As we get close to the halfway point of 2013, many parts of the Patient Protection and Affordable Care Act (PPACA) are being prepped to roll out, with significant structural reforms — including the introduction of the exchanges — scheduled to go into effect starting in January 2014.
Employers who want to provide their employees with an attractive, cost effective benefits program need to consider fully insured options, examine whether self-funding is an option, and look at whether starting a captive would serve their needs better.
An employer should also take into account how PPACA will affect the actual cost of of health care services.
One of the key drivers of health care trend — change in the underlying cost of care — is the provider unit price.
If the price of a unit of care goes up, that means the cost of care will be higher. What complicates the discussion is that hospitals, doctors and other members of the provider community receive payments from many sources.
The provider community’s revenue and its expenses are moving in the opposite direction.
The federal government is proposing cuts in Medicare reimbursement rates and Medicaid funding. Meanwhile, as a result of PPACA and other laws, providers need to comply with new reporting and electronic recordkeeping requirements.
The resulting economic model may present hardship for a provider. How hard the hardship is will depend on several factors, including the share of the provider’s total payments that come from federal programs and the size of the gap in technology and administrative infrastructure that the provider must bridge to comply with PPACA requirements and expectations.