The U.S. Supreme Court’s ruling to uphold the Patient Protection & Affordable Care Act cleared a big cloud of uncertainty for employers, but with just 18 months before the most significant provisions of the law kick in, many questions remain. Three benefits consultants from Indianapolis-based Gregory & Appel Insurance—Bob Miller, Mike Miles and Karl Ahlrichs—sat down to discuss what the future looks like for employer health benefits.


IBJ: Now that the health insurance reforms that were part of the health reform law have been upheld, how do you expect employers to react?

Miller: Employers said that, regardless of what happened [at the Supreme Court], they were not going to cut benefits. I think there’s going to be a number of the small ones—and I’ve got a couple of clients like this—that said they’re going to use the exchanges. But I think we’re going to see it as the exception rather than the rule.

Miles: I don’t think employers are going to be able to make a decision. Until we see exactly what that exchange plan is going to look like, I think people are going on the assumption that the exchange plans are going to be priced attractively. And we just don’t know that. It’s still going to be kind of tough for them to make decisions until we figure out all the puzzle pieces on the table.

IBJ: The health reform law is more than two years old now, yet there are still so many questions about how it will work. Do you expect that to continue because of the law's complexity?

Miller: That’s typical. This is something that’s going to go on for years. The federal government, they’re creating more questions than they’ve got answers. That’s going to frustrate employers because they want answers.

Ahlrichs: This confirms that they need to have a strategic plan for their benefits that aligns with their business plan. They have to have it now because of this complexity. People who normally just float through year-to-year decisions and pass on the increase and think that’s good enough, that ends now. They need to draw up a strategic business plan that includes the total rewards side and the wellness side.

Miles: We think this is really going to be a call to action on the part of employers to really get serious about strategic planning and population health management. The only way you can really, truly control your costs is not going to be through plan design any more. What they’re really going to have to do is create incentives to really get employees to get control of their chronic diseases.

IBJ: The health reform law calls for states to create online exchanges in which individuals and small employers can shop for and purchase health insurance—and do so with a government subsidy, if their incomes are low enough. Do you expect Indiana to be ready to launch an exchange in 2014 or will it have to send Hoosiers to the insurance exchange being created by the federal government?

Miles: If the state was going to have an exchange program, they basically were going to have to have all that defined and priced by early 2013. I don’t know how long it’s going to take them to pull the trigger and jump in.

Miller: Even if Indiana started today, they won’t have it finished by 2014, and the feds are going to come in, anyway. So we could see the feds come in, at least initially.

IBJ: The big question for employers is, of course, will health insurance premiums go up faster or slower under the health care law? How will the presence of the exchanges and the government subsidies affect health insurance costs for employer-based health plans?

Miller: I think it’s going to be an underwriter’s nightmare. How do I price your plan for Jan. 1, 2014, when we don’t know who’s going to stay [in the employer plan] and who’s going to go [buy insurance in an exchange]?

Miles: Are they at risk for having a number of employees that come off the group plan and go into the exchanges? That’s going to have a tremendous impact on the pricing of the group plan for the employees that remain. There is going to have to be some very sophisticated modeling done for employers. If [the exchanges are] going to take all of their younger, healthy people, and that’s going to cause the rest of their health plan to go into a death spiral, what do employers do? Depending on how this all plays out for a particular employer, this could really end up changing the dynamic for how the spreading of risk works.

IBJ: Could the Supreme Court’s ruling that failing to obtain health coverage is not an infraction of the law, but is merely a choice that can be taxed, lead to more people than initially expected choosing to the pay the tax and remain uninsured? If so, could that lead to higher insurance premiums in commercial health plans?

Miller: About 44 percent of U.S. citizens don’t file federal income taxes, because they don’t need to. So if you’ve got that many people not filing taxes, how are you going to make them pay this? I think they totally underestimated what the cost impact is going to be.

Miles: If you have an opportunity to anti-select, that’s a recipe for disaster. ... It’s going to be challenging times ahead, but it’s almost kind of exciting.