Why Employers Should Care About the Fate of the ACA

June 11, 2012

Recent Supreme Court oral arguments have left many wondering about the fate of the Affordable Care Act (ACA). If the ACA does not remain in effect—the result of Supreme Court decisions or the political process—employers need to understand what might happen next. (Hint: it won’t be pretty.)

The problems the ACA was designed to address—coverage, quality, cost, and individual/small group market instability—will not go away even if the Act does. Indeed, without systemic solutions, they will only get worse.

Business leaders—even those who already offer health benefits—should care just as much about coverage and insurance market stability as they do about cost and quality. Why? Because lack of coverage comes at a cost to everyone.

Hospitals are required by law to provide emergency care to any patient, with or without insurance, and that cost has to be covered somehow. Often, it is built into the way health plans pay hospitals. Blue Cross Blue Shield of Michigan includes some compensation for bad debt and charity care in their payments to hospitals, and most other health plans also consider uncompensated care in their payments to hospitals.

Many economists believe uncompensated care costs are shifted to those with health insurance in other ways as well. For example, physicians cross-subsidize services to those who can’t pay through those covered by health insurance.

Bottom line: people (and employers) with insurance are bearing the cost of those without.

These problems are only getting worse. In just one year (2008 to 2009) the percentage of Michigan’s population that was uninsured jumped from 10.8 percent to 12.8 percent. And fewer employers—especially small ones—offered coverage. In 2004, 60 percent of Michigan employers offered health insurance; by 2009, that number had dropped to 54 percent. Not surprisingly, hospital uncompensated care costs increased accordingly—from about $1.1 billion in 2004 to $2.34 billion in 2009.

Ideas about what could realistically “replace” the ACA are limited and do nothing to address market problems and the increasing instability of the risk pool: i.e., the less affordable insurance is, the more healthy people gamble and don’t buy it; without healthy people in the risk pool, health care costs go up, making coverage even less affordable…and so on. We also risk losing popular features of the ACA that eliminate pre-existing condition exclusions and caps, cover evidence-based preventive services, and allow children to ride on parents’ policies to age 26—not to mention the chaos that would ensue if things already in effect had to be reversed.

The best hope for business is that the Affordable Care Act stays in place. While it may not be perfect, it addresses critical issues systemically and can be improved in the future. If it is struck down or repealed, it will be a long time before we have the public will again—especially the political will— to deal with systemic healthcare reform. In that event, all stakeholders in healthcare—and that’s all of us—will be worse off as a result.

(Originally published in Crain’s Detroit Business, April 29, 2012)