How to Reduce Risk Associated with the Next Healthcare Act

CEOs of the thousands of companies in healthcare's mammoth supply chain are learning to live with huge uncertainties as Washington attempts to repeal and replace Obamacare.

Health-insurance CEOs aren’t the only business leaders who are anxious about the outcome of Trumpcare negotiations on Capitol Hill. Leaders of the thousands of companies that are part of the industry’s mammoth supply chain also are learning to live with huge uncertainties as Republicans in Washington, D.C., attempt to keep their promise to repeal and replace Obamacare.

Shaun Francis is one of them. As CEO and an equity partner in EHE, a 104-year-old company that provides physical examinations through employers, he’s having to figure out what impact the Obamacare-to-Trumpcare transition may have on the preventive-care market where EHE operates. And then Francis has to strategize how to react to whatever changes come about.

“You have to keep your eye on it and understand how it’s going to impact your business and modify your plans accordingly,” Francis told Chief Executive. “You have to keep your eye on all these third-party intervenors to make sure you know what’s on the horizon.”

Among other potential effects of new healthcare legislation, the major employers that are EHE’s clients could hesitate to contract the company for the physical exams it conducts depending on how incentives for doing so shake out in the new law.

“You have to keep your eye on all these third-party intervenors to make sure you know what’s on the horizon.”

These concerns affect all healthcare companies
Francis isn’t alone in his uncertainty. While CEOs of many medium-sized and large companies have been able to proceed with their own approaches to providing health insurance through the ups and downs of Obamacare and the latest chapter which may lead to Trumpcare, many leaders of small and mid-market companies are watching the proceedings warily as well.

That is because under the new legislation being considered, called the American Health Care Act, tax credits of up to 35% of health costs for businesses with fewer than 25 employees in 2020 are deleted. The Congressional Budget Office said that a repeal of the credit would prompt fewer employers to offer health insurance because it would eliminate the current penalty for employers that don’t offer it, among other reasons.

In fact, the CBO said in assessing AHCA, by 2020, employers would be sponsoring 2 million fewer people by 2020 than they do now and 7 million fewer by 2026.

At the helm of a company which he and an investor group acquired in 2016, Francis is trying to focus on shoring up EHE’s business model and on creating a modern brand for its B2B services. EHE doctors conduct annual physicals across the country for big national self-insured employers as well as consumers.

Here are 4 ways in which Francis says healthcare CEOs can deal with the uncertainties created by the AHCA debate.

1. Focus on your offering. No matter what’s going on in the background—even if it seems chaotic, like now—“you need to create a service … that other people want. That means we need to have employers look at what we do and say, ‘This makes sense for us,’ regardless of whether there’s a regulatory incentive to do it.”

2. Play the new law. On top of ensuring your service is desirable and top-notch, Francis said, CEOs need to “layer the regulatory and incentive environment on top of that. How can it accelerate your growth? For example, for EHE, Obamacare now stipulates that preventive care is favored. As far as we know, the new legislation will stipulate the same thing. In this case, the regulatory environment might accelerate our growth.”

3. Be wary of penalties. One provision of Obamacare that’s widely reviled by CEOs is the so-called “Cadillac tax.” Starting in 2020, it imposes a 40% excise tax on employers’ health-insurance plans that cost more than $10,200 for individuals and $27,500 for families. Republicans have considered keeping the Cadillac tax, but pushing back its implementation to 2025.

If the Cadillac tax stays in any form, that could hurt EHE, Francis said. “If you spend too much on preventative services”—such as physical exams for employees—“that could be taxed,” he explained. “If your company is based on a service that’s only relevant if it has reimbursement, then that could be catastrophic. But we have a great service that was around for decades before Medicare and even health insurance.”

4. Lobby—or not. The forces at play in determining the fate of U.S. healthcare are so large, Francis said, that “it’s almost too difficult even for large companies” to have an impact via lobbying. So EHE stays on the bench in that regard.

“But if there were something catastrophic—like someone tried to make it illegal for some reason to get a preventive exam—then that would get our attention,” he said. “But provided that doesn’t appear to be the case, we save our resources and deploy them elsewhere.”

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