Is Obamacare Ending Corporate Health Care As We Know It?

We are now just 11 short days away from state-run health exchanges opening for business as mandated under the Patient Protection and Affordable Care Act -- perhaps known better by its other name, Obamacare -- and the changes are really starting to add up.

Source: National Institutes of Health, Wikimedia Commons.

Less than two weeks ago, we looked at a growing corporate trend that was pushing retirees out of corporate-run health plans and into private health exchanges. The move -- which is being done by IBM and Time Warner among some of the more high-profile names -- is being made for two specific reasons. By supplying retired workers with a cash subsidy, these companies believe that they'll be allowing for greater health plan choices for retirees while also reducing their involvement (and money spent) on retiree health care. It's no secret that retiree health care costs are expected to rise, and pushing this group into the private exchange is a way for these companies to distance themselves from the time and money associated with locating optimal group health plans.

Is this the end of corporate health care as we know it?
Today, we can add another industry behemoth to the list in Walgreen (NASDAQ: WBA  ) . Earlier this week, drugstore chain Walgreen announced that it would be joining 17 other companies in moving 120,000 of its employees to Aon Hewitt's privatized corporate health exchange where participants would receive a cash subsidy and select their own insurance from the plans made available to them.

As you might imagine, there has been a decent amount of backlash against these recent moves. Workers and skeptics have denounced the corporate move as another selfish example of cost savings at the expense of the American worker. While I do share in some of these potential question marks, there are also some very intriguing investment opportunities, as well as room for health care quality improvement, with this move.

The move away from group plans generates risks and opportunity
Three companies that are looking like crystal-ball readers at present are WellPoint (NYSE: ANTM  ) , CIGNA (NYSE: CI  ) , and Aetna (NYSE: AET  ) , which spent through the nose to purchase Amerigroup, Healthspring, and Coventry Health Care since 2011. Although these deals were orchestrated to capture a good chunk of soon-to-be-covered Medicaid members as outlined under the Medicaid expansion, if large corporations continue to move away from group health plans, we could see a large uptick in individual and privatized corporate health plans -- thus providing a pop to all three companies.

On the flip side, though, corporate group health providers could simultaneously see their membership and/or margins shrink. Over the past three years, Walgreen had only allowed its employees the choice between two health plans, offered by WellPoint and UnitedHealth Group (NYSE: UNH  ) , which often carried lofty premiums. With more choices on Aon's corporate health exchange, including the now familiar tiers (bronze, bronze plus, silver, gold, and platinum), employees may have to option of moving toward lower-premium (i.e., lower margin) health plans. Based on Aon Hewitt's data collected thus far according to Reuters, a majority of plan participants (42%) had selected a cheaper plan than in the previous year compared with the 26% that purchased a more expensive plan.  

This presents itself as a double-edged sword in that it could be bad news for large corporate insurers like UnitedHealth and Aetna in that increased transparency may reduce margins and membership. Yet, it's also an opportunity to bundle higher-priced full coverage packages together, which may be able to make up for some, or all, of the lost premium on lower-tier packages.

The addition of Walgreen to the corporate health care privatization trend also doesn't change my opinion that insurers offering Medicare Advantage plans will be big beneficiaries. Although Walgreen's move is all-encompassing in terms of age (it's not just for seniors or retirees), and all employees will now be in control of their own health plan selection, the uncertainty derived from continuing health care subsidies will likely drive individual users in greater number to purchase the supplemental insurance known as Medicare Advantage to fill the gaps of what Medicare doesn't cover. Humana, which derives almost two-thirds of its revenue from Medicare Advantage would therefore be expected to benefit in a big way. 

But, there is still one very big unanswered question
Putting the fact aside that it appears that corporations are attempting to distance themselves from employees when it comes to offering health insurance, and that employees will have greater diversity in health plan choices than they had previously in almost every instance, plenty of unanswered questions remain. Perhaps none is more prevalent, though, than how these corporations will ensure that ongoing contributions keep up with the rate of premium inflation.

