How Hospitals Relieve the Pain of New ACA Health-Care Costs

Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...

By Kristen Ricaurte Knebel

July 19 — When it comes to lowering health plan costs in the face of changes brought on by the ACA, hospitals have advantages that other employers don't.

“Many health systems are entertaining the same types of strategies that other large employers are looking at,” including various forms of disease management and wellness programs, Peter Bresler, practice leader of Willis Towers Watson's health system consulting in Chicago, told Bloomberg BNA July 18.

But while hospitals are subject to the usual Affordable Care Act requirements, such as the employer mandate and the Cadillac tax, they do have a few special cost controlling options at their disposal, Bresler said.

One way for hospitals to lower the costs of the benefits they offer is to make changes that incentivize employees to seek care in their own health systems. This can be done through lower copays or deductibles, Bresler said.

Hospitals also can form a “narrow or high-performance network,” which is a health plan offering a smaller choice of doctors and hospitals in exchange for lower fees, he said.

“A lot of major national carriers are introducing them,” including Aetna Inc., CIGNA and United HealthCare, Bresler said. The idea behind these networks is to provide better care at a lower cost.

Cadillac Tax

All large employers also continue to fret about the ACA's 40 percent excise tax on high-cost plans and the tax's impact on their plans.

Since hospital system benefits generally are more generous than those offered in other industries, hospitals will have to make adjustments for the tax, Steve Wojcik, vice president of public policy at the National Business Group on Health, told Bloomberg BNA July 13.

Bresler agreed, saying that the benefits offered by hospital systems are on the higher end of the cost spectrum.

One thing hospitals can do to drive down their costs in anticipation of the tax is to look at internal discount rate that they charge themselves, Bresler said. If the hospital systems charged their benefit plans less, that would lower the cost of benefits, which would delay when the hospital was subject to the Cadillac tax, he said.

The problem is that lowering the cost of benefits also lowers the revenue going into the hospital system.

“There is a reluctance to reduce the revenue that would be coming from the lower cost,” he said, so there has to be a “purposeful trade-off between management of benefit plan as well as their overall financials.”

To contact the reporter on this story: Kristen Ricaurte Knebel in Washington at

To contact the editor responsible for this story: Jo-el J. Meyer at

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