Observing the First Anniversary of the Obama Health Reform Bill

Barely a year ago, Nancy Pelosi, speaking about Obama’s Health Reform Bill said, “We have to pass the bill so you can find out what’s in it.” And, so we did. Fast forward a year later after the American people have had an opportunity to slog through the quagmire of 1,017 pages, and we discover the majority of voters support the repeal of ObamaCare. No real surprise there. In a recent Fox News commentary, Sen. John Barrasso (R-WY) said, “Now we know what’s in the law. It’s clear that it is unsustainable, unaffordable and unconstitutional. It's time to repeal and replace it."

The good news is that several federal court judges, including U.S. District Judge Roger Vinson in Pensacola, Florida, have pretty much concurred by ruling the current health care legislation as unconstitutional. Judge Vinson said that the provision of the law requiring Americans over 18 to obtain insurance coverage exceeded the power of Congress to regulate commerce under the U.S. Constitution. He further said that because the insurance mandate is central to the legislation, the entire law must be voided. Naturally, the White House took exception and the case will be presented to the Supreme Court for final resolution.

While this may delay ObamaCare’s day of reckoning to the tune of several billion dollars of the taxpayers’ money, Hal Shepherd, President and CEO of the Kennion Group, believes that the Supreme Court will ultimately rule the mandate requiring everyone to buy health insurance to be unconstitutional. “However, until that ruling is passed it is our position that employers should continue operating on the assumption that the mandates are still in place until this has been resolved,” he says. “We really don’t know what’s going to happen and need to be prepared for the worst while hoping for the best.”

False Hopes for Small Business Owners

Shortly after the passage of the health care overhaul last year, many small business owners got their hopes up after receiving postcards from the Treasury Department indicating they may be eligible for a generous 35 percent tax credit for companies with less than 25 employees who averaged less than $50,000 in wages.

Regrettably, those hopes were dashed to smithereens against the wall of disbelief when it was discovered the tax credits were only available to companies with 10 or fewer employees who averaged $25,000 or less a year. This was bad news indeed for business owners who are running out of affordable options for employee benefits. Health care related expenses are a huge problem for small businesses, especially with policy renewals facing double digit increases each year.

The way things stand right now is that all group insurance policies must provide annual benefits of at least $750,000 per employee. In September 2011, that figure will rise to $1.25 million, and after January 2014, no annual limits will be permitted. This has put an enormous strain on business owners who are already suffering from the negative impact of the economic decline as these mandates have raised monthly premiums to exorbitant levels.

The Band-aid Solution (It’s Only Temporary)

Today, health care insurance costs approximately $4,000 or more per person and if an employer is paying someone a minimum wage, this doesn’t work economically. Many small companies are seeking relief through alternative methods so they don’t have to absorb the full impact of these increases by passing some of the costs on to their employees in the form of co-payments, steep deductibles, and higher premiums.

In an attempt to offset some of these costs for companies who cannot afford to meet the new annual coverage limit, the Department of Health and Human Services has issued more than 1,000 waivers that enable employers and insurers to offer limited coverage for as low as $2,000 per person. These are called mini-med plans with maximum limits of $10,000 to $25,000, and are much more realistic. However, this is only a band-aid providing temporary relief as the waivers are good for only one year at a time. Plus, the waivers represent less than two percent of privately insured individuals.

Something else to consider is that a vast majority of privately insured people never file large claims. Statistics show that 50 percent of people under group health insurance have claims less than $1,000. Another 25 percent have claims less than $10,000. This means 75 percent of insured individuals under group health plans have claims less than $10,000. Out of the remaining people under group insurance, 24 percent have claims between $10,000-$99,000. This means only one percent will have health insurance claims over $100,000. One percent.

A Better Solution

In light of these statistics, the question that begs to be asked is: Why is the White House insisting that everyone have unlimited annual limits when less than one percent needs it? Instead of penalizing everyone with outrageous insurance premiums (or severe tax penalties if they cannot comply), why not provide extended coverage for those individuals with claims over $100,000? Instead of costing taxpayers billions of dollars, it would save them that much or more.

Hal Shepherd feels a better solution for the American people is a two-tiered program where employers cover 90 percent of insured individuals through mini-med policies like the ones they offer. Then have the government or state-funded program cover catastrophic expenses instead of trying to force one-size-fits-all mandates. “These are some of the things that could be done that would solve 95 percent of the health insurance problems this country faces without requiring a massive takeover,” Shepherd says.

The bottom line is that one year later, Americans are standing on very shaky ground when it comes to health care reform. However, there is a glimmer of hope knowing that federal agencies are reviewing and reconsidering regulations under the Patient Protection and Affordable Care Act. This allows employers to be more optimistic about providing adequate and affordable benefits for their employees.