The Trump administration on Thursday proposed new rules to let certain small businesses and trade groups band together to buy health care, in its latest move that could weaken Obamacare’s insurance marketplaces.
The expansion of so-called association health plans is part of a broader effort to encourage the rise of cheaper coverage options that are exempt from certain Obamacare patient protections and benefit rules.
For a myopic view of Obamacare’s effect on small business, one can look at its results in Louisville, Kentucky. The state saw one of the biggest drops in uninsured individuals under the Affordable Care Act, from 20.4 percent in 2013 to 7.8 percent in 2016, largely in part to the state’s expansion of Medicaid. The state operated its own Obamacare marketplace for two years before moving to the federal exchange in 2017, where today only three insurance companies offer coverage on exchange.
Of late, Louisville has become a flashpoint for the GOP to tout its plans to repeal and replace, with visits from both President Donald Trump and Vice President Mike Pence in recent months to talk about why the ACA isn’t working in the state, or elsewhere.
Steadily and without fanfare, the Affordable Care Act has created a boom in Silicon Valley. Since the law passed nearly seven years ago, billions of investor dollars have flowed into digital health startups such as Stride Health that were spurred by the legislation’s overhaul of the health-care system and the market forces it unleashed. The law’s reach also extends to a generation of “gig economy” companies — including Uber, Lyft, TaskRabbit and Instacart — that are dependent on the labor of flexible workers, who are among the biggest ACA consumers. Tech entrepreneurs have also relied on the law, saying it has made it easier for them to found startups.
Today, many startups are trying urgently to read the tea leaves of a new Congress and presidency that is set to strike down President Obama’s sweeping health law. With no clear replacement plan at hand, many in Silicon Valley wonder how its repeal will ripple across the region.
Enrollment in the Obamacare insurance marketplace is likely to stall or even decline for 2017 as higher premiums drive away people who aren’t eligible for government subsidies, according to S&P Global Ratings forecasts.
“Our forecasted modest-to-negative growth is clearly a bump in the road, but doesn’t signal ‘game-over’ for the marketplace,” S&P analyst Deep Banerjee wrote in a report released Thursday.
Glenview Capital Management is a hedge-fund founded in 2000 by Larry Robbins, whom the Wall Street Journal describes as a “billionaire hockey fanatic.” According to a new report in the Journal (online, 7/23) by David Benoit, Mr. Robbins apparently has knack for spotting trends early, especially when it comes to healthcare and its related, needed insurance coverage. Back when President Barack Obama was unveiling the concepts of healthcare overhaul, Robbins and his fund began gobbling up shares of stock in health insurers. It turned out to be “too early” according Benoit’s Wall Street Journal article.
While Robbins and Glenview suffered their share of losses as a result of the 2008 financial meltdown, Robbins started making “investments in hospitals and insurers four years ago,” and the result “has been one of the most successful hedge-fund wagers in recent years,” adds Benoit.
Noted tax expert and attorney Robert W. Wood returns to Forbes. The subject this time is the dreaded-by-business Obamacare “Cadillac Tax.” According to Wood’s recent post in Forbes (online, 5/15) it seems increasingly this levy will affect both individuals and healthcare plans.
Wood also writes (and compellingly asks) “The tax is increasingly under fire from Congress, and this marketplace reaction is fueling the bonfire. If no one pays it, how else will we pay for Obamacare? The Supreme Court upheld Obamacare as a tax law, and it contains many taxes. One tax that hasn’t yet kicked in is the Cadillac tax. In enacting the law in 2010, the Cadillac tax was buried, not applying until 2018.”
Wood’s Forbes column gives some history of at least the intent of the 2010 Affordable Care Act, that “The theory of the law is that health insurance should be the great leveler. The Affordable Care Act included the Cadillac tax as a tool to cut healthcare costs. It puts direct and forceful pressure on employers to offer less-generous health insurance plans. Starting in 2018, Obamacare imposes a 40 percent tax on the cost of individual healthcare plans above $10,200 for individuals and $27,500 for family coverage.”
Wood describes the tax as “decidedly punitive.” The purpose of the tax is to ensure “that more health insurance dollars are spent across a greater number of people,” according to Wood in Forbes.
