Health Insurance Reform: Ramifications When Expanding or Relocating Out of State
Will “Obamacare” encourage or inhibit the expansion of companies into new areas?
Phillip M. Perry (Q1 / Winter 2013)
The Affordable Care Act (ACA) is now the law of the land. Over the coming 12 months, federal agencies will roll out a cascade of regulations intended to offer practical guidance for the law’s implementation. But here’s the rub: States will also have the option of developing their own guidelines in a number of areas. Among the most important are details concerning the state-level health insurance marketplaces or exchanges. Decisions made at this level can make a big difference in the attractiveness of a state to new business.
Competition is good. That’s the theory behind the new exchanges designed to allow individuals to shop for plans from competing carriers. Individuals who opt out of employer healthcare plans, or who work for employers who offer no such plans, may shop at the exchanges. (Smaller employers of fewer than 50 workers may also access exchanges.)
“To understand how the exchanges will work, imagine navigating to a travel website that aggregates airfares,” says Karl Ahlrichs, benefits consultant for Indianapolis-based insurance broker Gregory & Appel. “You type in your parameters and the site sorts your options and you pick what you want. That’s what employees will be doing with the exchange sites.”
Under the best of conditions the new exchanges will also help trim the human resources overhead, by providing a host of robust administrative services. “Businesses that send employees to the health insurance exchanges will be getting out of the health insurance management business,” notes Ahlrichs.
Organizations on the move will want to take a close look at the prospective states’ exchanges.
“Exchanges will differ from state to state,” says Joan Smyth, partner at the New York City-based Mercer consulting firm. “Companies moving into a new state, and who have employees who might be attracted to the exchanges, should examine those exchanges in terms of their offerings.”
Suppose State A’s exchange offers more affordable and better quality policies than State B’s? State A may be more attractive as a company’s new home.
“Expansion decisions depend partly on the quality of the available work force,” says Ahlrichs. “And that includes how healthy people are. State A’s workers, receiving access to more healthcare, will be healthier and thus more productive and incur less absenteeism.”
A state with a robust exchange may be more attractive in another way, says Ahlrichs. “The state that does a good job designing an exchange with lots of options, and has a statewide focus on health and wellness, can make it easier for entrepreneurial types to get health insurance coverage. That can make the state more attractive for businesses looking for high-quality individuals for contract work.”
There’s another variable: Under the provisions of the ACA, states have the option of extending Medicaid to more lower-income people, with the federal government paying the tab. Not all states will do so, and that can have an impact on relocation and expansion decisions.
“The fact that a certain state has chosen to extend Medicaid may make it a more attractive option for companies looking to relocate or expand, if they employ a lot of low-wage labor,” says Ahlrichs. Again, the attraction is a healthy work force with less absenteeism. At the same time, adds Ahlrichs, the business looking to expand into such a state must balance the quality of the work force against the possibility that resulting Medicaid expenses may drive up taxes.
States that get proactive in encouraging health initiatives may also enjoy an advantage. “Long term, the big answer to the health insurance conundrum is wellness,” says Ahlrichs. “Within the ACA there are incentives for wellness. States that properly implement those incentives will have an advantage. They can say not just that they have the arts, infrastructure, and financing but that they also have a healthy productive work force.”
There is another hidden benefit that the new law may provide smaller organizations: access to higher-quality personnel. That, in itself, can help sway a location or expansion decision.
“Today, at larger employers, there are many high-quality mid-career professionals who are frustrated because they cannot be very entrepreneurial,” says Ahlrichs. “They would love to join a smaller organization where they can try things out, or they might want to band together and start something.”
In the current system, says Ahlrichs, if such people quit their current positions they may be uninsurable. “They may have a daughter or wife who is a diabetic or cancer survivor. Or they themselves may have some chronic condition. As a result, they are handcuffed to their desks because of healthcare.”
When the exchanges come online, the handcuffs come off. “There will be a significant shift in high-performing talent out of the larger organizations and into smaller ones,” says Ahlrichs. “This could be a huge benefit to small entrepreneurial organizations, which position themselves as places where talented people can exercise some freedom.”
Next: Decision Time