In the November 2015 issue of EMS Insider, I provided a synopsis of the Cadillac Tax and its impact on your employee benefits costs. The tax will be 40% of the difference between the type of health insurance policy that the government wants us to have and the cost of the health insurance policies we currently have. This is not only designed to help finance the Patient Protection and Affordable Care Act (PPACA), but to leverage us into purchasing health insurance policies that have high deductibles and lower payment thresholds. By forcing us to pay more money out of our own pockets, the government hopes each of us will become consumers (rather than solely providers) of healthcare and participate in creating a competitive environment that forces hospitals and doctors to increase quality, increase patient/customer satisfaction and reduce prices.
My purpose in this article is to update our industry on the reality of the rising costs of healthcare that will likely impact your budgets even further.
The Spiraling Cost of Healthcare Insurance
Health insurance companies set their premiums based the projected amount they will need to pay out for the healthcare policy holders; naturally, the higher the costs, the higher the premiums. At risk of oversimplification, health insurance companies calculate the average costs of providing healthcare to all policy holders plus a profit.
It’s a commonly accepted fact that older policy holders require more healthcare dollars and younger policy holders require fewer healthcare dollars because the younger population is generally healthier. The majority of those enrolling for health insurance through the ACA state or federal exchanges are older. This disproportionate amount of more costly policy holders is the current dilemma of the PPACA.
Health insurance companies are responding to this dilemma in the best way they know how: increasing premiums. The following is just a sample of increases requested by insurance companies this year:1
- New Mexico Blue Cross wants a 50% increase
- Ohio will have a 13% increase
- Blue Shield of Tennessee looking for a 36% increase
- Care First in Maryland wants a 30% increase
What is the Solution?
The federal government is attempting to solve this problem by instituting higher penalties on those who do not have health insurance. The government hopes that by increasing penalties, it can drive more of the young and healthy into the PPACA insurance exchanges. Beginning in 2016, the penalty for not having health insurance will increase to 2.5% of a family’s taxable income or $695 per adult, whichever is greater. This penalty will still be less than the cost of purchasing most health insurance policies, so the jury is still out as to whether this financial incentive will solve the ACA’s problem. Regardless, some solution must be found if the PPACA is to remain in existence.
Staggering Increases in the Cost of Providing Healthcare
If that problem wasn’t challenging enough, the basic cost of healthcare has been rising at a staggering rate. According to the Centers for Medicare and Medicaid Services, total health care spending in the U.S. is expected to reach $4.8 trillion in 2021; up from $2.6 trillion in 2010 and $75 billion in 1970.2
This increase has placed a significant burden on the American family. Those consumers with healthcare coverage experienced a 7.2% increase in their share of healthcare costs between 2011 and 2012. Healthcare costs for American families in 2012 exceeded $20,000 for the first time.3 As a result, more and more families are having problems paying for care—26% report they or a family member had problems paying medical bills in the past year, while 58% of Americans reported foregoing or delaying medical care in the past year.4 It is also interesting to note that the U.S. has the highest rate of per capita expenditures for healthcare compared with 25 of the most developed nations in the world.
What about Quality?
Many of us would approve of these higher costs for healthcare if the care provided was of the highest quality. But according to the Commonwealth Fund, “the U.S. underperforms relative to other countries on most dimensions of performance.”5 Among the 11 nations studied—Australia, Canada, France, Germany, the Netherlands, New Zealand, Norway, Sweden, Switzerland, the U.K. and the U.S.—the U.S. ranks last, as it also did in 2010, 2007, 2006 and 2004. Most troubling, the U.S. fails to achieve better health outcomes than the other countries, and is last or near last on dimensions of access, efficiency and equity.
These are wicked problems that require a solution. As the PPACA evolves in order to address these problems, there is no question that some of the solutions and strategies developed will impact EMS providers, our budgets and our EMS missions.
1. Radnofsky L. (May 21, 2015) Health insurers seek hefty rate boosts. The Wall Street Journal. Retrieved on Nov. 13, 2015, from www.wsj.com/articles/health-insurers-seek-hefty-rate-boosts-1432244042.
2. Centers for Medicare and Medicaid Services (n.d.) National health expenditure data, historical and projections 1960–2024. Retrieved on Nov. 13, 2015, from www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/National-HealthAccountsProjected.html.
3. Girod C., Mayne L, Weltz S. (May 15, 2012) 2012 Milliman medical index. Milliman. Retrieved on Nov. 13, 2015, from www.milliman.com/insight/Periodicals/mmi/2012-Milliman-Medical-Index/.
4. The Henry J. Kaiser Family Foundation (June 10, 2012) Kaiser health security watch. Retrieved on Nov. 13, 2015, from http://kff.org/health-costs/poll-finding/kaiser-health-security-watch/.
5. The Commonwealth Fund (June 16, 2014). Mirror, mirror on the wall, 2014 update: How the U.S. healthcare system compares internationally. Retrieved on Nov. 13, 2015, from www.commonwealthfund.org/publications/fund-reports/2014/jun/mirror-mirror.