What a year it has been. On March 23, 2010, President Barack Obama signed the Patient Protection and Affordable Care Act (PPACA) into law. While the spirit of the law seeks to correct many of the failings of our current healthcare system, such as a lack of transparency and accountability, exorbitant out-of-pocket costs, variable costs based on gender, industry or health-status, and the refusal to provide coverage for pre-existing conditions, this legislation also places significant new burdens on the private club industry and adds significant new costs to private clubs and their members.
As we reflect on the one year anniversary of the PPACA, we have had to consider the effects the PPACA will have on how clubs deal with their employees and members in the years to come.
Though the PPACA creates a new small business insurance exchange that will be fully in place in 2014 and ends discriminatory practices by stabilizing insurance costs for employers, the law introduces several problems for the club industry. Two examples will help illustrate some of the challenges that the PPACA presents.
New Fees
The first is an added cost, introduced by the PPACA on every health insurance policy sold beginning in 2014. Since health insurance providers will likely pass this fee on to their customers, it is expected that clubs could see a three percent increase in their premiums related to this fee.
This three percent figure was not pulled out of the air. It is the number the America’s Health Insurance Plans (AHIP), a national trade association representing nearly 1,300 member companies providing health insurance coverage to more than 200 million Americans, has said will be the amount its members expect to pass on to their consumers.
The rationale for this fee was to make the insurance companies help pay for the health care needs of Americans. In reality, employers will be largely subsidizing this initiative. This unintended consequence may actually cause clubs to reduce their insurance coverage if they cannot absorb this higher premium cost. Even with the additional small business tax credits provided by the bill, the implementation of the Small Business Health Options Program (SHOP) and the accompanying leverage SHOP can provide in negotiations, it is unlikely the increased premiums will be offset.
“Grandfather Status” Rule
A more significant provision of the PPACA for private clubs is the “grandfather status” rule. Under this rule, if a club had an insurance plan in place on March 23, 2010 then that plan qualified for grandfathered status. This means that as long as the plan’s costs and benefits stay the same for employees, then it will not have to comply with the requirements found in the PPACA.
However, if a club makes any changes to its plan after March 23, 2010—including increasing deductibles, changing co-pays or increasing their employees’ contribution percentage to offset higher premium costs, then it must purchase a health insurance policy that meets all of the requirements set forth under the law. That will likely mean a much higher premium cost for clubs when purchasing a government approved plan.
What makes this provision so bad is that most clubs were unaware of its impact until it was too late. Unfortunately, when the law was passed the government had not created the rules establishing what a club could or could not do to maintain its grandfathered status. By not establishing these ground rules, the federal government allowed clubs to continue the normal practice of increasing deductibles, changing co-pays or increasing their employees’ contribution percentage to offset higher premium costs in plans purchased or renewed after March 23, 2010. As soon as a club did this, it lost its grandfathered status.
As with other provisions of the PPACA, the rationale for this provision seemed reasonable—members of Congress did not want insurance companies to arbitrarily change benefits in the policies they sell from year to year. So, rules were established that prohibited plans from being altered.
However, the law failed to take into consideration the fact that most employers deal with rising premiums by making subtle changes to their policies. By limiting the any changes from businesses and insurance companies alike, the unintended consequence was to strip most clubs of the ability to keep their current plans.
Fixing PPACA
Obviously, these provisions of the PPACA were not specifically drafted to intentionally hurt private clubs, but that could happen. After one year of reflection on these types of unintended consequences, how do we fix them?
For the last twelve months, NCA and our allies on the Small Business Coalition for Affordable Healthcare have been opening the eyes of members of Congress to these problems. While many members understand the impact these provisions are having, many are not interested in making adjustments. Fortunately, some members of the House understand these issues and want change. The House alone cannot do what our industry needs when it comes to the PPACA.
The most effective way to ensure changes to the PPACA is to change the makeup of the Senate. With new Senators who have a different set of priorities, these burdensome provisions will be removed. Of course, beating an incumbent Senator is an extremely difficult thing to do, but 2012 may prove the exception to this basic election rule.
With a total of 33 senators up for reelection in 2012, and any number of possible outcomes in the house, it’s likely that healthcare will play a major role in the debate.
An additional concern for many candidates is the fact that, even after one year, the public still has not embraced the PPACA. According to a February 2011 Henry J. Kaiser Family Foundation poll, 48 percent of Americans view the law unfavorably and 43 percent view it favorably. More importantly, 69 percent of independent voters want it repealed along with 51 percent of Democrats, according to the same poll.
Since it is independent voters who usually swing an election, it seems many Senate candidates may well begin talking about repealing this law on the campaign trail. With luck, they will expose the unintended consequences of the law to more Americans.
Another way to see these burdens removed from the private club industry is if the federal judicial system deems the entire PPACA unconstitutional. To date five federal district courts have ruled on the constitutionality of the law. Three have found it constitutional and two have not.
Each of these cases will be likely appealed to their respective U.S. Circuit Courts of Appeal. Regardless of the outcome in the lower courts, the U.S. Supreme Court will ultimately decide the PPACA’s constitutionality. It is anticipated that a final ruling by the country’s highest court will come in late June of 2012—right during the 2012 Presidential Convention season.
Conclusion
To say the least, it is disheartening that a seminal law passed with the intention of fixing our broken healthcare system so profoundly affects our industry, but that is the state of affairs with the Patient Protection and Affordable Care Act on its one year anniversary. While there are new benefits and protections afforded by the law, there are also significant concerns as the law’s implementation moves ahead.
The ability to influence enough Senators to change the law does not seem to be a viable option at this time. The fate of the law really lies in the hands of the voters and the Supreme Court. Let us hope either or both make the right decision in the very near future.