The Affordable Care Act, colloquially referred to as ObamaCare, includes in its new mandate virtually all American companies with over 50 employees have to have or buy group health insurance or pay a penalty to not do so. This Act was held constitutional by the U.S. Supreme Court on June 28, 2012 in its final opinion of their term.
The Court did not uphold it on the ground the U.S. Congress could use its power to regulate commerce between the states to require everyone to buy health insurance. Instead a majority of five of the nine Justices agreed the penalty to be paid if one were to refuse to buy group health insurance is a kind of “tax” Congress can impose using its taxing power. Under that theory, Congress could legally force us to all purchase licorice gum if our Congress were to set a penalty for not buying it. Civil libertarians and folks who don’t like to be told by government how to run their businesses will be debating this one for some time.
Pay for Group Health Care, Pay a Penalty or Divide to Conquer?
The problem this new law creates for small businesses including law firms, some adjusting companies, nurse case management companies and other smaller players in our industry who may have been against the Obama administration’s health care law was it would increase costs and make their companies less competitive. Now that our highest court has upheld it, small companies could opt to go a route that will save them thousands of dollars each year. Under the law, companies with more than 50 workers must provide health insurance the law magically defines as affordable, or pay a penalty. Paying the penalty may be cheaper and many small business owners are considering doing just that.
The penalties or what the Supreme Court called a “tax” are set according to a complicated formula and start at $2,000 per worker, with the first 30 workers excluded from the calculation. Small employers will now be forced to decide whether to pay for coverage, accept penalties or find creative ways to avoid the law. We are confident no one is going to want to hire “unhealthy” workers because the cost of healthcare for such workers is typically higher. We also expect to see more fitness-for-duty evaluations to potentially screen out folks with pre-existing problems. We do hope employers will get more involved in health care by encouraging good diet habits and regular daily exercise.
Smaller employers will be faced with deciding whether to grow to a size where they are faced with the problem, pay for coverage, accept/pay penalties or find ways to avoid the law. Another simple way to avoid the issue would be to divide into two or more companies as your company grows close to the threshold of 50 workers. With key issues like what the group health care plans will cost still unanswered, many owners still have a long list of questions.
Some group health care experts say business owners will find more insurance alternatives will soon be available. This is because the law provides for the creation of state-based exchanges to sell insurance to companies and individuals. We understand Illinois and most states are now scrambling to create these mandates health care coverage exchanges. While the jury is out on this concept, we are unimpressed—it is hard to imagine group health care insurance brokers have been hiding lots of low-cost options that will only come to light with state government help.
Illinois WC claims are trending way down and may drop even further under ObamaCare—What are we prepared to do about it?
How will it impact workers’ compensation in Illinois and other Midwest states? Well, if more companies follow the intent of the law and buy/offer group health care coverage, it is much less likely for workers with medical problems to try to “create” accidents to seek WC coverage of medical care. This may lead to fewer and fewer medical-only or litigated WC claims across our country.
The trend toward less WC litigation is being demonstrated by the fact the IL WC Commission only had about 22,000 claims filed in the first half of 2012—this should mean this state will have less than 45,000 new claims being filed at our Commission this year—ten years ago, there were almost 70,000 new claims filed each year before the Commission. Ten years ago, there were over 200,000 pending claims at any given time—shortly, there may be less than 100,000 pending. Some speculate the lower claim count is due to fewer jobs, better safety, litigation avoidance techniques and workers being afraid to lose their jobs. We are not aware of any metrics to prove any factor is more effective than any other but we are certain ObamaCare will be another hit to the overall number of claims.
However one views it, the IL WC claim count may be down for any number of reasons but there is no question, WC claims in this state are down by almost half and the numbers continue to drop. As you may note in the next article, many Arbitrators’ jobs are now up for grabs but whatever the State does, it is going to be hard to justify a $30 million dollar annual budget for the IWCC in a state that is hemorrhaging red ink when our administrators simply don’t have as much to do in years past. The Illinois WC Commission has about 32 Arbitrators along with 9 Commissioners who each have two full-time lawyer assistants, the Chairman and his staff—in all we have something like 60 administrators. In stark contrast, Indiana to our east has less than ten similarly situated administrative hearing officers. While we don’t know if we will ever hit the Indiana WC administrative model, the cost of all the Illinois administrators has to be looked at moving forward.
The problem with talking about IL WC administrative budget cuts is Illinois business pays literally every nickel of the annual budget of the IWCC but has literally no say in how their money is spent. We don’t hear clarion calls from the great folks at the Illinois State Chamber of Commerce, the Illinois Hospital Association, the Illinois Manufacturers Association or the Illinois Retail Merchants to cut administrative hearing costs in our state. For example, if they could cut the IWCC budget by 1/3 or $10,000,000, one would think they might be happy to tell their members they saved each of them thousands of dollars by forcing the Commission to get more efficient, effective and cut their budget to insure they match changing needs, such as fewer claims caused by outside factors like ObamaCare.
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