President Trump’s pick for the next secretary of Health and Human Services, Alex Azar, goes before the Senate Committee on Health, Education, Labor and Pensions (HELP) today. If confirmed as secretary, Azar will have a real opportunity to bolster health care in this country — but in an area that does not get the same kind of attention as the battle over the Affordable Care Act (ACA): that of employer-sponsored coverage.
The debate over the ACA has focused mostly on dealing with those who rely upon the individual market for coverage. The costs and uncertainties in that market have led to unacceptable levels of uninsured individuals. This problem is indeed worthy of policymakers’ attention. But what is often overlooked in the debate is the fact that employer-sponsored insurance, which covers 177 million Americans, is the cornerstone of the U.S. health-care system.
First, government should continue to incentivize employers to provide health benefits to employees. Employers are good at both getting people covered and maintaining manageable risk pools, and public policy should be aimed at encouraging these goals.
Maintaining the strength of the employer market also provides stability for the health-care system overall. As indicated in a May 2017 AHPI paper that looked at employer concerns, 91 percent of large employers say that policymakers should encourage and facilitate the development of a robust and competitive market for individual health-care coverage. In fact, if all ACA penalties were removed such that employers could voucher some or all of their employees into the exchanges, 53 percent would consider such an option, which would help develop a strong individual market.
Azar should also note that innovations in employer-sponsored health benefits are helping to reduce health-care costs. However, regulations imposed by the ACA serve as a barrier to cost-savings. In 2014, an AHPI study found that over the next decade the cost of the ACA to large U.S. employers will be $4,800 to $5,900 per employee, and over the same time period, the total cost of the ACA to all large U.S. employers will be $151 billion to $186 billion. As health-care reforms move forward, federal policies should leverage and encourage innovation by reducing unnecessary and costly mandates and burdens on employer-provided health benefits that limit flexibility.
While some regulatory guardrails may be needed, too many "one size fits all" decrees hinder employers from providing quality benefits and needlessly increase costs. Employers should have the flexibility to design health-care programs that ensure a healthy workforce and enable access to affordable health care coverage in the way that best fits their business goals, company culture and talent needs.
Although health-care costs have somewhat moderated in recent years, they continue to escalate at an unsustainable pace, flummoxing politicians from both parties and challenging ordinary Americans in their efforts to secure health services for themselves and their families.
According to the Kaiser Family Foundation, annual premiums for employer-sponsored family health coverage reached $18,764 this year, up 3 percent from last year, with workers on average paying $5,714 towards the cost of their coverage. One way a Secretary Azar could expand affordable coverage is to relax the regulations on health reimbursement arrangements. According to an AHPI analysis of large employers, 95 percent of large employers support expanding access to and permitting more liberal use of tax-free health savings accounts. Aggressively implementing value-based payment models with provider input would also leverage employer efforts to reduce costs as well.
It is imperative that lawmakers on both sides of the aisle work together to bring down costs and to minimize unnecessary or inappropriate burdens on the individual market and employer-sponsored coverage.
Lack of transparency is another major concern when it comes to cost. Employers would like to see increased transparency of underlying financial transactions and contractual commitments in services provided by health-care vendors. In the aforementioned AHPI study, 92 percent of large employers say that complete and transparent access to health-care cost and quality data should be mandated so that a more competitive marketplace can be achieved. And 94 percent said that purchasers of health care, including corporate benefit managers and consumers, need greater insights into the relative cost and quality of the services and products available to them through the health-care supply chain.
Lasting cost-cutting steps will need legislation, which will require bipartisan compromise. Fortunately, transparency tends to get support on both sides of the aisle, something that a Secretary Azar could use to secure a legislative victory.
Finally, employers could not provide top-flight benefits without the protections of the Employee Retirement Income Security Act (ERISA). ERISA enables employers to offer uniform low-cost health-care benefits to employees and their dependents, no matter where they live or work. By allowing employers to offer the same benefits in multiple states, ERISA is crucial to the continued success of the employer-based system.
An August 2017 AHPI paper looked at this issue, and warned that:
“Key stakeholders involved with current health care reform efforts favor a state-driven solution that would enable states to tailor individualized health care regulatory schemes, but may not recognize the importance of maintaining preemption protections.”
Given ERISA’s importance, a Secretary Azar should ensure that well-meaning initiatives to increase flexibility for states to run their Medicaid programs and reduce costs in the individual and small group markets are carefully crafted so as not to disrupt ERISA’s protections.
Taken together, these steps will help create a healthier and more productive workforce, which in turn will make the American health-care system more fiscally sustainable. Employers have a vested interest in reducing health-care costs for employees, retirees and their dependents, and driving innovations that lead the way for the system overall. Alex Azar is an experienced and knowledgeable nominee, and he has a real opportunity to work with employers to bring about these badly needed improvements. The employer community stands ready to help.
Daniel V. Yager is the president and CEO of the HR Policy Association.