about employers eliminating employee coverage, the percentage of employer-insured workers in Massachusetts has remained consistent and has actually increased slightly in the nearly six years since the law's implementation.
So, in retrospect, it would seem that during World War II, the corporate world responded to a dramatic change by acting in its long-term interest and offering employees health insurance. Despite dire predictions, employers will likely do the same in 2014, if they consider fact rather than emotion.
Foster, a Charleston physician and state senator, was chosen as the Sunday Gazette-Mail's West Virginian of the Year because of his tireless crusading to reform the health system.