Dr. Paul Fronstin, Ph.D. is Director of the Employee Benefit Research Institute’s (EBRI) Health Research and Education Program. Paul and I recently sat down to discuss his keynote presentation at our upcoming Las Vegas Mid-Sized Retirement & Healthcare Plan Management Conference, Sept. 7-10, 2014. Dr. Fronstin also oversees the Center for Research on Health Benefits Innovation and is one of the nation’s foremost experts on the health insurance system.
Dr. Fronstin’s Las Vegas presentation will cover such key data on the healthcare system that I thought it would be helpful for him to provide an overview of some of the areas he’ll be covering for us.
MARK: You’ve previously spoken at our conferences about a “tipping point” after which the employer-based health insurance system would start to implode. What’s the situation now?
DR. FRONSTIN: It certainly feels like employment-based health benefits have been at a tipping point for a long time. In some ways, the Affordable Care Act (ACA) may have put it over the tipping point, but I think the jury is still out because we haven’t seen a whole lot of change yet. There is a lot of talk about employers doing something different, but right now it seems like it’s still just talk. We do, however, have the “Cadillac tax” looming in 2018, and I think that’s going to drive employers to make changes sooner rather than later. They can’t wait until the last minute.
We’re halfway to the excise tax—and we’re going to get there fast. The other reason I think we may have finally reached the tipping point is because of public exchanges; they may change the playing field for what employment-based health benefits look like.
These are the kinds of things I’ll talk about in Las Vegas. I’ll have plenty of data to illustrate my points. I think it will be interesting.
MARK: That we’re halfway to the “Cadillac tax” seems like a huge point. Many (probably most) people seem to have been ignoring it. Won’t it have a major impact if there aren’t changes to it?
I think one reason a lot of employers are waiting is the regulations haven’t come out yet, and that makes it easy to wait. It’s hard to imagine the Obama administration is going to wait until the last minute with the regulations—they really can’t. But it is the last piece of the ACA to take effect, so it means it’s probably one of the least important priorities in terms of issuing regulations. We’ll definitely be illustrating the impact the “Cadillac Tax” will have on employers when I present my data in Vegas.
MARK: Teaser alert! Paul, if you don’t discuss whether or not there will be changes to the “Cadillac tax” before it’s implemented during your keynote, I want to warn you—it will be one of my follow-ups!
DR. FRONSTIN: Thanks for telling me that. I’ll make sure to be fully prepared to answer it!
MARK: The ACA has been a big point of campaign rhetoric in every election the last four years. When you speak for us in September, Election Day will only be two months away. How big of an issue do you think the ACA will be in deciding the upcoming Congressional races?
DR. FRONSTIN: I don’t think it’s going to be big in terms of the outcome of the election, but I think it’s definitely going to be an issue that will be used by both Democrats and Republicans as a campaign issue.
MARK: Can Democrats claim “ObamaCare” a success at this point?
DR. FRONSTIN: Well, they have a number of things they can claim success on. You’ve got some 8 million people covered through the public exchanges, many of whom didn’t have insurance coverage before. Plus, more people are covered by Medicaid than in the past, there is the age-26 mandate, and the rate of increase of health care costs is abating.
But there are still some issues that I think can be used by Republicans. We’ll see what happens with the labor market, but potentially there will be more part-time employees or more part-time employees losing health benefits. And there is this whole issue of contraceptives and the Supreme Court.
So there’s enough out there for both sides to use the ACA as a campaign issue. More importantly, given the partisan environment that we have now, it’s hard to imagine that there will be much tinkering with the law through legislation. There may, however, be more tinkering with it through guidance and regulations.
MARK: Turning to costs, many attribute at least a portion of rate increases to the ACA, yet we’ve seen a slowing of the trend of increasing healthcare costs. What’s the reality?
DR. FRONSTIN: There is no doubt the ACA contributes to cost increases. There’s a whole long list of things that contribute to the cost increases from taxes that are direct and indirect on employers to mandates and other things. But it’s also true that while costs are increasing, the rate of increase has gone down. A Mercer survey found a 2 percent increase in premiums last year, which doesn’t sound like a lot, and in fact it was the lowest increase in 15 years. But employers still spent nearly $11,000 per worker last year, which is a large number. As a result, employers are still concerned about where costs are and where they are going. That’s why they are interested in innovative things like private exchanges, defined contribution health benefits, reference pricing and evaluating whether to offer health benefits to groups like spouses and part-time workers.
MARK: Paul, we will certainly be examining all these approaches throughout our conference and look forward to your comments on them. With all these attempts to keep costs down, why are they expected to keep climbing?
DR. FRONSTIN: For a lot of reasons. I’ll mention a few in no particular order: an aging population that increases demand for health care services, an aging working population, consolidation among providers and hospitals, technology in medical care, which is always expensive. Those are just a few of the reasons.
At the same time, there are also efforts to try to mitigate cost increases. I mentioned employers trying to be innovative with their plans. Plus, pricing transparency, plan design changes like reference pricing, private exchanges and just giving people more choices of health plans may be helpful.
During my session, I’ll discuss some of the experimentation that’s been done with concepts such as medical homes and with telemedicine, basically paying for online consultation, whether it is emails or video technology for virtual office visits. What’s interesting is a lot of these ideas have been around a long time.
I’d argue, for example, that private exchanges are 21st century versions of cafeteria plans. What’s happening is the technology is catching up with the ideas. The fact that we could do a video office visit is catching up with the idea of engaging people more in their health. Now there is a new option that instead of going to the office to get your care you can go online to get your care. I think it really means that the sky’s the limit in terms of how technology may help control health care costs in the future.
To me the interesting thing is that the people who are coming up with some of these new ideas are people we don’t really engage with because they are outside the health field. Think about the wearable technology we have now and the smart watches and the Android watches—Apple is coming out with the iWatch—all these health gadgets are being developed by technology people as opposed to the health business or the employee benefits business.
The point is, when it comes to creating quality health benefits that are affordable, I think everything is on the table.
Mark: Paul, thank you so much. You and I have known each other for many years and every single time I hear your presentations I’m awed by the scope and quality of the data you pull together. I look forward to seeing you in September.
Mark’s final note: The Las Vegas conference is our last Mid-Sized Retirement & Healthcare Plan Management Conference in 2014 and your last chance to learn valuable strategies for upcoming renewals. Our next conference is not for another 6 months after Vegas, March, 2015.
Hope to see you in Vegas.