Why Health Insurance Exchanges Unnerve CFOs
Once these exchange plans are established, some financial leaders believe they could cause area employers to stop offering their sponsored programs altogether, forcing employees to opt for the new plans instead.
A McKinsey & Company report says, "30% of employers will definitely or probably stop offering ESI [employer-sponsored insurance] in the years after 2014 and at least 30% of employers would gain economically from dropping coverage even if they completely compensated employees for the change through other benefit offerings or higher salaries." It also noted that "Contrary to what many employers assume, more than 85% of employees would remain at their jobs even if their employer stopped offering ESI, although about 60% would expect increased compensation."
Aaron Coley, vice president of decision support for MemorialCare Heath System, a six-hospital system based in Southern California, says "We did some modeling around what would happen if our commercial rates went just halfway between where they are now and Medicare, and what does that do in terms of revenue here? It will be $200 million for us a year that comes out of our system on a total net revenue base of about $2 billion. And that's just if the rate goes halfway to Medicare [rate]; that's not even getting to Medicare rates."
Freas adds, "In many ways, exchanges are worse than losing [inpatient] volume, because now we're taking care of all those patients, perhaps even more patients than before, and that's going to drive up the competition for [clinical] labor and the need for more staff, and we'll have to deliver care at a much lower cost. I just don't know how this is going to work out for us."
Trying to get a handle on which employers and industries might forgo offering insurance in favor of HIX is causing a great deal of financial uncertainty, as CFOs try to analyze how much of their patient base may be at risk to leave higher-reimbursing, employer-sponsored plans for the likely lower-reimbursing exchange plans.
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