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Smart CEOs Aren’t Waiting For Washington To Fix The HealthCare Crisis

When the U.S. Senate rejected a bill that would have repealed parts of the Affordable Care Act and subsequent reform efforts tanked, it became clear that the nation’s healthcare system won’t see meaningful reform this year—or next.

When the U.S. Senate rejected a bill that would have repealed parts of the Affordable Care Act and subsequent reform efforts tanked, it became clear that the nation’s healthcare system won’t see meaningful reform this year—or next. “I would not bet on anything becoming law before the 2018 election,” says Matthew Fiedler, a fellow with
USC-Brookings Schaeffer initiative on health policy in the economic studies program at Brookings Institution, a Washington, D.C. think tank.

That uncertainty leaves employers in a holding pattern. With the mandate still in effect, smaller businesses nearing the 50-employee threshold may put off hiring decisions. The requirement to cover specific essential health benefits and pre-existing conditions also remains in force—for now. Plus, the so-called “Cadillac Tax” scheduled to take effect in 2020 will impose a 40 percent surcharge on the value of employer-based health premiums above specific thresholds.

“That’s still sitting out there and we need that resolved,” says Jerre Stead, CEO of IHS Markit, a London-based analytics solutions provider with key operations in Englewood, Colorado, where unemployment has fallen to 2–3 percent. “In recruiting today, more and more people ask whether you’re going to have healthcare coverage in the future. And the answer is, ‘Yes, we hope so.’ That’s not the answer I’d like to give. If there’s any place in the country where folks can get a job at the drop of a hat, it’s here. So, as an employer, you want to give them that certainty.”

At the end of the day, Stead says “taking care of our colleagues is just something we’re going to do.” If the tax stays on the books, then he’ll have no choice but to pay it.

With the escalating war for talent, health insurance is becoming a competitive requirement. Midsize companies (50–499 employees) mirror larger outfits (500-plus employees) in prevalence of healthcare plans, according to Transamerica’s employer survey report: in both categories, 98–99 percent offered plans, compared with 57 percent of small businesses.

The specter of rising costs has not dampened companies’ expectations that they will continue to provide coverage, according to the annual employer survey by Willis Towers Watson, which found that in 2017, employer confidence in offering healthcare benefits rose to its highest level since the ACA was passed, with 92 percent saying they were “very confident” they would still be offering benefits in five years, up from 87 percent in 2015. And survey respondents were under no illusions about future affordability of healthcare; they anticipated healthcare costs would rise by 5.5 percent in 2018, compared with 4.6 percent in 2017.

Exploring DIY Solutions
For businesses, ballooning healthcare costs are simply a fact of life. The average premium for family coverage hit $18,764 in 2017, up from $11,480 in 2006, according to Kaiser Family Foundation stats. Total U.S. healthcare spend for 2016 reached nearly $3.4 trillion, up 4.8 percent from 2015. What’s more, according to the Centers for Medicare & Medicaid, healthcare spend is projected to reach nearly 20 percent of GDP by 2025.

“Our healthcare system is a mess,” says Zane Tankel, CEO of Apple-Metro, who began self-insuring two years ago as a way of bringing costs down.

However, many say the noise around the healthcare legislation debate is distracting CEOs from exploring solutions. Eric Helman, chief strategy officer for the employee benefits firm Hodges-Mace, says his meetings with C-Suite members get mired in talk about Capitol Hill. “It’s all about whether we will have healthcare reform. So, a CEO will only spend a couple of hours a year on benefits and that conversation is consumed with a bunch of stuff that doesn’t matter.”

Yet, regardless of the details, any future bill is won’t solve the problem, argues Paul Johnson, CEO of Redirect Health. “[The legislation] is all about how you pay for healthcare, not how you fix it,” he says. “The existing system is ripping people off because it’s not designed around the customer. It’s designed around the industry. And the industry is so freaked out now, they’re saying the only answer is single payer, because they’re terrified of having to operate in a real marketplace where competition exists.”

Such a marketplace would force the industry to address the waste and inefficiency responsible for soaring costs. Studies, including Harvard’s examination of Medicare, estimate that waste in the U.S. system—overcharging, overtreatment, administrative complexity and fraud—accounts for between one-third to one-half of total costs.

“We think it’s much closer to 50 percent,” says Johnson, who blames, in large part, hospital buy-ups of medical practices, which then owe a quid pro quo to the hospitals. Redirect Health aims to bring prices down with a system that offers employees, particularly those making less than $15 per hour, unlimited access to primary care, with the long-range goal of keeping them out of the hospital labyrinth.

“We’ve found you can do that for less than $100 per employee,” says Johnson. “To be successful at disrupting the healthcare system, we have to disrupt both the supply and the demand side.” He points to Uber as an example. “Uber didn’t go after the people going back and forth to the airport. They went after the drunks in downtown Scottsdale. They disrupted supply and demand.”


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