Have you heard about these so-called “Cadillac” medical plans? This is the government’s name for health plans that are above $10,200 per individual and $27,500 for family coverage; the idea behind calling them “Cadillac” is that they can be thought of as medical plans for the “rich.”
Part of the Affordable Care Act outlines what ACA proponents call the “Cadillac tax,” which is a tax the government believes will help fund benefits to the uninsured under the ACA. It will force employers to pay a 40% tax on the cost of any Cadillac health plans they offer their employees.
When the Cadillac Tax Goes into Effect
When the Cadillac tax starts in 2018, it is estimated that one in four employers could be affected by the regulation. In other words, 25% of employers would be compelled to change their benefit structures; that means offering fewer benefits and less coverage to their employees. Does that sound fair? Of course not.
And as if that wasn’t significant enough, a study by The Kaiser Family Foundation reported that the Cadillac tax could impact even more employers as their costs rise – nearly one third of the nation’s employers by 2023 and 42% of employers by 2028, if those employers’ plans remain unchanged and health benefit costs continue to rise as they have been.
To avoid being “penalized” (that’s essentially what is happening), many employers are already raising their co-payments and deductibles – and, they’re also shaving away some of the coverage they were previously offering. Part of that is giving their employees more restrictive provider lists, a move that some employees may not be happy with (and understandably so).
A Solution to the Cadillac Tax on Health Plans
How can Cadillac health plan penalties like these be avoided? If employers choose a benefits model like direct contracting, they can circumvent much of this catastrophe. Direct contracting lets employers provide the coverage, benefits and high quality providers of a Cadillac health plan without the high cost; dollar for dollar, what direct contracting offers is equal or greater to what is available in a Cadillac health plan. But because they don’t pay the high cost, the plans don’t need to qualify as “Cadillac” – and therefore, the Cadillac tax can be avoided.
This is the best possible way for employers to deal with the Cadillac tax healthcare crisis! For more information, contact GM&A. We will be happy to discuss direct contracting with you.
Everyone likes to talk about the “new economy” and all the new advantages that come with it: easier access to travel accommodations, transportation and even personal income are all great examples that people are becoming more familiar with. But the truth is, there are some downsides to the new economy as well, one of them being higher medical costs. In fact, the costs of actual medical care seem to be growing more quickly than the cost of insurance; according to many experts, this indicates that inflation will affect healthcare costs even more in the coming years.
Speaking of experts, how do they calculate the rising costs of healthcare? It appears that three factors are involved. To gauge whether healthcare costs will increase, economists and healthcare statisticians measure:
- Increases in total healthcare spending
- The cost of providing health insurance
- The rise in prices charged for actual medical care
Adding substance to the claim that healthcare costs will accelerate even more with time, a new U.S. Commerce Department report shows that medical spending grew 100% more quickly than the American economy itself in the second quarter of 2015. Plus, the data showed that healthcare spending rose by 4.9 percent compared to the same quarter in 2014. The Affordable Care Act is partially to blame, sure – but it’s not the only factor.
Another player is rising prescription drug costs, as new drugs for hepatitis C, cancer and multiple sclerosis have all entered the market recently. Of course, these aren’t just new drugs; they’re also expensive. Couple that with the rise of America’s aging population (according to The New York Times, 40 cents of every dollar spent on healthcare will go to beneficiaries of Medicare and Medicaid), and you have a formula for higher healthcare costs in America.
What can be gleaned from this? Americans need to find new ways to save money on healthcare, and that starts with employers. Because employers are the primary purchasers of healthcare plans, it is incumbent on them to explore untapped health plan options. One of them is direct contracting, which can save employers money by contracting directly with providers – not insurance company middlemen. If you are tasked with finding an innovative, money-saving healthcare option for your company, contact GM&A to inquire. We will be happy to explain direct contracting to you.
