Healthcare Reform: The Good, the Bad and the Ugly

Now that the Patient Protection and Affordable Care Act (ACA), otherwise known as healthcare reform, has been circulating for a while, we are seeing different aspects come to light - as the good, the bad and the ugly of health care reform begin to take shape.

Some aspects of the bill are good, and do put a focus on prevention and protecting the regular employee/consumer. But other provisions of the bill are bad, and some are downright ugly.

Healthcare Reform: The Good

The good parts of the health care reform law are the following: Preventative Care Covered at 100 Percent: Though this part of reform will initially add costs to plans, I do think it is a good provision.  The only way to truly lower costs over the long term is to keep people healthy.  And the way to keep people healthy is to ensure they get their screenings so problems can be detected early - while they can be treated with less cost.

Removal of Lifetime Maximums: Again, even though it will add costs to plans, I do think this is a good provision.  If someone is going to hit a $1 million or $5 million maximum on a plan then they are seriously ill and should a plan then be allowed to just cut them off at that point when they truly need the coverage?  The point to having insurance is for it to be there when you need it - and this provision allows just that.

Removal of Preexisting Conditions - First for Children, Then in 2014 for Everyone: Another one that may add costs to plans, but is a good provision.  We should not deny coverage to a child for a pre-existing condition they have, and if we deny adults coverage for pre-existing conditions we will never get rid of the uninsured problem.  However those with pre-existing conditions should be rated accordingly by the insurance carrier.

Nondiscrimination Requirements: Though this affects only non-grandfathered plans to start with, eventually it will affect all plans, and I do think it is a good provision.  I don't think it's a bad thing to no longer allow key employees to have better benefits or costs than other employees.

Healthcare Reform: The Bad

As for the bad parts of the health care reform law, they include:

Dependent Coverage Until Age 26: Extending coverage to age 26 with virtually no requirements is ridiculous.  Under this law, a dependent can be married and still remain on their parent's plan - and if the plan is not grandfathered they can even be employed with their own coverage and still remain on their parent's plan.  

There should have been more restrictions under this provision - such that you could not be married, could not have your own coverage available and had to be a full time student.  It shouldn't have been made the free-for all that it was.

Adding Cost of Medical Insurance on Employee's W2 Beginning in 2012, for W2's Issued in 2013: This is just an administrative nightmare for employers.  There could have been a requirement made that once a year you have to notify employees of the cost of the medical insurance - but not on the w2.  

Employers are scrambling to ensure their systems are updated to allow this, and this is adding more cost to the employer. Removal of over the counter drugs from Flexible Spending Accounts (FSA) reimbursement without a prescription: Removing over the counter drugs from allowable FSA reimbursements will drive employees to use higher cost medications that they can reimburse from their FSA.  

If they have to go to their doctor to get a prescription for an over the counter drug, they are most likely walking out instead with a prescription for a higher cost drug.  This provision also increases medical plan costs by now forcing an office visit when not necessary in order to obtain the prescription.

Healthcare Reform: The Ugly

And now for the ugly.  These are parts of the bill that make you say what were they thinking, and include:

Flexible Spending Account (FSA) cap of $2,500 in 2013: At a time when we are asking employees to pay more out of their paychecks for medical coverage, and more out of their pocket for deductibles, coinsurance and copays, limiting the FSA is not helping them.  You're now taking away the one pretax benefit so employees are not only being asked to pay more for their medical coverage but they are also being asked to pay more in taxes.

"Cadillac Tax" in 2018: This provision levies a 40 percent nondeductible tax on the annual value of health care plan costs for employees that exceed 410,200 for single coverage and $27,500 for family coverage beginning in 2018.  Given the cost of medical inflation, by the time 2018 comes around, most plans will hit this threshold - even if they are not truly "Cadillac" plans.  

The threshold needs to be raised significantly if this is truly a "Cadillac" plan tax.  Otherwise it just looks like another way to hit employees with a new tax, or significantly higher out of pocket expenses as plans will be forced to slash benefits to be under the annual value requirement.

Health Care Exchanges: This is a BIG ugly provision.  Since every state is being left on their own to develop these it will be interesting to see how they play out.  Carriers are not being forced to join the exchanges - so I wonder how many will choose to?  

If they do make it up and running, the exchanges will add tons of notification requirements on to employers and give many an incentive to no longer offer employee's coverage - they can just send them to the exchanges.  And let's be serious, has the government ever implemented any program well?

There is still hope that these bad and downright ugly provisions will get modified as the fight against this bill continues in Washington but I don't think we should count on it.  It seems that most - if not all - of the health care reform bill's provisions are here to stay - for now anyway.