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Why would the government want companies to report how much they spent on employee health benefits?
The Patient Protection and Affordable Care Act (PPACA) requires that employers report the cost of providing health insurance to an employee on the employee's Form W-2. Why would the federal government require this? Why are employers suddenly being asked to report this information? Could it pave the way for taxing health benefits in the future?
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8 Answers
Hi Caty,
Good question. And there is a good answer for it. As an employee, it is important to know just how much is being spent for my medical care, by my company, and out of my own pocket. It's important for every employee to understand the real, total cost of their healthcare as part of their compensation.
It's also essential that we have a way to compare costs with benefits for every health care plan offered by health insurance providers.
It's also important that our society have this aggregate data. Data is critical, in business, in government and in many other areas. Without accurate, timely and well-collected data, it's virtually impossible to develop and execute any type of program. And, without such data, collected on an ongoing basis, you're operating in the dark, unable to make improvements or change things as needed.
Government does things for all of us that private industry can't or won't do; and many government functions aren't the job of a private company. No private concern will (or should) spend their funds insuring that, for instance, our water is safe, our air is clean, and our food won't poison us. Government does for all of us what no one of us could afford to do individually. All of our lives are made better when we all pitch in together, to do things cooperatively, in those instances where we simply don't have the ability or the resources to do it on our own.
Given that most Americans receive their medical coverage from their employer, it's critical for each individual and our government to understand as much as possible about the specifics of that coverage, the details on what is provided, how it's provided, and the costs, to both the company and the employee.
We are living in an era where so many of our fellow citizens hate our government and the people who serve in it. As a result, some people are suspicious of anything our government does. And that's counterproductive, particularly in an era where we Americans---only 6% of humanity---have to compete with the other nations of the world.
We Americans can't complete globally if we hate and distrust our own government. It's essential we all work together, the public and private spheres, as we did, so successfully, in the 40's, 50's and 60's, when we Americans set a positive example for the rest of the world, with both our economy and our democratic form of government.
1. So they can tax it.
2. So they can make political arguments about why it should be taxed.
3. So employees will be encouraged to (a) organize or (b) demand those sums be converted to cash pay or (c) both.
4. To give the government more data to support the federalization of all health care.
If this information was truly considered important to disclose to employees by employers, or even thought to be useful for employees to know, don't you think companies would have shared it already long ago? Forget the fact that it is extremely difficult if not totally impossible to precisely attribute personal benefit costs to any one individual. We can also gloss over the massive additional paperwork this will require and the demands it will place on HR staffers who will be deluged with queries and challenges.
Hidden benefit values provide a significant competitive advantage to enterprises who can negotiate well and who provide positive work-life environments. Exposing the underlying benefit cost details will punish economically efficient employers while not improving the lot of enterprises with excessive benefit costs... but it will encourage ees to move from bad-benefit firms to strong-benefit firms, so there might be a temporary upside from some perspectives before health care is totally federalized.
I agree with most everything that has been said, but the long and short of it in my opinion is that they want to tax it.
I agree with everything that's been said as well; however, I feel this also has a lot to do with creating an early cost awareness for employees. The HCR provision that's scheduled to roll out on 1/1/14 is when employees will have the opportunity to say they cannot afford their employer's health coverage. At that time, employers will be required to give these employees "free choice vouchers" so they can purchase health insurance through the government exchanges.
On 3/1/13, a provision will roll out when companies will be required to inform all employees of their options with the government exchanges. They have yet to be clarified as to what the quality of the insurance options or the carriers. The only thing that's been stated is that there will be competitive choices in Medicare-like plans. There will be income caps (thank goodness) so that not all employees will be able to say they cannot afford it.
This is the beginning of the end of companies offering health insurance to their employees. With all of the compliance reporting that insurance carriers are going to have to do for the government, they're going to need to staff up and we'll pay for that in premiums. That coupled with the compliance admin headache that businesses will have makes this a vicious cycle in my opinion.
Perhaps I am not cynical enough. We spend an inordinate amount of money on delivering health care in this country with pretty average outcomes. The distribution of care is also pretty poor, we have a lot of people who receive their care in the ER because they lack coverage so we deliver it in the least efficient setting and those costs get passed along to those who can pay for coverage.
I am not a fan of single payer or the government taking over administration of health care. That being said the VA (Veteran's Administration) and Medicare provide coverage to millions pretty efficiently.
Do they want to tax "cadillac" plans,absolutely. I also think health management and health care delivery are societal issues and they are impeding our efforts to retain a meaningful competitive position in the world economy,
There is a place for government, industry, and the consumer to address this issue.
As Kimberly points out the codependency and lack of awareness of factors affecting their health and the cost of care by consumers is deeply rooted and a huge impediment to overcome and address the health management issue.
To take your comments a step further Mark, I firmly believe that we have a huge lack of responsibility in our society with regard to healthcare. Childhood obesity is at an all-time high and I don't agree that in our workplaces, we should all be required to pay the same payroll deductions for our healthcare premiums. What we're going to start seeing is companies who will reward employees who have a healthy lifestyle and penalize employees who do not. There are independent companies who are now offering employer programs where they will partner with employees' doctors and then report the findings to the insurance carriers. If you decide to not take care of yourself, you should pay more. I guarantee you that if it hits someone's wallet, their lifestyle will change. We'll see more people quitting smoking and exercising more. When that happens at HOME (where it should be happening anyway!) it will trickle to the children and start a new trend of having healthy families. What a concept!
Most auto, home and life insurance policies are that way -- so should employer sponsored healthcare.
Couldn't agree more Kimberly! 60% of health care costs are attributable to lifestyle. That means they are managable and controllable. When you add in the indirect costs of health care related to workplace stress and dissatifaction (lack of engagement) we are "leaking" billions of dollars annually.
I work with clients among other areas to implement integrated health and wellness management programs that "partner" with their employees and their providers. The results are showing up both directly on the bottom line and in the health and morale of employees and their families.
The "solutions" being offered by most current government interventions are focused on "delivery"- the 40%. As employers we have a great opportunity to address the 60%, just like we did with quality in the 70's and 80's!
The answer, pure and simple, to Caty's question is found in PPACA and the legislative history behind it. PPACA established a requirement to report amounts spent on health-related benefits as a precursor to implementing the so-called "Cadillac plan" tax in 2018. It was implemented early as a secondary means for HHS to address the actuarial levels and relative pricing for the three tiers of benefits to be offered via the exchanges. The rest is window dressing.
I concede the following, at least in part, reflects a political bias. I'm not a believer the exchanges will be the downfall of employer-provided health insurance; however, I do believe it will become the basis for dropping the majority of plans to the minimum benefit level government says is acceptable. Bear in mind the exchanges do nothing to address the costs of the underlying services, medical care; rather, they serve as a consolidated purchasing mechanism. Before this becomes less expensive, a solution beyond price controls (Medicare's approach) is required. I've worked with Congress on insurance issues, and the sad reality is the members and their staffs don't get it and don't really want to. That, again in part, is why we're starting to see parts of PPACA get scaled back or repealed.
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