A fresh Financial Times report profiles a newer breed of tech healthcare entrepreneur. One such entrepreneur, Josh Kushner, founder of an insurer calling itself “Oscar,” says, “the consumer never mattered in healthcare, and for the first time ever the consumer does matter, because they are making choices on their own.”
Yet, while this quote alludes to opportunities for businesses in the healthcare arena, another quote by Kushner may bear closer scrutiny, even a reading between the lines, “We can have engineers look at [any industry] and say ‘this doesn’t make any sense,’ and do it better. There’s government, education, financial services . . . but healthcare is the most screwed up — it is a total train wreck.”
Does a “total train wreck” at the end of the day ultimately mean that perceived governmental ineptitudes in healthcare translate into an Achilles heel for healthcare tech overall?
So far so good for people like Kushner. The Financial Times Report (online, May 5, 2015 by Aaron Stanley) says, “In addition to Obamacare’s cost-cutting pressures, it’s more politically controversial mandate of requiring people to obtain health insurance has forced millions of Americans to deal directly with the complexities of the healthcare system – creating opportunities for consumer education and choice.” Here, opportunity seems to abound for tech company start-ups.
Another healthcare tech startup businessman, Sean Duffy, according to the Financial Times Story, “swears by Obamacare, as the act is known informally, and generously credits it as the catalyst for the launch of Omada Health, his digital platform.” This is thanks literally to page 879 of the 906 page Affordable Care Act.
Duffy describes his “light bulb moment.” It was during his internship with a consulting firm in Palo Alto California, where, according to The Financial Times, “he drew up a business model that would tap into ACA funds allocated to the Centers for Disease Control and Prevention, the U.S. national public health institute, for the prevention of type 2 diabetes.” Duffy told FT, “We wouldn’t have any customers without the ACA doing this.”
An update on how a U.S. Supreme Court ruling could severely impact small business in America: The Boston Herald’s Kimberly Atkins (online 4/28) says, “Lawmakers have been scrambling to put legislative fixes in place of the court ruling, expected in June. Last week Senate GOP leaders, including Majority Leader Mitch McConnell of Kentucky, R-Ky., signed on to a bill by Sen. Ron Johnson, R-Wis., that would extend the federal subsidies through 2017 should the court rule against the administration.” One of the key issues remaining for small business is that of Obamacare subsidies. Atkins’ Boston Herald report elaborates, “For those covered through the federal exchange, David Chase, national health care policy director at the advocacy group Small Business Majority, said, ’This is a really big deal, because small business owners are self-employed and they rely on these subsidies.’”
Since passage of the Affordable Care Act, “Perhaps the most blatant anti-innovation provision in the ACA is the tax on medical devices. In an effort to partially pay for the law’s massive spending hikes. Democrats included a 2.3 excise tax on revenue – not profit – from the sale of medical devices.” This is according to a new report in The New American (online, Apr. 9) by Michael Tennant.
Such effects are being felt in the insurance marketplace, and at companies now shrinking staff and their work hours. Such moves comprise efforts to avoid Obamacare’s employer mandates.
Dr. Scott Atlas, a physician and also a senior fellow at Stanford University’s Hoover Institution is quoted by Tennant’s New American article as saying that the Affordable Care Act’s “threat to innovation” is “one of the ‘least noticed,’” negative effects, ultimately having a severe consequences for the health of Americans.
Meanwhile, Stephen Ubl, who heads up AdvaMed, a medical technology trade association, said in a recent press release, “The effects of this tax could have a damaging ripple effect for decades to come if left unaddressed. This tax is not just a tax on medical technology companies, it’s a tax on medical progress,” so says The New American.
Holly Wade is Research Director for The National Federation of Independent Business’s Research. Recently, according to a recent report in Reason by J.D. Tuccille (online, Mar. 23) Wade testified before the Senate Finance Committee. Regarding Obamacare’s effects on U.S. small business, she said, “The problems that many predicted have arrived but most of the promises for small business owners remain unfulfilled. We found that 62 percent of small business owners are paying higher premiums while only eight percent say their costs have dropped.”
Tuccille’s Reason account also cites the Federal Reserve Banks of New York and Philadelphia who have found the following after receiving reports from small businesses in their locales: