The Affordable Care Act will have little impact on the way Duke manages its health care policies.
For the past three years, Duke has been preparing for the recent enforcement of the Patient Protection and Affordable Care Act. Duke has decided to continue to offer its health insurance plan to employees for 2014, despite needing to be diligent with reporting requirements and fees.
The ACA sought to increase access to and lower the cost of health care insurance by mandating citizens to have either public or private insurance, funding the expansion of Medicaid for states and creating an annual online marketplace for insurance while providing subsidies and tax credits for people between 100 and 400 percent of the Federal Poverty Level. The ACA has also forced employers like Duke to decide between the “play strategy”—continuing to offer their previous insurance plan for employees—or the “pay strategy”—mandating that employees participate in the exchange.
“The biggest issue that every employer is facing right now is whether you’re going to pay or play,” said Vice President of Administration Kyle Cavanaugh. “We believe it makes most sense for us in the foreseeable future to stay in the play strategy.”
Duke pays for a portion of employees’ insurance premiums under the current system, resulting in a relatively low monthly bill for coverage for employees and their families. Competing employers have not moved toward exchanges and will continue with the “play strategy” for 2014.
“As we look at the various industries that we compete in—from health care to academic medical centers to universities—none are moving into the exchanges in an aggressive way at this point and time,” Cavanaugh said.
A switch to the “pay strategy” would potentially be detrimental to both employees and employers explained Donald Taylor, associate professor of public policy and associate professor of community and family medicine and nursing.
Employees who are below the federal poverty level—such as some part-time laborers—would be uninsured, while those above 400 percent of the poverty level—such as some professors—would have to pay full premiums for themselves and their families, as opposed to a single monthly fee when covered by Duke, Taylor said.
“People with employer-provided health insurance have a lot to lose with any change coming about,” Taylor said. “With enough people with a lot to lose it makes it hard to bring about any changes—and that’s a pretty big deal.”
In addition to having to pay more, employees could also potentially receive less income from Duke because a tax-exempt portion of that income is spent on subsidizing premiums.
“Duke pays around three-fourths of the premium cost for employees, and the tax code treats these employer-paid premiums as not taxable, providing employees with tax free income,” Taylor wrote in an email Sunday.
A change in medical insurance policy could result in fines and revenue loss from employee visits, Taylor said.
“Generous health benefits are one thing that makes Duke an attractive employer for professors, researchers and other employees,” Taylor said. “Tradeoffs from any savings would include being a less attractive employer, and potentially reducing revenue to Duke University Health System because many Duke employees must use Duke providers given the plan they have chosen.”
No changes in coverage
Duke is the second largest private employer in the state of North Carolina and covers 64,000 lives under its health insurance plan—including employees’ children up to the ages of 26. Although the ACA mandates individuals to have a health care plan by Jan. 2014, Cavanaugh does not believe many of its employees will switch to other insurance plans, citing that 92 percent of eligible employees currently accept Duke’s offer.
“Any way that you measure that, that’s considered to be a very high participation rate, which speaks to the quality of the plans that currently exist,” Cavanaugh said. “We think that we’ve been enormously successful as a system in managing the cost and delivering a very high-quality benefit plan.”
Additionally, a new provision of the act—auto-enrollment—changes the signup policy for new hires. Previously, individuals had 30 days to accept or reject Duke’s medical insurance offer or wait a year for the next enrollment window. Now, all employees are automatically signed up for the offered insurance unless they explicit reject it. Cavanaugh predicts a 2 to 3 percent increase in coverage due to the new rule.
Cavanaugh explained that smaller organizations have limited options when it comes to providing health insurance to their employees, which could potentially make the “pay strategy” more appealing.
“Smaller employers have less options than do larger employers,” he said. “We have the very good fortune of having the benefit of numbers and having access to world-class care and having the ability to design strategies that proactively help to manage costs.”
Community impact
North Carolina is one of 25 states as of Oct. 6 that chose not to expand Medicaid under Obamacare to cover individuals whose incomes were at or below 138 percent of the federal poverty level. For community health centers, this decision has made it so that the way they provide care to the poorest in the community will not change.
The Lincoln Community Health Center in Durham, for example, sees roughly 41,000 patients annually, 80 percent of which are uninsured, and 84 percent who are below the federal poverty level, said Phil Harewood, CEO of Lincoln Community Health Center.
“With the promise of the Affordable Care Act, we expected that the bulk of those uninsured patients would have qualified for Medicaid and receive coverage,” Harewood said. “As a result, very few of our patients are going to benefit from the Affordable Care Act.”
It was estimated that 475,000 people would be eligible for coverage in the state of North Carolina if Medicaid was expanded.
“People who understand what happened are outraged, but I don’t think most individuals that we see understand it,” Harewood said.
Under the ACA, people without insurance—public or private—who are below the 138 percent federal poverty level will be fined only if the state legislature approved of Medicaid expansion, Taylor explained.
The Division of Community Health at Duke University Medical Center is aiming to expand primary care services to limit emergency room visits through community health centers.
“One of the things that you want to look at is how many folks come into the emergency with conditions that are better treated at a setting that are much less acute than the emergency room,” said Division Chief Michelle Lyn.
Fred Johnson, vice chief of the division and director of clinical and care management services, noted that not expanding Medicaid has forced some premiums to skyrocket, despite previous rates.
“The algorithm for the insurance premium can only take into account three factors—one of them is geography,” he said, adding that if you have private insurance in a neighborhood where most people are uninsured, your premium may increase to cover those individuals.
The community health division of the medical center has begun to reach out to communities through partnerships in order to educate individuals about the exchange brought on by the ACA.
“What we’re doing right now is primarily rolling out a community outreach strategy through a countywide coalition to inform everyone of the exchange,” Johnson said.
Harewood’s health center has also began its outreach program, having recently received $300,000 through a Health Resources and Services Administration grant to hire full-time certified application counselors to inform individuals about ACA opportunities.
“We work with other community agencies in Durham and reach out to the uninsured population to educate them about the opportunities found in the Affordable Care Act,” Harewood said.
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