‘Significant difference’ with health care costs expected under new law

The more than 65 attending a healthcare reform discussion Thursday (Aug. 18) afternoon at the Fort Smith Regional Chamber of Commerce heard the following phrases many times:
“It depends.”
“The rules aren’t clear yet. … Every group and plan is different.”
“The actuarial ranges to set those (premiums) aren’t consistent.”
“We’re not sure, because the final regs on that have not been written.”

And those phrases were from Cal Kellogg, one of the few people in Arkansas who best understand what businesses and individuals may soon face under the new federal healthcare bill.

Kellogg, senior vice president/chief strategy officer at Arkansas Blue Cross and Blue  Shield, was the featured speaker in the third in a series on healthcare hosted by the Healthcare Division of the chamber. Konecny Insurance Services sponsored the event.

A broad view of the controversial federal health care bill is that it will expand access to health insurance, reform the health insurance market to provide additional consumer protections, and improve the health care delivery system to reduce costs and produce better outcomes. The Congressional Budget Office (CBO) estimates that the coverage provisions in the bill will cost $848 billion over 10 years (fiscal years 2010-2019). The major provisions in the bill would not take effect until Jan. 1, 2014, meaning the bill uses 10 years of revenue to pay for six years of coverage. Also, the uninsured with a pre-existing condition can get insurance and will allow retirees maintain coverage.

In April 2009, Kellogg spoke to more than 250 chamber members about the new federal health care law, during which he predicted more than 200,000 pages of regulation would be required to implement the 2,400-page bill.

On Thursday he said the rules were becoming more clear, but not entirely so. His primary focus was to outline the advantages and disadvantages of remaining with a “grandfathered” health care plan compared to moving to a plan that meets the new federal mandates. He said rulemaking on many of the key regulations are expected within the next two months.

Those who stay with a “grandfathered” plan are not allowed to make adjustments that represent more than a 10% change to any element of the plan, Kellogg explained. Grandfathered employee health care plans are those in place prior to March 23, 2010.

Kellogg stressed that business owners and human relations execs must separate themselves from the emotion of the issue, noting that people emotionally considering the options often “lose the ability to logically reason” through the expected health care changes and instead “make knee-jerk reactions” based on short-term factors.

According to Kellogg, the basic advantages of staying with a grandfathered plan are:
• Avoid many potential expensive mandates through full implementation of the plan in 2014;
• Maintain current plans with insurance companies and avoid having to explain complex changes to employees;
• Gain time to see what happens in the marketplace and the “political arena”; and,
• A younger workforce will likely be less costly.

The disadvantages are:
• Additional paperwork to maintain grandfathered status;
• If a company has a fully insured plan, it cannot change carriers;
• Loss of common methods to manage and/or control health care costs; and,
• If the company has an older workforce, or workforce with more women, it may cost more.

Overall, Kellogg said employers should expect a “significant difference” in the cost of premiums between grandfathered plans and those mandated by the new federal law — with the difference being higher for the mandated plans. However, depending on the company and the plans in place and employee diversity, the costs vary.

“We’re just going to see how this plays out … to see what the real costs will be for these changes,” Kellogg said when asked if there was a standard estimated cost difference between plans.

As to the political possibility of repeal of the new law, Kellogg is skeptical.

“The toothpaste is out of its tube on this, and I’m not sure, no matter what happens politically, that they (Republicans) could repeal this,” Kellogg said.