The Oregon Educators Benefit Board could be forced to pay some steep excise taxes to the federal government by the end of the decade, and while there are steps that could be done both at the state level and by individual school districts to decrease the tax owed, the health plan likely cannot avoid paying at least some tax, starting in 2018.
Unlike the Public Employees Benefit Board, which has restructured its health plan to focus more on coordinated care and reportedly can put off the tax by restructuring the amount paid by families versus individuals, OEBB could do both those things and still pay about $600,000 a year in tax, according to consultants at Towers Watson.
Health plans come under the tax if their cost exceeds a certain threshold, which happens for the traditional, richer plans that OEBB offers both through Kaiser Permanente and Moda Health. These generous health plans are known perjoratively as “Cadillac” health plans compared to the skimpier plans most Americans must accept.
The tax will not affect less generous OEBB plans, i.e., the high-deductible catastrophic plans.
“It’s coming from the high-end plans and not the lower cost ones,” said Steve Carlson, an actuarial consultant from Towers Watson. “We can’t fully eliminate it.”
If OEBB and the school districts make no changes, they’ll have to pay as much as $11.4 million in 2018. That figure has a compounding effect and could reach $15.6 million in 2020, assuming that healthcare costs increase at 8 percent a year.
The school districts would receive no direct benefit from this tax; it was put into the Affordable Care Act to provide funding for the Medicaid expansion and individual insurance subsidies as well as discourage “over-insurance,” built on the theory that if healthcare is cheap and easily available to consumers, they will seek more healthcare than they need, driving up costs.
“The excise tax happens to be a blunt instrument inserted into the law to control the cost element,” Carlson told OEBB board members.
Savings from Coordinated Care
Carlson provided lower tax projections that OEBB will pay if it meets Gov. John Kitzhaber’s goal of holding inflation to 3 to 4 percent a year -- a figure typical of the rise of the consumer price index but uncommon for healthcare in the United States, which alone in the world has seen healthcare costs increase at a rate of two to four times that of inflation.
At Kitzhaber’s insistence, OEBB plans to revamp its contract later this year to align it more closely with the coordinated care reforms in the state Medicaid program, a process that PEBB has already completed.
The new PEBB contract did not result in a dramatic break from previous contracts, however. Pressure to maintain patient relationships with Providence and Kaiser physicians led to PEBB keeping the status quo while adding coordinated care options. About half of the public employees opted to keep their old insurance model, which after a few years of near-zero inflation saw a return to cost increases higher than regular inflation in the past year.
In a likely attempt to keep the OEBB contract, Moda Health and Kaiser have both offered more options with a focus on coordinated care and cost controls, but the traditional Moda plans saw sky-high premium increases of nearly 10 percent last year for OEBB.
School Districts Encouraged to Restructure Plans
The tax could be reduced dramatically if school districts simply restructured their health plans and shifted the cost from individuals to families, which would align it more closely with the private sector and the designs of the ACA. This change would save OEBB $6 million to $8 million a year, depending on healthcare inflation.
But restructuring health plans is up to the individual school districts, and is typically subject to collective bargaining. The change could likely be made only when the contracts come up for renewal. So far, few districts have been willing to make the switch, despite encouragement from OEBB.
“We’ve gotten a few,” said OEBB deputy administrator Denise Hall, adding that the number of districts that have realigned their health plans has increased about 1 percent in the past four years.
OEBB could end up in a situation where some school districts make the changes by 2018, but others resist, leaving the benefit board with the burden of paying those additional costs unless it could force those school districts and consumers to pay that extra tax they generate.
If OEBB completely eliminated its richest plan, it could save about $1.9 million a year, but Carlson said that by simply passing that tax onto consumers, economics could work out the problem. Those who chose the richer plan would have the option of paying the higher cost, but more than likely would switch to a lower cost plan with higher deductibles and copayments.
Chris can be reached at [email protected].
Over-insurance! Such a good frame for healthcare profiteers!!!
Healthcare is neither cheap nor easily available for any "consumer." Healthy people don't "seek" healthcare. Sick people do. And when they seek care, they do so to become healthier!
How can we have a healthcare "market," when no one knows the price of care? Don't expect transparency since the Oregon Health Authority lets insurance companies get away with claims that price negotiations are "trade secrets" protected by Oregon law. (I'd like to see whether lawmakers agree with that interpretation...)
Without price disclosures and with narrowed networks, co-insurance will be cost prohibitive for patients who can't afford care. Then the industry literally gets away with murder.
So let's not call healthcare a market. It's a cartel.
Like the Columbian drug cartel, except PhRMA, AHIP (American Health Insurance Plans), the American Hospital Association and Medical Device Manufacturers Association are the the thugs who shake us down.
Think about that when you chose your "Cadillac" or stripped-down-Nissan-Versa health plan. Stumptown or Folgers?