Now that the Supreme Court has ruled that Obamacare, the so-called Affordable Care Act, can stand, we must focus on the many challenges that the law presents for Maine.
Although Obamacare is the single largest government intrusion into the private health insurance market, it is important to recognize that Maine is in a somewhat unique position. First, Maine is one of a handful of states with a regulatory framework that is in many ways already more restrictive than Obamacare.
For example, many states will experience significant rate increases when they transition to guarantee issue and community rating under Obamacare; Maine adopted these two reforms in 1993.
Maine also passed Public Law 90 in 2011, which has already helped to lower insurance premiums for many small businesses and individuals. Several reforms in PL90 have yet to fully materialize and will continue bringing much-needed relief to Maine’s insurance market. This law was specifically designed to comply with the health care overhaul.
However, we must not understate the negative effects Obamacare will have. Many provisions in this complicated law will increase insurance premiums, and many others will hurt businesses.
New taxes under Obamacare are expected to increase insurance premiums, such as a medical device tax, starting in 2013; a tax to fund comparative effectiveness research, also starting in 2013; and an annual fee on health insurers, starting at $8 billion in 2014 and increasing to $14.3 billion by 2018.
Employers now face a number of new reporting requirements. They must record the value of health benefits on employees’ W-2 forms, and they must file reports with the secretary of the Department of Health and Human Services regarding whether plans meet certain criteria. The staff time necessary to ensure compliance with these new regulations will inevitably increase the cost of providing employer-sponsored health insurance.
One of the most notable impacts of Obamacare pertains to the coverage itself, including premium contribution and eligibility criteria for their employees. Health plans must contain all required “essential benefits,” as defined by DHHS, and they must meet certain actuarial values. Mandating these benefits will result in more expensive plans than are now offered.
Under the law, waiting periods for new employees to get health plans may not exceed 90 days. This provision will be particularly acute for Maine’s construction industry, which commonly imposes six-month waiting periods. Since construction workers often come and go during their first six months, contractors will now be required to manage paperwork and expense for employees who may be gone in a few weeks.
Obamacare mandates that employer premium contributions must result
in “affordable” coverage for employees. “Affordable” is defined as employee contributions that do not exceed 9.5 percent of their family income. This is challenging for employers because they have no way to verify what an employee’s family income is.
The law also requires that employers offer health coverage or face severe penalties. This specifically affects employers with 50 or more employees. To determine the number of employees they have, employers must count part-time employees using a calculation to determine full-time equivalents.
Seasonal employees may be excluded unless they work greater than 120 days per year. This will hit Maine’s tourism industry especially hard, since most seasonal employees in Maine work more than 120 days. Seasonal businesses that do not offer coverage now will be severely affected by the cost of providing health coverage for these employees.
There is legitimate concern that some companies may choose to pay fines, rather than continue to offer health insurance coverage, to avoid the costly burden of maintaining compliance with Obamacare’s requirements. Other companies that do not offer coverage could now face penalties that will threaten their very existence.
Obamacare subsidizes a very inefficient health care delivery system, further insulates that system from market forces and mandates many provisions that will put upward pressure on insurance premiums, adding more financial challenges to businesses that are already struggling.
At the same time, Maine’s efforts to reduce insurance regulations and encourage new competition has produced lower insurance rates for many and will introduce new competition in the market. So how do we improve Maine’s health care delivery system and lower costs in this environment?
At The Maine Heritage Policy Center, several important strategies will guide our health care policy work over the next couple of years, regardless of whether Obamacare is implemented or repealed. We will promote transparency in health care cost and quality, we will identify barriers to market forces in health care and we will promote patient-centered policy reforms, including payment reform that would align incentives among patients, providers and payers.
We cannot count on the federal government to solve the health care problem. It is up to us to promote a competitive, responsive and efficient health care delivery system.
Joel Allumbaugh is director of MHPC’s Center for Health Reform Initiatives. He is also CEO of National Worksite Benefit Group, Inc., a full-service employee benefits insurance agency specializing in consumer-driven health plan strategies.