The way of business: Adapt or Die

A few months ago, the Wall Street Journal published an article detailing the potential consequences of health care reform. Over the past three years, there’s been a slowdown in spending here, and economists initially thought this may show the effects of health care reform as a cost savings. The Centers for Medicare and Medicaid Services just released a study showing that the legislation would, in fact, probably cause an increase in health spending starting in 2014. After that initial peak, the study predicted the rate would drop but still grow at a higher rate than we’ve seen recently. The thing is, we don’t really agree. Read on to see if you think we’re right.

The actual numbers make the reasons for the drop clearer: current spending has averaged about 4% annual growth for the past three years and is predicted to continue for the next two. In 2014, spending is expected to jump to 7.4% annual growth due to the market flood of participants gaining coverage through government-subsidized insurance plans or Medicaid. Health care cost increases would then level off in 2015 to about 6.2% for the next several years.

The increased spending is attributed to an escalation in routine doctors’ visits, prescriptions, and administrative costs. The article does point out that only 0.1% of the growth would be attributed to new portions of the law, and that most of the issue comes from the increased number of people in the market, particularly aging baby boomers.

The thing is, we don’t really agree.

Businesses have always found a way to circumvent any classic logarithmic equation that would result in increased costs.

Currently, benefits are intrinsically linked to compensation, so, to maintain competitive advantage in hiring, companies must offer competitive benefits. But if health spending goes up, then benefits will change in the private sector. The article even hints at this, though it fails to connect to the future effects—it points out that the reduced spending we’re seeing right now is partially because “employers have trimmed insurance since the U.S. first fell into a recession.”

That is the way of business. Adapt or die.

More aging baby boomers on the plan? Try a working spouse policy—either spousal carve out or surcharge would offset some increased costs. Or a dependent verification, which ensures that the employer isn’t paying for the extra costs of ex-spouses or any other ineligible dependents.

Escalation in doctors’ visits? Implement high deductible plans. They turn employees into consumers, giving them awareness of the costs associated with unnecessary visits. Or include telemedicine as an additional offering, driving down urgent care and emergency visits at the same time.

You see our point. Businesses are adaptable, and they will find a way to not have a 7.3% increase. In fact, you’re probably walking your clients and prospects through some cost saving options right now.

What we can all agree on, though, is that the government probably won’t move so fast.

This article was first featured in the June 26th edition of our e-newsletter, Directions. If you'd like to receive that weekly email, contact directions@continuoushealth.com. (Your email will never be shared, sold, or otherwise distributed, and you will receive only the type of content for which you sign up.)

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