Today or tomorrow, we’re likely to hear the Supreme Court’s decisions about a challenge brought by two employers against the Affordable Care Act:
- In Hobby Lobby vs. Sebelius, the Green family seeks relief from the ACA’s requirement that its employee health insurance cover the use of two methods of birth control it finds objectionable on religious grounds: intrauterine devices and morning after pills. The 600-store, $3 billion crafts enterprise is privately owned and operated. The Greens are devout religious conservatives: theirs is a position anchored in the same religious conviction that had led them to keep their stores closed on Sundays and donate $800 million to build a Bible museum in the nation’s capital.
- In Conestoga Wood Specialties v. Sebelius, similarly, is run by devout Mennonites who make wood cabinets. The company was started by the Hahn family in 1964 and remains active in its religious community in Lancaster County, Pennsylvania. Like Hobby Lobby, the family is challenging the requirement that certain methods of contraception be covered.
At issue in these cases is the Affordable Care Act requirement that health plans include contraceptive coverage per an Institute of Medicine recommendation without requiring a co-pay. In 2012, HHS allowed religious employers—churches, schools, et al- to opt out of the requirement by allowing their employees to seek services directly through an outside insurer. In oral arguments March 25, the plaintiffs argued that religious freedoms extend to a company’s decisions about coverage. The government’s countered that some controls are necessary, lest an owner use religious grounds to justify any limitation i.e. vaccines, or medical care et al. The Court’s decision is expected this week as it close out its 2013-2014 docket.
The issue in these cases is not the employer mandate. The issue is religious freedom and its applicability to a company’s rights vs. an individual. Specifically, it marks the first time the highest court will determine how the Religious Freedom Restoration Act (1993), protecting an individual's exercise of religion applies to private, for-profit companies and their owners.
If the Supreme Court agrees with the plaintiffs, the stage might be set of a new series of challenges from employers seeking exclusions to other ACA requirements of employers health benefits coverage. If the Court finds with HHS, it settles at least temporarily the ACA’s formidable role in policing health benefits. So these cases—Hobby Lobby and Conestoga—will not likely derail health reform, though they’re important nonetheless.
The bigger legal challenge to the Affordable Care Act is the question about subsidies. Section 1401 of the ACA stipulates that premium tax credits to buy insurance (subsidies) will be provided to individuals and families who enroll through “an exchange established by the state” In May, 2012, the IRS issued a rule that in effect said subsidies could be accessible to enrollees through the federal exchange used in 36 states as well as the 14 state-run exchanges. The cases—Haliburg v. Seebelius (DC), King v. Sebelius (Richmond), Pruit v. Sebelius (Oklahoma) and Indiana v. IRS (IN) will likely end up on the Supreme Court’s docket for 2015. A decision by the high court that subsidies through the federal exchange are disallowed would disrupt coverage for the 6.5M new enrollees who would lose their subsidies and coverage altogether. It would create chaos for insurers that enrolled them and for the doctors and hospitals they’ve used. And it would pose a fascinating Campaign 2016 theme.
But stepping back, the Court’s decisions on these matters will not answer a far more important question: what’s the future for employer sponsored health insurance?
Conventional wisdom says that employer-sponsored health insurance helps a company recruit and retain its workforce. In some industries, employees highly value the benefit, foregoing higher wages to keep generous health coverage. In others, where competition for talent is not as intense, benefits costs are additive but not strategic to their workforce formula.
The Affordable Care Act is premised on continuation of employer-sponsored coverage: after all, if suddenly employers decided to drop insurance altogether, many would go without coverage and take their chances, some would enroll in subsidized coverage through a health exchange or enroll in Medicaid, and a few would buy individual policies from a private plan. The net impact of a mass employer exit from health insurance coverage could be chaotic and costly.
But employer-sponsored health insurance coverage is at a crossroad. It’s expensive to provide coverage for the 55% of our population covered by a company’s benefit. Per Kaiser Family Foundation data, employees pay 17% of the cost for themselves, and 25% for their dependents. The company pays the rest, receiving a tax deduction for their portion.
But might the uncertainty about the long-term impact of the Affordable care Act, the questions arising from these and other legal challenges, and the certainty of escalating health costs and higher insurance premiums drive employers to drop coverage, equip their employees to buy plans directly, and walk away? It’s a question many company owners and their boards are considering.
Fewer and fewer companies can afford to provide health insurance—not the result of the ACA, but due to cost. The percentage of non-elderly workers with employer sponsored coverage dropped from 68% in 2000 to 61% in 2009—before the ACA became law.
Has employer sponsored insurance run its course? It’s too soon to know. What’s clear is that employers are restless: they’re demanding more value in local markets via narrow networks, reference pricing, direct contracting, bundled payments, and price transparency and more.
So regardless of these legal challenges to the ACA, the real story is how employers navigate their future and their growing influence as the catalysts for health system transformation. They’ll watch the Supreme Court, but they’re paying closer attention to their bottom lines and the value they get from the system.
PS: for a complete recap of the week's news in healthcare, go to www.navigant.com/pulseweekly.
Sources: "Income, Poverty, and Health Insurance Coverage in the United States: 2010." U.S. Census Bureau. Issued September 2011; Robert Wood Johnson Foundation and State Health Access Data Assistance Center, "State-Level Trends in Employer-Sponsored Health Insurance." June 2011; "Changes in Health Insurance Coverage in the Great Recession, 2007-2010" John Holanan and Vicki Chen. Kaiser Family Foundation, December 2011; Torio CM, Andrews RM. National Inpatient Hospital Costs: The Most Expensive Conditions by Payer, 2011. HCUP Statistical Brief #160. Agency for Healthcare Research and Quality, Rockville, MD. August 2013. ; Congressional Budget Office, "CBO and JCT’s Estimates of the Effects of the Affordable Care Act on the Number of People Obtaining Employment-Based Health Insurance." March, 2012; "Health Insurance: Enrollment, Benefits, Funding, and Other Characteristics of State High-Risk Health Insurance Pools". U.S. Government Accountability Office. July 22, 2009.