Premiums represent a top-of-mind cost for every employer with regard to the new healthcare legislation. But don’t overlook a hidden, and thus more insidious, expense associated with the new law: the administrative overhead required to understand and comply with the law’s provisions.
“People might not think about it, but there is a hidden cost in terms of labor and time required to manage all the changes required by the legislation,” explained Cynthia A. Van Bogaert, partner and employee benefits attorney at the law firm of Boardman, Suhr, Curry & Field, Madison, Wis. “Employers will have to learn about the requirements of the legislation and monitor additional guidance from agencies such as the U.S. Department of Health and Human Services.”
It can all seem like an unneeded headache at a time when business owners are already reeling from the effects of the severe recession.
“Employers are all groaning at the thought of administering health insurance under this new legislation,” said Joan Smyth, partner at the New York City-based Mercer consulting firm. “Some are saying, ‘Maybe it’s easier to just pay the penalty [required of larger employers who do not provide insurance] and let employees buy whatever they want.’ That’s scary, because we do not know what the state exchanges will look like and how they will be priced.”
Concerns that higher carrier costs would trickle down to the real world of monthly premiums seem to ring alarm bells.
“One area where Congress will come back to the table in future years is that of the overall issue of healthcare inflation,” said Terry Gardiner, national policy director for the Washington, D.C.-based advocacy group Small Business Majority. “Some $2.4 trillion flows into the healthcare industry each year. Every part of the industry has a lobby group that says, ‘Don’t tweak my part of the budget too much.’ So reforms to control costs have not gone far enough. Congress will have to come back and finish the job on cost containment.”
Nevertheless, the legislation in its current form was a crucial first step, Gardiner said.
“Yes, it will cost more to cover people,” she said. “But we cannot keep going down the road where we have 47 million people uninsured who are utilizing the emergency rooms. We are paying for that now, because each of our policies now pays $1,100 on average each year for uncompensated care.”
Phillip M. Perry is a New York City-based freelance business writer.