1. Introduction (25%) Provide abrief synopsis of the meaning (not a description) of each Chapter and articlesyou read, in your own words that will apply to the case study presented.
2. Your Critique (50%): Case Study
This is the first of a two-part series aboutthe impact of health care reform on a Texas-based small business, SoftwareAdvice, and how the CEO, Don Fornes, plans to keep providing quality benefitswhile controlling costs.
When the Affordable Care Act (ACA) was passed,I thought it was just a watered-down version of health care reform. However,our health insurance broker recently briefed me on how it will impact our businesswhen we renew our coverage. The majority of the ACA’s provisions go into effectin 2014 — and they are much more onerous than I expected.
The bottom line: We are expecting priceincreases of anywhere from six percent to 40 percent per employee next year.That’s a big variation, right? I’ll explain why we’re facing such uncertainty.
Dramatic changes to health insurance pricing
The ACA’s first major impact is a shift toward”community rating.” Starting in 2014, insurance carriers will nolonger be able to price small group coverage based on employees’ health statusand claims history. They will use only four factors: age, gender, tobacco useand ZIP code. That means other employee populations in your area will affectyour insurance rates.
Community rating is a dramatic change, and itwill result in substantial inflation for small groups that had previouslyenjoyed low rates based on younger, exceptionally healthy employee populations– like ours.
Expanded coverage requirements
The ACA introduces broader requirements onwhat an employer’s health care plan must cover. For example, small groups’coverage must now provide for essential health benefits, such as pediatricservices, maternity care and substance abuse treatment, and is subject tomaximum deductible and out-of-pocket limits. Large groups’ plans must provide”affordable coverage” — that is, the employer must cover at least 60percent of the actuarial value of health care costs, and employee contributionsmust not exceed 9.5 percent of their income, whereas previously there was nosuch coverage quota.
Because our business has always beenrelatively healthy, we’ve been able to provide coverage that meets or exceedsthese requirements, but I empathize with employers whose profit margins don’t easilyafford the provision of high-quality coverage. They will be the mostsignificantly impacted by the new requirements.
As I examined all this information, I came toa conundrum: Are we a small group, or not? Under current Texas law, a smallgroup is one with two to 50 employees. However, pending legislation — TexasState Senate Bill 85 — could expand that to companies of up to 100, if passed.We just hired our fifty-fifth employee.
Large group pros and cons
Many companies have been fearful of the “largegroup” label when it comes to health care reform, carefully keeping theirstaff numbers under 50. But we found that being a large group is actuallybeneficial to us. As a large group, we are exempt from community ratings andmaximum deductible limits. We also don’t have to provide essential healthbenefits — though we already do. And the expected increase in health carecosts for large groups in 2014 is relatively low — six to eight percent.
Potential drawbacks of being a large group: Weare subject to the “pay or play” rule — provide coverage that meetsthe requirements, or pay a penalty– as well as automatic employee enrollmentupon hire and at renewal. For companies with a tighter bottom line, these rulesmay prove challenging. For our business, they are less relevant; we are alreadyproviding quality coverage, and we want everyone to have it.
Small group pros and cons
Small groups are exempt from pay or play. Theydon’t have to provide coverage to their employees. If we were, say, a smallpizza shop, this would be a relief. But we’re not. We want to remaincompetitive in hiring — and can afford to keep doing so.
The requirement to provide for essentialhealth benefits could be problematic for cash-strapped companies and mightraise carrier costs.
The biggest downsides if we’re a small group:we’d be subject to detrimental community ratings, and maximum deductible andout-of-pocket limits would drive up costs across the board. As a small group,we would face a whopping 30 to 40 percent increase in health care costs for2014.
The outcome
One thing we will do is push our renewal dateout to December 2013, so that our new plan won’t take effect until January2014. That’s because the government may actually change or delay implementationof some ACA provisions. Pushing out our renewal delays the new requirements aslong as possible and allows us to keep a plan we like, while giving us a chanceto see if the government backpedals.
CASE STUDY CHALLENGE
1. Describe hoe some changes in the healthservice delivery system have led to a decline in hospital inpatient days andgrowth in ambulatory services.
2. All primary care is ambulatory, but notall ambulatory services represent primary care. Discuss.
3. As hospital evolved from rudimentarycustodial and quarantine facilities to their current state, how their purposedid and function changes.
3. Conclusion (15%)
Briefly summarize your thoughts &conclusion to your critique of the case study and provide a possible outcomefor the Health Care Center. How didthese articles and Chapters influence your opinions about Health Care and newreform act?
Evaluationwill be based on how clearly you respond to the above, in particular:
