1.9.15 | Forbes
By Steve Brozak
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Challenging Obamacare is sure to be one of the top priorities of the newly convened 2015 Congress. With Republican majorities in both the House of Representatives and the Senate, bills that attempt to chip away at what is formally known as the Patient Protection and Affordable Care Act are likely to be regularly launched at the White House. Ironically, the ammunition for overturning Obamacare could come from one of the institutions whose economists heartily endorsed it.
Harvard faculty members were among those consulted about the Affordable Care Act while it was being written and the Act’s impact has caused dissension among the ranks of the faculty. Changes are being made to Harvard’s health plan to bring it into line with one of the controversial elements of the law, the so-called Cadillac tax on health plans, which goes into effect in 2018. The Cadillac tax is a 40% surcharge on health-insurance spending above $27,500 for a family or $10,200 for an individual, and most institutions, including Harvard, are not willing to pay it. Most for-profit and non-profit companies are adjusting their employee health insurance benefits to avoid the increased cost of the Cadillac tax.
Healthcare insurance is big business. The top ten healthcare insurers posted 2012 revenue of $267 billion. The two publicly traded healthcare insurers with the most revenue – Humana and Aetna — each reported more than $21.7 billion in revenue, with each representing 3.8% of the total healthcare insurance market, ranking fourth and fifth in total healthcare insurance revenue. Harvard’s healthcare provider, Harvard Pilgrim Healthcare, is a small, private company, insuring 1.2 million people with $2.6 billion in 2013 revenue.
The Harvard arts and science faculty unanimously condemned the change in their insurance plan, reflecting the pain that people in business experienced a few decades ago when corporations put a cap on how much they would pay for employee healthcare and began shifting healthcare costs to employees through higher premiums, higher deductibles and higher co-payments. Elite institutions and privileged people in business were exempt from the added costs to employees until now. In this case, the Affordable Care Act may be forcing Harvard dons to experience the healthcare system in the same way as others do.
Harvard full professors, who make close to $200,000 a year, and assistant professors, who make around $100,000 thousand per year, will continue to have a generous healthcare package. Premiums will be reduced in 2015 and coverage will include a maximum of $250 in deductibles per year for medical appointments, and 90% coverage of treatment costs after the deductible is met. Total out-of-pocket costs are capped at $1,500 a year for individuals and $4,500 a year for families of three or more. This is in keeping with what employees must now pay out of pocket due to changes caused by Obamacare at large corporations like Bristol-Myers Squibb Company and PNC Financial Services Group, Inc. where premiums and out of pocket expenses have increased. Premiums are also increasing for the most popular healthcare plan offered by the largest U.S. employer, Wal-Mart Stores, Inc. Wal-Mart provides healthcare insurance to 1.2 million of its more than 1.3 million employees with significantly higher deductibles, co-payments and out-of-pocket maximums than the Harvard faculty members pay.
What the Harvard faculty is now learning is that the U.S. healthcare system is complex. There are many players with different agendas – doctors, hospitals, insurance companies, pharmaceutical manufacturers and corporations that buy insurance all have a stake in the $2.9 trillion healthcare economy. Unintended consequences are inevitable; make one change here and it is likely to affect something else over there. Trying to figure it out is like the proverbial group of blind men trying to describe an elephant.
In the case of the Harvard faculty one must ask if they are making a bold stand for egalitarian healthcare coverage or whining because they are being required to share the cost of healthcare. Most employees have had to wrestle with the confusing and often gut-wrenching impact of increasing healthcare costs for many years now. It is time that those in the ivory tower experience some of the challenges most of us face daily.