I believe it is safe to say that most people agree with the idea of providing health insurance to a greater number of citizens. And that is the intent of the Affordable Care Act (ACA). And it is true that several million Americans who did not have health insurance now have it.
But at what price? I’m not referring to the cost of insurance. I’m focused on the burden placed on all businesses to meet the reporting and data gathering requirements of this 11,000 page law. Most companies are forced to enlist the aid of expensive legal and accounting experts in order to even hope to be in compliance. I say ‘hope’ because not all of these ‘experts’ agree on how to proceed.
In the staffing business, it’s even worse. The very nature of staffing – employees hired for temporary assignments – complicates matters. Look-back periods, gaps in employment, monthly 1094 tracking – and the list goes on. And it doesn’t matter if you have 51 or 51,000 employees. The same rules of compliance apply.
So, at the end of the day, 10’s of millions of dollars are being spent on meeting the government’s rules on administering ACA. And not one penny of that money provides insurance to anyone.
Is there a better way? One possibility might be to look at how benefits are managed in a program that has been in place for almost 70 years – Social Security.
Social Security is actually a form of insurance. It insures that we will have income when we retire. The fund for that retirement security is based on the amount we and our employers have contributed. (Current issues related to the management of those funds and the possibility that they may not be there at some in the future could be the subject of another publication).
How This Idea Can Work.
(Note: I have no intention of writing an 11,000 page document here! I’ll let our elected officials handle that. What follows are some general ideas that can be explored.)
- Who is paying for this? The structuring of the amounts taken from employees and employers will take a great deal of study. Right now, taking roughly 9.5% of an employee’s pay is considered affordable. The employer would probably be required to make some contribution. They could volunteer to pay more than required as a recruiting tool as well as possibly earn tax credits. But the key is, payments start immediately – there is no grace period or opting out. Just like Social Security.
- When does the employee choose insurance plans? The employee can be given a period of time (90 days?) to make a decision. If the decision is not made by that time, a default plan will be issued. For employees that change jobs frequently and don’t make it to 90 days with any of them, there can be a balance limit in the fund that will require insurance to be chosen.
- What insurance can the employee choose? This is one of the best parts. Any health insurance company that wishes to participate and compete will establish plan parameters – possibly more than one plan. They will be required to present their plans in a pre-determined format in order to simplify the selection process for the employee. Once chosen, the employee will sign a form with the choice made.
- How is the insurance company paid? This could take a number of routes. One method would be to have the employer place the total amount of funds withheld/contributed into the employee’s personal healthcare fund (this would actually happen automatically – again, like Social Security). Based on the employee’s preference, the fund can be programmed to pay the determined premium to the chosen insurance company.
- What if the employee stops working? Whatever funds are left will be paid to the selected carrier until they are exhausted. If the former employee has the means and wishes to continue to place funds in the account, he can do so to keep the insurance active. If the employee leaves one position to immediately begin work with another company, the program continues unabated. And the employee gets to keep the insurance already chosen. There is no need to change insurance carrier/coverage because you change jobs! Key point – under NO circumstances are the funds ‘cashed out’ to the employee. They can only be used for health insurance.
- What if an employee is covered by a spouse/family member/ parents/other? Prove it! There would need to be standard form that an insurance carrier can provide that shows the employee is covered by some other means. The employee would request that form be sent directly to the employer – not via the employee. The form should be updated if/when the circumstances change or resubmitted on an annual (?) basis. If this process is followed, the employer would not be required to place funds to the employee’s account. But upon audit, if the proper documentation cannot be provided to justify not contributing to the employee’s account, the employer could suffer severe penalties.
- Are there other issues to be addressed? Absolutely – probably tons! After all, we do have to find a way to fill 11,000 pages!!
- Administration is very simple. All you need is the same W-4 you have today in order to have an account established or connect to an existing one.
- The goal of ACA is to have all Americans insured. But it hasn’t even come close. Employees are allowed to refuse insurance. Under the Social Security model, there is no choice. Funds are applied from day one.
- Insurance companies are starting to back away from ACA. Since enrolling is an option, people who are young and healthy are looking at the cost and the deductible amounts. They are choosing to pay the penalty and take their chances. Those who have a history of illness or other medical issues are signing up – and they can’t be refused. It doesn’t take an accountant to see how this paradigm will cause insurance providers to run the other way. Using the Social Security paradigm, the problem disappears – everybody working must have health insurance.
- Forget the need for employers to choose insurance carriers for their employees. As mentioned above, let it be a free market exercise. The insurance companies can compete for the business, and the employees can choose which one they want.
I sincerely believe that this approach will increase the number of people covered, motivate insurance carriers to provide truly competitive plans (lower insurance cost), and dramatically reduce the complexity, cost, and risk related to compliance.
I’m very interested in knowing what you think. All comments, ideas, agreement, disagreement will be very much appreciated.