Direct Contracting and Ancillary Services
Providing basic healthcare for employees can be costly enough; when those who are covered by your company plan need ancillary services to support treatment, it can be even more expensive. That’s why we recommend that employers consider adding these services into their direct contracting plans, so they can reduce health plan costs for their companies and give employees one less thing to worry about. Some of the ancillary medical services we can include in an employer’s healthcare network include:
- Dental and orthodontic treatment
- Optical (optometry and ophthalmology) services
- Chiropractic care
Of course, we can also ensure that ancillary medical devices are covered in your direct contracting health plan. Some of the devices employers may consider covering under the company plan include:
- Hearing aid devices
- Sleep apnea treatment devices (CPAP)
- Back and orthopedic braces
If there are other devices you are interested in adding to your plan, please let us know right away so we can begin the process of finding the best providers to add to the network. We can negotiate the maximum possible discount for any ancillary medical devices you would like to include in your direct contracting healthcare plan, and we can find providers located near you so that employees can receive their treatment as close to home as possible (of course, this also minimizes the amount of time they spend away from work – a win-win).
Ensuring that ancillary medical services and devices are covered in the company health plan is a great way to keep employees happy, retain them for longer periods of time, and improve the health and well-being of your workforce. Direct contracting is the best way to provide these services; if you are interested in discussing this option, contact a GM&A healthcare consultant to request a complimentary corporate health plan consultation.
Direct Contracting for Healthcare: Risks vs. Rewards
From time to time, we are asked, “What are the risks of direct contracting for healthcare?” It may sound trivial to say that there aren’t any – but yes, that’s exactly what we’re saying. As healthcare consultants to so many companies that have benefited from it, we here at GM&A truly believe the risks of direct contracting are virtually non-existent when compared to taking part in traditional health plans, such as PPOs.
Why are Direct Contracting Health Plans Better?
Remember, direct contracting involves entering into direct relationships with providers, without all the bureaucracy and middlemen of traditional healthcare. That means lower costs for employers, in addition to better, faster and more affordable healthcare for their employees.
Without direct contracting, you miss out on the cost reduction benefits and better care for everyone who is in your network – the healthcare network your company has created especially for its employees and their families. So the truth is, the real risk is not taking advantage of direct contracting.
Direct Contracting vs. PPO Plans
Some will say that if you go the traditional health plan route, you’ll get more services. First, that’s not necessarily true. We have seen some very critical care services – including life-saving surgeries, transplants and neo-natal care – provided in a superior manner for our direct contracting clients. Patients who have been unable to affordably receive these services via the former company health plan are now receiving them in the manner they deserve, and naturally, they couldn’t be happier. Second, it doesn’t matter how many services you get with a traditional PPO plan; your costs will be inherently more because you haven’t made competition work in the marketplace.
All in all, direct contracting is just the more sensible way to provide a company health plan. To learn more, contact GM&A to request a complimentary company health plan consultation. We will be glad to answer your questions.
And more importantly, why are so many employers getting on board with it as a way of providing healthcare to their employees?
Here’s the first answer: Private exchanges are a natural extension of the new healthcare economy, which includes the online healthcare marketplace. Much like the federal government’s Healthcare.gov service has public healthcare exchanges in most states (and residents of those states can apply to pay for coverage under those exchanges), corporations can have private exchanges of healthcare plans that are available to employers. So, think of a private exchange as a privately owned version of the government’s healthcare model.
As an employer, you can participate in employee healthcare plans under these exchanges. A private exchange works alongside a variety of third party insurance companies to provide healthcare services. Another way to think of it is as a contractor/sub-contractor relationship. An umbrella organization that operates a private exchange acts as a contractor, and the private exchange is akin to a sub-contractor.
Perhaps you have heard that some large consulting firms are acting as umbrella organizations that offer private health insurance exchanges. This is true, and it’s also true that GM&A is doing the same thing via our direct contracting model. We have created private exchanges for many employers so that everyone – employers and employees – can reduce their out-of-pocket costs. By partnering with the insurance companies that participate in our private exchange, we act as an appointed producer of your company’s healthcare plan and it benefits everyone: you, the employer; the provider, who administers the care; and the end users, which are your employees.
We can help your company provide coverage for full time and part time employees, in addition to existing retirees of your company if applicable. If you need a cost-effective healthcare solution for your company, it’s hard to beat the cost savings, personalization and flexibility of the private exchange model. To learn more, feel free to contact us for a complimentary health plan consultation.