Special Report: Health reform 101

Health reform 101

Industry sifts through the 2,600-page landmark health care and insurance reform bill

By Todd Dills

After the U.S. House of Representatives approved the Senate’s Christmas Eve-passed version of health-care and insurance reform legislation by a vote of 219-212, with 34 Democrats joining Republicans opposing the bill, U.S. President Barack Obama signed the legislation, and the bill went to the Senate for reconciliation of the House-made changes.

The end result? Health-care reform is close to becoming reality. But the mandate for everyone to have health insurance on which the bill’s projected budget deficit savings ($143 billion over 10 years) rests will not go into effect until 2014, at which time the majority of the structural changes to the health insurance system also takes effect.

Six-hundred-plus-truck fleet Watkins & Shepherd Trucking President Ray Kuntz, former American Trucking Associations chairman, says for trucking companies, on balance the bill will favor smaller carriers already providing insurance, who “have a lot to gain on this thing. It will have only a positive effect for them.” Businesses with 25 or fewer employees making on average less than $50,000 a year will be eligible for tax credits on premium costs. “For us larger carriers, we don’t get any of that,” he says.

At the same time, the National Federation of Independent Business contends that the bill will drive up the costs of insurance as new taxes on health-care-industry parties are passed on to consumers and businesses in higher premiums.

It’s one reason, no doubt, that 23 percent of respondents to an eTrucker.com poll suspected their employer would drop benefits as the ultimate result of the bill. Kuntz cautions not to put the cart before the horse. “There are potential positives — in Montana [where W&S is based], close to 20 percent of the people are uninsured. If they, in fact, get insurance, and the majority of those start paying their fair share for hospital care, it would stand to reason our costs will come down as hospitals bring in more revenue. Will we see a kind of return with lower hospital costs?”

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With mandates come fines for not complying, of course, and individuals without insurance have until 2014 to do so or face a $95 fine, or 1 percent of income, whichever is greater. In 2015 the fine would move up to $325, or 2 percent of income; in 2016 $695, or 2.5 percent of income. Hardship exemptions for the poorest of Americans would apply, however, and government subsidies for private insurance purchases will be available to individuals and families if they earn up to 4 times the federal poverty limit. That means about $44,000 yearly for an individual or $88,000 for a family of four.

The overlapping mandate for businesses with more than 200 employees to provide health insurance or pay their own fine has some watchers worried that, in the long run, throughout the country, it may prove less costly to businesses to, so to speak, “pay the tax,” says Gordon Klemp, principal with National Transportation Institute, publisher of the National Survey of Driver Wages. He tells of a conversation he had with a business owner outside the industry who noted his “employer mandate cost would be around $90,000 yearly,” Klemp says, if they decided to drop benefits and pay the fine. “They pay $480,000 in health insurance premiums today for their employers. If the rest of the world sees the same thing, it looks like you won’t see very many people providing health insurance.”

Both Klemp and Kuntz are quick to note that the same may not hold true for the trucking industry, where as the economy recovers competition among fleets for the best drivers is expected to get heated. “You don’t find too many trucking companies with sound financials that don’t provide health insurance,” says Kuntz. “They have to get drivers.”

“Occasionally we work with carriers who are distressed,” says Klemp. “We had one not so long ago in a very bad way who was considering eliminating their health insurance. In the end, it was not really a close call, because they had real concerns that the expectation among drivers was so high that, if they dropped insurance, they could roll their entire fleet over. My expectation was the same. If there were a lot of options for individuals out there, [the situation may have been different]. There are not a lot of options out there right now.”

Come 2014, there will be.

Highlighted at the top of the legislation’s text are “Immediate Improvements” to the health care system including variations on the small business incentives mentioned; relief for individuals who have been excluded from most affordable insurance plans due to pre-existing health conditions (they will be able to join a new, temporary national high-risk insurance plan); elimination of insurance companies’ ability to end your coverage except for cases of policy fraud; and prohibition of insurers’ exclusion of coverage for children with pre-existing conditions. Children will be eligible to remain on their parents’ policy up to age 26, which of all the changes is the part that worries Kuntz most. “Pregnancies and premature births are a high risk in that age group,” he says, and costly for group plans.

Other structural health-care changes include new tax credits for families to help offset premium expenses and the establishment of health insurance exchanges run by the states or nonprofit entities within the states where individuals, the self-employed and small businesses alike will be able to pool risk to buy into group plans to reduce overall costs. These may be particularly good options for small fleets and owner-operators who do not currently offer or have their own insurance.

Also in 2014, the bill expands Medicaid eligibility to a cutoff point of 133 percent of the poverty line for those not eligible for Medicare. That means individuals making less than $16,572, $33,729 for a family of four.

“I think that, before people assume reform is going to hurt them, they ought to take time to dig into the particulars here,” Kuntz says. “The verdict’s still a ways out.”