ACA Balancing Act Is there a Silver Lining for Employers

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ACA Balancing Act Is there a Silver Lining for Employers
Calendar02 April 2015

Now that we are five years into ACA compliance, are employers going to see some benefit from the law’s positive effects on the market? The market has responded in a number of ways: Providers are reorganizing and re-engineering how they provide care, funding for health care innovations is at an all-time high, and the drop in the number of uninsured has reduced uncompensated care. Is that the perfect formula for lower health care cost trends? Let’s look at a few recent news stories that give us reason to hope it is.

  • Health insurance industry is healthy. Given all the unknowns about the risk pool in the public exchange marketplace, initially there were legitimate concerns that insurance companies would be taking on too much risk. From an employer perspective, that could mean higher fees and/or cost shifting to balance out the risk. But a recent report by the Commonwealth Fund indicates health insurance industry profits remain nearly identical to what they were before implementation of the ACA. In fact, the increase in enrollment has been a boost for insurance companies.
  • Hospitals have fewer unpaid bills. Hospitals in the US saw a $7.4 billion reduction in uncompensated care costs last year, according to a government report. Hospitals in the 28 states, plus D.C., that expanded Medicaid under Obamacare saw $5 billion of that savings, while the cost of unpaid bills declined by $2.4 million in states that did not expand. The Cleveland Clinic also announced a drop in the cost of free care provided to patients who can’t afford to pay — to $101 million in 2014 compared with $171 million in 2013. The reduction in uncompensated care should have a downstream impact on the prices negotiated by the insurance companies for private payors.
  • Growth in Accountable Care Organizations (ACOs). Since 2011, nearly 750 organizations have become ACOs in public and private programs, including 120 in the past year alone. In an ACO, health care providers accept responsibility for the cost and quality of care for a defined population. ACOs are designed to achieve the “triple aim” — to improve quality, increase patient satisfaction, and lower costs. Many insurance companies are partnering with hospital-based ACOs and some jumbo employers have direct contracts with ACOs. ACOs are an important emerging opportunity to save cost, and employers are moving quickly to integrate them into their health plan designs.
  • Government support for Pay For Value (P4V). The Department of Health and Human Services (HHS) recently announced its goal to move 50% of Medicare payments to alternative payment models (including ACO-based arrangements), an indication of the government’s strong backing of the P4V model. Together with continuing endorsement of the approach from state Medicaid programs and commercial insurers, HHS support will help accelerate the private activity already underway. And that should mean we will all benefit sooner.

These stories in the news are of keen interest to employers looking for cost-management options that support the triple aim and do not necessitate additional cost shifting to plan members. We are all ready for a win-win!

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