O Waiver, Where Art Thou?

On May 2nd, I will personally become acquainted with our President's failed promise that under his health care reform law, we could keep our current insurance if we wanted to.  On that day, our union will begin negotiating a new collective bargaining agreement with management to replace the contract that will end on June 30th.  First order of business on May 2nd will be a presentation on health insurance.  Even now, many of our senior members are choosing to retire under the current agreement, rather than take a chance on what our health care benefit will look like on July 1st.

My employer has been self-insured for the vast majority of health care expenditures for many years now.  There are two primary exceptions to this.  One, they pay a third party insurance carrier for a catastrophic coverage plan for its employees and two, our insurance coverage has a lifetime benefit maximum.  On average, less that 1% of employee's health care expenses meet the catastrophic limit each year and as far as I know, none have ever met the lifetime cap.

Over the life of the current five year contract, the cost of our health care plan has averaged a yearly increase in the low single digits with a cumulative increase under 10% over the last four years.  Both management and our union have worked to keep expenses low.  Part of that plan was having our union members cover a greater portion of the health care costs.  Under the previous contract, employees paid less than 20% of expenses, but in the most recent year, employees paid just under 30% of the total cost of the insurance plan.

Additionally, management began offering certain preventative care provisions free of charge to employees.  As they examined the data, the company realized that less than 5% of covered employees would use over a third of the health care dollars spent each year.  It was cheaper to treat and find issues early rather than wait until they became health problems.

Despite the inherent faults in the health care system, my employer, working with my union brothers and sisters had found a way forward to bring what were formerly 15 - 20% yearly increases and created a sustainable program that worked well.  Negotiations for this next contract brought hope that any wage increases would do more than simply pay for the additional health insurance costs.  That, of course, is now out the window.

Under the new health care reform law (Obamacare), there are a few mandated changes to our plan.  The lifetime cap is now gone with the wind and employee's 'children' up to age 26 must be eligible for coverage.  Suddenly, the costs of our program have went up because of changes that neither management nor our union members wanted.

I spent the majority of my twenties living without health insurance.  What I found was that when you visit a doctor and tell them you want to pay with cash, you suddenly become an unacknowledged VIP.  Have you ever went shopping for a car and the salesman asked if you were going to finance the purchase?  Do you remember the way his eyes lit up when you said you'd pay cash instead?  Try this sometime - haggle a price on the car of your choice based on financing the purchase.  Then, once you have the price all set, ask him what he would take if you paid cash instead.  The price will drop 10% if not more. 

A doctor's office works in the same way.  All that extra paperwork disappears, making the nurses and clerical workers happy and the office gets to put money in the bank immediately rather than wait 60-90 days to get paid from the insurer.  Even today, for some items I don't bother with my health care coverage because it's cheaper to make separate arrangements with my provider for cash payments.

In truth, the one thing I was missing during those days was coverage for any large expenses that may have come up.  I didn't need a health plan that I would use often, but I did need some sort of catastrophic coverage in the event the worst did happen.  Even today, I could benefit under a plan with a high deductible that would pick up coverage over that amount, provided that I didn't have to go through the insurer to meet the deductible.  Now, every expense that goes toward my deductible still creates a blizzard of paperwork for my provider, even though I will be paying cash at the time of my visit.

Unfortunately, the Obamacare legislation goes in the opposite direction in an attempt to create savings.  Whereas my employer has found that limiting their presence in the insurance market, putting more of the financial decision making & burden on the shoulders of the employees while providing preventative care as a free benefit has created a way to contain costs, Obamacare seeks to force more people into the insurance market, mandates unnecessary and unwanted care while removing the decision making from both the insurer and the insured.

Under Obamacare, the employer's have an incentive to eliminate health care coverage and the provider's have an incentive to escape the insurance market altogether, either through concierge medicine or leaving the field.  The poor incentives built into the program are evident in the vast number of waivers requested and received to allow companies to be excepted from certain provisions of the law.  This, naturally, makes the whole system, even that much worse.

As I stated earlier, one of the mandates of the new law is that companies cannot offer coverage with a lifetime maximum.  As of last week, over a thousand companies had received a waiver from this particular provision.  One of the first to receive a waiver was McDonald's.  The cost of this provision would have added too many millions to their health care coverage.  Without a waiver, the company said it would not be able to continue offering coverage.

But what about Burger King?  Or Wendy's?  Where's their waiver?  Perhaps they received one; I don't know.  If they didn't, wouldn't this put them at a competitive disadvantage?  If McD's is saving millions from a waiver, then wouldn't BK or Wendy's be losing millions by not receiving one.

Looking at the list of companies receiving waivers, it seems that the list is populated with those that fall into one of two categories.  The waivered company is either extremely large and would make good news copy if they were forced to eliminate coverage due to Obamacare, or they were small, but closely affiliated, politically with the Democrats.  Of the second group, the largest percentage of these were unions.

My employer has obviously not received a waiver because we are currently operating without a lifetime maximum benefit.  With about 700 employees, we are not large enough to make a ripple in the press and as a coal burning facility, I wouldn't expect us to have the proper political credentials to make the cut either.

This of course, presents a couple of dilemmas.  What happens if one of our chief competitors decides to play the political games and receives a waiver?  Now, not only has the health care law altered our plan against our wishes and made it more expensive, it's waiver process has now put our companies viability and competitiveness in jeopardy. 

Our CEO is left with several bad options - seek to curry political favor with the party in power or seek to drop our health care coverage altogether, risk losing market share by selling product at a higher cost or risk profitability by matching prices with the waivered competitor.  Both the employer and the employees will be harmed under any of these options and they are necessitated, not by their own actions, but by the actions of the government.

In the past, as we worked toward a new collective bargaining agreement, market pressures would set outer limits and we negotiated in the space between.  This year, Obamacare has repositioned the limits with little to no regard for the market.  As the waivers continue to be handed out, those limits are shifting still.  Many years of hard work and effort to successfully bend the cost curve down have now been tossed aside by a group of Washington politicians who have no idea how markets really operate.

But hey, in seven years, my now 18 year old daughter will still be covered on my plan.  Well, she will if we still have a plan.  Thanks to Obamacare, that's no longer a sure thing - even for union workers.