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How Obamacare Is Encouraging Employers To Cut Wasteful Spending And Promote Workers’ Health

By Sy Mukherjee  

"How Obamacare Is Encouraging Employers To Cut Wasteful Spending And Promote Workers’ Health"

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In an effort to cut wasteful U.S. medical spending, certain employers will be scaling back expensive health plans available to their employees and encouraging workers to pursue more preventative and ongoing primary care. The move is being prompted by Obamacare provisions that encourage a more cost-sensitive and efficient approach to Americans’ health care than the status quo.

Recently-released government data shows that Americans’ medical bills are completely random, with some hospitals charging as much as $100,000 more for the same services performed at other facilities. In turn, that drives up the costs of many private health plans, and increases companies’ spending on employer-sponsored insurance.

Obamacare attempts to change this dynamic. Under the law, health plans that cost over $10,200 for an individual or $27,500 for a family will have to pay an excise tax of 40 percent on every dollar that they exceed that cutoff beginning in 2018. As Jonathan Gruber, an MIT economics professor who helped design the law, explained to the New York Times, the tax is meant to reorient the way that employers approach their workers’ health problems and their associated costs. “It’s focusing employers on cost control, not slashing,” said Gruber.

Companies aren’t waiting until 2018 to shift their health care models. Some are increasing their use of high-deductible health plans (HDHPs) — which charge workers low monthly premiums but high annual deductibles — in an effort to raise employees’ awareness of how much their health care consumption costs.

On their own, HDHPs may not be particularly beneficial to workers. But employers are linking these plans with in-house doctors, on-site health clinics, and wellness programs meant to improve workers’ health and reduce their need for more expensive treatments later on.

Obamacare encourages these efforts by offering federal rewards to companies that subsidize their employees’ gym memberships, enroll smokers into cessation programs, and provide clinical wellness programs and in-house services such as diabetes and blood pressure testing. In fact, some employers like Intel have already begun using doctors and clinics within their facilities to provide such services.

That’s not just good news for Americans’ chronic care management — it’s been proven to reduce companies’ and the federal government’s health spending, too. According to a 2009 study by the American College of Occupational and Environmental Medicine, for “every dollar spent on in-company [wellness] programs, employers get a return on investment of $1.50 to $3.” Furthermore, studies have shown that Americans who pursue quality, preventative and primary care earlier on in their lives need less care when they are elderly — which is when most expensive health spending occurs. In turn, that saves money for public entitlements such as Medicare.

Critics may point out that companies’ increasing use of HDHPs — which the Obamacare excise tax is expected to fuel — could end up harming sicker and older Americans with serious chronic medical problems by shifting costs onto them. But companies were trending toward these types of plans long before Obamacare even existed. Since 2006, the percentage of American workers enrolled in employer-sponsored plans with a deductible of over $1,000 tripled across all firms.

The only reason that HDHPs pose a financial risk for the sick is because American health care services are indefensibly expensive and largely arbitrary. Americans don’t actually consume more care than people in other countries — they’re just forced to pay a lot more for the care they receive.

There are many policy solutions that, in tandem with Obamacare, could shift that paradigm. For instance, the Center for American Progress (CAP) has proposed forcing hospitals and insurers to disclose all information regarding how much medical care costs at different facilities, helping patients choose the best value for their care. Other reforms, including a shift towards competitive bidding for medical services and “bundled payments” for managing particular chronic diseases could also dramatically reduce the price of U.S. health care.

In fact, there is evidence to suggest that the staggering cost of American medical care is already starting to fall. In the meantime, employers are working to implement Obamacare in a way that reduces spending and gives Americans the tools to improve their health.

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