In the case of Walgreen, its subsidy next year is expected to match what corresponds to the silver level on Aon's corporate health exchange. But what happens moving forward is the real question. Obviously, health insurance premiums are going to march higher (but hopefully at a slower pace due to Obamacare's health system overhaul) over time. The question would then be: Will corporate subsidies be able to keep pace? And if so, how does this save these companies any money as opposed to offering group plans that can come with favorable rates? I'm not sure anyone really knows the answer to this yet, and it represents one of those unforeseen factors that clouds the real benefit that these insurers could see with the move toward corporate privatization of health care.

Onward we march
Earlier this month, Aon Hewitt estimated that roughly 60% of all businesses either have, or are seriously considering, making changes to their retirees' benefits health plans. Given this high number, it seems pretty obvious that until proven otherwise we're going to see a move by many large corporations away from employee-sponsored group health and toward subsidized private health care.

Clearly, we have some questions left to be answered (and soon we will indeed have some answers!), but I'd suggest that many of the aforementioned insurers stand to benefit in the interim with the employee/retiree in many cases gaining additional plan options that weren't previously available. If I didn't know any better, I might quantify that as a win-win for corporations and employees/retirees, but I'll reserve my judgment until we have conclusive data to work with in perhaps a year's time.

Where there is change, there is always opportunity!
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  • Report this Comment On September 20, 2013, at 4:45 PM, 2smartforlibs wrote:

    Is that a rhetorical question? Its a give me Obama care is killing the health care field doesn't matter if its insurance or health care itself

  • Report this Comment On September 20, 2013, at 5:20 PM, Makikijoe wrote:

    I wish that Obamacare WOULD end "corporate health care" as we know it !

    The fact it, the American "corporate provided" health insurance system is a maddening mish mash of "maybes", "ifs", "ands", and "buts" that omits at least 30 million of our fellow Americans.

    President George W. Bush pushed for "no child left behind" in regards to education. How about "no American left behind" when it comes to health care too ?

    It should NOT be the responsibilty of employers to provide health care access to a nation's people. Corporations are in business to make a profit. Not to make sure that everybody has health insurance. It was not fair to burden them with this task in the first place.

    British and Canadian corporations don't have to calculate the cost of providing health insurance to employees into their business costs.

    Ensuring that all citizens have access to affordable health care should be the responsibility of the government, not businesses.

    Already, the government DOES provide a great deal of health care through the highly successful Medicare program and through the Veterans Administration program in VA hospitals.

    They spend a much SMALLER amount on overhead because those systems are much more centralized. Just like the systems in Britain and Canada, both countries with government guaranteed and "mandated" health care systems.

    Health care should be a birthright in our country.

    It should not be a privilege for the people who can afford it. Or the lucky who happen to have jobs that provide it.

    I support Obamacare because it will bring us closer to universal health care.

    That should be our ultimate goal.

  • Report this Comment On September 20, 2013, at 5:36 PM, David32707 wrote:

    In no surprise, instead of the young and healthy lining up to overpay and subsidize the old and sickly. Its the old and sickly lining up to be subsidized by everyone else.

    Big companies will cherry pick. Self pay their young vibrant workforce to avoid subsidizing the sick and unable to work.

    Dumping retirees on the public and sucking up the savings.

  • Report this Comment On September 20, 2013, at 5:42 PM, captaintodzilla wrote:
  • Report this Comment On September 20, 2013, at 5:42 PM, captaintodzilla wrote:

    The government is acting like a sixteen year old kid that thinks it knows everything."If there isn't justice for the people let there be no peace for the government." Doing the same thing over and over is insane. Fix America First. Prioritize. Recycle America ,turn things around. The Government should fear the people, opposite of how it is now. the government should protect people and regulate corporations not protect corporations and regulate people. We need to Build a good foundation then rebuild. Reinstate common sense. Create Accountability and most of all treat our cancers greed , ignorance and self-entitlement. Our society runs the way it does because it is designed that way for the rich by the rich. There are many common sense simple ways to change things to make a better world to live in. Until we can prioritize correctly , have accountability , and worry about the American instead of the American dollar things will remain perverted. Anyone can find fault -- it's not a sign of anything other than moderate brain activity. It's much harder to offer creative criticism that actually improves the situation for everyone involved, UNITED we stand divided we fall...there is only one race the HUMAN RACE all the divisions of political parties and skin color have demoralized this country into a sewage plant of lying stealing ignorant greedy self-entitled hypocritical idiots the government has had too much money power and time with too little results actions speak louder than words.

