Does a postponed employer mandate signal more delays?
After the Obama administration surprised almost everyone in the healthcare industry by postponing the employer mandate by an extra year, two questions immediately came to my mind--How will this delay impact insurers? And will it lead to a similar postponement of the individual mandate?
The answer to the first question appears to be "very little." Ezekiel Emanuel, who previously advised the Obama administration and helped write the reform law, wrote in a New York Times editorial that "postponing the mandate's enforcement by one year isn't particularly noteworthy."
Of the 6 million employers in the country, 96 percent employ fewer than 50 workers, thereby exempting them from the employer mandate. And of the about 200,000 companies with more than 50 employees, the Kaiser Family Foundation found 94 percent already offer health insurance. That means only about 12,000 employers--and up to 1.5 million workers--are subject to the employer mandate and don't already provide health coverage.
Emanuel argued that delaying the employer mandate won't compel the other 94 percent of companies into dropping health coverage. "They provide it now with no mandate," he said. "They do it because it makes business sense in terms of attracting and retaining good workers."
A more likely scenario is that the 1.5 million workers will shop for health insurance through the online exchanges in October. "It definitely increases the number of people who will be getting coverage on the exchanges, because they won't be getting coverage from their employer," Jay Angoff, a partner at law firm Mehri & Skalet and a former Obama administration official who helped implement the health law, told the Wall Street Journal.
That's good news for most insurers who have already been ramping up their business-to-consumer marketing efforts and creating new plans to sell on the exchanges. It will add to their enrollment totals and boost the viability of the online marketplaces, eventually encouraging more insurers to sell plans.
So it seems the employer mandate delay could actually benefit insurers.
But that begs a follow-up question--Now that the White House has proven willing to postpone major elements of the reform law, would it consider delaying the individual mandate as well?
"That would be a major problem or concern for the insurance industry," Chris Rigg, an analyst with Susquehanna, told CNBC. "Then you'd be subject to adverse selection where only the sickest people get the insurance through the exchanges next year, but those that are healthy will probably opt out, because there's no penalty if they choose not to buy the insurance."
Rigg called the individual mandate the "linchpin" and any delay "would fundamentally undermine the entire system." Likewise, Ron Pollack, head of advocacy group Families USA, said it's "inconceivable" that the individual mandate will be delayed. And Timothy Jost, a law professor at Washington & Lee University, said he isn't expecting the Obama administration to delay the individual mandate.
What's more, insurers themselves probably won't let the individual mandate go down without a fight. The directive is key to their ability to cover expensive patients with pre-existing conditions as they're required to do under the reform law. And given that the individual mandate is the core of the reform law, it's unlikely the Obama administration will do anything to risk its own legislation from succeeding.
Most insurers weren't yet commenting on the delay, referring instead to their lobbying group, America's Health Insurance Plans. Robert Zirkelbach, a spokesman for AHIP, said in a statement to FierceHealthPayer that "we appreciate that the administration is being responsive to the concerns employers and insurers have raised about the workability of the reporting requirements related to employer health care coverage."
He added that delaying the employer mandate was partly due to comments from AHIP and other groups that the law "imposes significant new requirements on health insurers and employers," including health coverage benchmarks for actuarial and minimum value and informational reporting with respect to health coverage. "It is critical to implement these provisions in a manner that minimizes the burdens on insurers, employers and individuals and to provide a simplified process for reporting that avoids duplication of effort," Zirkelbach said.
Both Aetna and Cigna said they're ready to work with their large group clients to help them understand the effect of the employer mandate delay. "Once the new guidance from the Administration is released, we will advise our customers and brokers on their options under the new reporting and related regulations for 2015," Aetna spokesperson Cynthia Michener told FierceHealthPayer.
Cigna spokesperson Mark Slitt told us the company is reviewing the announcement about the employer mandate delay and will help its clients understand how the changes will affect them.
All in all, it looks like insurers won't have to wait with baited breath to hear whether the Obama administration decides to also delay the individual mandate. It's far too important to the overall success of the reform law to risk postponing. Meanwhile, it looks like insurers will be gaining some additional members when the exchanges open, thanks to the delay of the employer mandate. - Dina (@HealthPayer)