House Subcommittee Hears Testimony on Health Care Costs

On May 31, the U.S. House of Representatives Education and the Workforce Committee’s Health, Employment, Labor and Pensions (HELP) Subcommittee held a hearing, Barriers to Lower Health Care Costs for Workers and Employers, to discuss the continually rising cost of health care.

The press release issued by Subcommittee Chairman Phil Roe (R-TN) announcing the hearing referred to a Kaiser Family Foundation study, which revealed the average annual premium for a family health care plan increased by 9 percent in 2011 and now exceeds $15,000, and a PricewaterhouseCoopers (PwC) survey estimating that employer health care costs will rise by 8.5 percent this year (though a more recent PwC survey indicates that spending “is expected to grow at a historically low rate of 7.5 percent” in 2013).

In his opening statement, Chairman Roe suggested that increasing flexibility for employers – particularly with regard to the establishment and administration of consumer-directed health care vehicles such as health savings accounts (HSAs), health reimbursement accounts (HRAs) and flexible spending arrangements (FSAs). “Consumer-directed health plans offer commonsense options to help millions of individuals secure a benefit plan that meets their health care needs at an affordable price. Unfortunately, recent policy changes threaten the success of these important plans,” Roe said, alluding to the Affordable Care Act (ACA). He commended the House Ways and Means Committee for its consideration of HSA improvement legislation that same day (see story in this issue).

The subcommittee heard testimony from a number of employer plan sponsors and health care benefit consultants on their experiences with health care costs:

• Ed Fensholt, senior vice president and director of Compliance Services for Lockton Benefit Group (and a member of the Council’s Policy Board of Directors), acknowledged that “federal regulators are making a strong effort to listen to the employer community, to understand the concerns of employers, and to endeavor to balance the needs of employers with the needs of those individuals the PPACA was intended to benefit,” but nevertheless, “PPACA has, to this date, bent the health insurance cost curve north, not south.” He identified employer coverage mandates, assorted taxes and fees and administrative burdens as threats to continued health care plan sponsorship.
• Roy Ramthun, president of HSA Consulting Services, asserted that “account-based” health plans (such as HSAs) have helped slow the decline in employer plan sponsorship and can continue to help slow cost increases, though he expressed uncertainty “that even account-based health plans can overcome the new employer responsibilities and costs of complying with the Patient Protection and Affordable Care Act.”
• Jody Hall, owner and proprietor of Cupcake Royale and Verite Coffee and member of a local network of small, independent businesses, described her personal challenges in managing the costs of health plan sponsorship. She voiced strong support for the ACA – and the state health insurance exchanges, in particular – which she said would help “break down the barriers to lower health care costs and finally level the playing field for small businesses.”
• Bill Streitberger, vice president of Human Resources for Red Robin International, said that “the rising costs of running our business, including significant and escalating health care costs, make the prospects for continued profitability, job creation and contributions to our communities increasingly difficult,” and cited coverage mandates as a particular cost concern.

During the question-and-answer period of the hearing, much of the discussion centered on the elements of the ACA that may be increasing costs for employers. Fensholt suggested that recent claims data and client surveys show a clear correlation between enactment of ACA and cost and premium increases, and said that additional regulations and notice requirements are also driving up costs for employers, resulting is costs being passed along to employees.

The subcommittee’s ranking Democrat, Representative Rob Andrews (D-NJ) and Representative Scott DesJarlais (R-TN) engaged in a dialogue on whether the ACA health insurance exchanges constitute a “government-run” plan, with DesJarlais arguing that it does – and creates a situation where individuals will lose existing employer-sponsored coverage.

Fensholt noted that providing health care coverage is also part of attracting a talented workforce. He said that employers closely monitor what their competitors are doing and will be reluctant to drop health coverage until their competitors do.

In response to questions about post-ACA efforts to control costs, Streitberger said that cost-control is more difficult now but tort reform could still be effective. Hall reiterated her support of the ACA but recommended improvement of the small business tax credit by increasing the limits currently in place.

With regard to HSAs and their current treatment under the law, Ramthun told the panel that these plans are not well understood and ACA has made it more difficult for employers to use them.