  • Report this Comment On September 20, 2013, at 7:48 PM, doco177 wrote:

    Google "Obamacare Flowchart" at Intellectual Takeout to see a visual representation of the convoluted, corrupt mess this really is

    Congress,Muslims, Amish, Native Americans are exempt from mandate and penalties under Obamacare that the rest of us have to pay.

    1. Millions are losing the insurance Obama promised they could keep. Because ObamaCare forces employers to offer expensive Cadillac plans but also offers the option of paying a fine for not providing health insurance that can be cheaper than providing it, between seven and twenty million Americans are likely to lose their health insurance coverage according to the Congressional Budget Office. The original estimate was closer to four million.

    2. The cost of healthcare premiums is about to further skyrocket. Premium costs have already exploded, but that is a slow-motion explosion. In the near future, we could see costs double or worse. Naturally, these costs will hit an already burdened middle class hardest.

    3. Lost jobs. Lost jobs.

    The Federal Reserve's March beige book on economic activity noted that businesses "cited the unknown effects of the Affordable Care Act as reasons for planned layoffs and reluctance to hire more staff."

    Consulting firm Adecco found that half of the small businesses it surveyed in January either plan to cut their workforce, not hire new workers, or shift to part-time or temporary help because of ObamaCare.

    4. Doctor shortages that will mean rationing: The healthcare industry is already a bureaucratic quagmire. ObamaCare is about to add steroids. As the profession becomes tyrannized by government, the talented people currently practicing medicine plan to get out sooner than expected. Who knows how many will choose not to get in. Doctor shortages are what lead to the nightmare known as rationed care.

    5. Somewhere around $800 billion in tax increases will hit America's middle class. This added burden will not only further oppress a middle class already reeling from a drop in wages over the last few years, but could damage the overall economy.

    6. Inflation, the cruelest tax on the poor. When businesses get socked with added costs brought about by higher taxes and burdensome government mandates, they pass those cost along to the consumer in the form of higher prices.

    7. Added bureaucracy. Even those Obama lapdogs over at the Washington Post's Wonk Blog are admitting that applying for health care is about to get more burdensome than the byzantine paperwork involved in buying a home.

    8. To cut costs or to avoid having to provide insurance, workers on the economic margins are already losing hours, which means a lower paycheck. There are a million sad stories in ObamaVille; here are just a few of them.

    9. ObamaCare is projected to add $6.2 TRILLION to a deficit the GAO has already declared "unsustainable." That's "trillion" with a "t".

    10. More taxes than currently estimated are likely to hit because of situations like this one.

    Three years ago, Obama, Democrats, and his media lied to us about cutting the cost of health care, being able to keep our insurance, and not taxing the middle class. Today, those lies and what ObamaCare is and will do to the working and middle class are the biggest untold story in America.

    The govt becoming more involved in health care is the reason the costs have increased. So Govt creates a crisis, then provides a solution that comes at the expense of liberty and freedom, costs trillions, and by most accounts won't solve the problem but in fact make it far worse.Corruption, incompetence, disregard of the Constitution, and lying are integral to the way that this country is being run.

    REFUSE and Repeal Obamacare...If only a mere 20% of the over 300 million population of the USA boycott Obamacare the government would be overwhelmed to even think they could penalize or mandate every citizen that refused to participate in the most corrupt and unlawful ways which it was passed that circumvented the constitution of the United States

  • Report this Comment On September 20, 2013, at 7:49 PM, csymonds wrote:

    yes it is and that makes them a higher profit and cost the workers more out of pocket money. This will mean less money for people to spend and will slow economic growth. Obamacare only cover 70% after the deductible is satified. Leaving 30% for the worker to pay which will be dang near impossible for them to afford to pay. The average paycheck will drop about 25% then add the increase in federal taxes will drop another 6%. So 31% of a persons paycheck will drop for what they recieve as pay after they have paid all previous taxes and entittlements like SS.

