Days after President Trump signed an executive order directing several of his departments to analyze regulations designed to limit certain practices and products in the small group market, questions remain. What does this mean for small businesses, their employees and brokers who serve this market?
Obamacare sought to improve health insurance by limiting what could be sold and where it could be purchased. To support this objective, certain products like short-term medical and association plans were restricted as well as the ability for employers offer premium reimbursement plans. As a provider of these plans prior to the passage of Obamacare, my experience is that the use of these arrangements was limited in scope, typically offering access to employees not eligible for traditional major medical coverage. When these plans were eliminated, these employees lost access to this coverage, intending to replace it with access to subsidized coverage on the Obamacare exchanges.
History tells us, however, that not all planned economies work. In the Soviet Union of the 1970s and ’80s, people often stood in line for non-existent (or unaffordable) goods when markets are severely controlled. In the Soviet Union, leaders boasted that “only the best products and services are available for our citizens,” while the reality was that the market controls resulted in very few products on the shelves. The experience with the Obamacare controls of alternative insurance arrangements is similar.
But what happened when the Soviet Union fell? This once monolithic empire devolved into something akin to the Wild West. Anybody could sell anything to anyone. Freedom resulted in comparative prosperity, but not every Russian citizen shared in the benefits created by the lack of market controls. Some of the products did not operate as advertised. Ironically, a new generation of Russian billionaires was created from the ashes of Communism.
What does this mean for small businesses, their employees and brokers who serve this market?
First and foremost, it creates more uncertainty. The order instructs the departments to “analyze” these issues without any clear direction. New regulation — or the repeal of existing regulations — leads to massive creativity. When the ultimate guidance is received, expect a flurry of activity by service providers — and the brokers who represent them — offering innovative solutions using the expanded short term medical, association plans and premium reimbursement plans for small businesses. In my experience, while these plans are more affordable, they do carry higher administrative costs and this results in less money being available for healthcare. In short, a Wild West characterized by great opportunity and, sometimes, great danger.
Will small businesses and their employees be better off? That remains to be seen. The increases in the price of health insurance places a drag on both profitability and income growth for small businesses and their employees. As we reach full employment, small businesses increasingly struggle to attract and retain talent. Creative benefit solutions can be an important element in presenting competitive total compensation packages to their employees.
While the Wild West may be a dangerous place, staying in the Big City with only access to a planned economy may no longer be an option.
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