  • Report this Comment On September 20, 2013, at 10:13 PM, soundersfan wrote:

    It is great to say that health care is a birthright, that corporations shouldn't need to provide healthcare, etc. but the author of that post forgot one very important fact. TAXES. Are you willing to see your taxes increase significantly (and I mean SIGNIFICANTLY) to pay for the healthcare that you are proposing.

    You mention Canada and Britain and universal health care as the 'ultimate goal' but you neglect to state that you are willing to see your tax rates double (or more) to pay for this. Are you also willing to have the govt control what treatments you do and don't get? As a cancer survivor, I am on a support group board with members from other countries and while, yes, it is very true that they don't have to worry about the cost of their treatment, they also quite frequently don't have the access to the same drugs that most of us in this country do. Tests such as PET scans aren't routinely utilized and even when they are used, there is a wait for them most commonly because there aren't the same amount of PET scanners (by far) as we have in this country. Do you rely too heavily on tests, drugs, etc.? Certainly that can be argued and is, at some point a valid concern. However, after you've been accustomed to having the access to most any type of care you want, are you willing to give it up to have universal health care?

    You should also be aware that, at least in Canada, things like drugs aren't covered so many corporations in that country DO offer that type of insurance as well as other health insurance policies to allow their employees to have more medical options.

    Are you also willing to accept that the govt WILL control your healthcare - NOT the doctor?? Are you willing to be 'told' what you should/shouldn't do with respect to your health? Again, here is another true example. A friend in BC is told by her doctor that she needs to have a heart test. She doesn't want to do it. If she doesn't, however, she won't get anymore treatment from her doctor and will be 'assigned' a new one. Is that the type of medicine that you want practiced on you? I don't.

    Let corporations give the benefit of healthcare to their employees. If you work for a good company, why shouldn't healthcare be a benefit just llike more vacation time, education benefits, etc.?

    I am not against all citizens having access to free healthcare but....if the administration and many of the politicians on the left feel that, for example, nurse practitioners and physician assistants are the 'wave of the future', then require those on free healthcare to be REQUIRED to utilize those providers and let us with other insurance be free to choose who we want to see.

    In order for good companies to keep highly skilled employees, they will always continue to offer some form of healthcare - whether it be as a supplement or as an employee's primary healthcare insurance. Regardless, if that employer sponsored insurance allows me to get 'better' care....if it allows me to move to the front of the if allows providers to be reimbursed at a higher rate and I get 'better care'...well so be it.

    You also neglect to state that in places like Canada, doctors are employed by the govt . Do you want YOUR doctor to be a govt employee? I sure don't.

    Leave my doctor alone to treat me in the best possible way that he/she knows how to do and not the way that the govt has decided is best. The govt can't do a good job at running the country - why should I believe that they can run my healthcare?

  • Report this Comment On September 21, 2013, at 12:35 AM, Dadw5boys wrote:

    We have been assualted by this Individual Responibility for so long that it is destroying Familys and Communities all over the USA. We no longer stand togeather to build this nation if we are standing alone. We pool our meger funds in taxes to build the highways, bridiges and provide support to Americans with Education, research and even support for Businesses.

    For too long now we have allowed our local and state government to try and run the publics affairs are a business. The only thing Government would have to sell is corruption.

    The People's Government is a Public Trust !

  • Report this Comment On September 21, 2013, at 7:59 AM, Prof52 wrote:

    We working American's are so screwed with ObamaCare. Doctors working for nothing, death panels, employers taking away medical insurance benefits, employers not hiring beyond 50 people, employers hiring part time employees and docking full time employees to less than 30 hours a week. It definitely does not create jobs.

    Notice it is the working person who is screwed........freeloaders get it for free (another abused entitlement program). Not to mention that Congress and their staffs are exempt!

    That is how you buy votes while destroying the world's best medical system and most successful economy!

  • Report this Comment On September 21, 2013, at 11:54 AM, sagehopper wrote:

    Reminds ,me of Hitler's line in "The Producers", when just about blown up by a bomb in a vase "They try, Lord how they try".

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