How will President Clinton's health care reform plan affect employers and CPA firms?

How will President Clinton's health care reform plan affect employers and CPA firms?

Maribess L. Miller, CPA, partner, Coopers, & Lybrand, Dallas.

For health care organizations, which include hospitals, physicians and providers of home care, the need to lower costs as part of health care reform will promote consolidation. In the push for improved competitiveness and lower costs, high-quality providers will come out ahead.

Employers with over 5,000 employees may choose to opt out of the proposed system of health care purchasing alliances and self-insure instead, but most of them will be forced, from a cost standpoint, to go along with the program.

Of course, there will be exceptions. If a company's employees tend to be younger than the overall population, and therefore healthier than the norm, opting out could be cheaper. Also, companies that traditionally have dealt with organized labor, such as those in. the auto industry, may provide health benefits that are more expensive than those under the proposed plan. However, because of union contracts they will not be able to reduce coverage. For that reason, they may be forced to opt out.

Service companies that operate across state lines also may opt out and self-insure, even if they don't have unions, rather than deal with the system of alliances.

All our clients, particularly those that operate in multiple states and have to deal with multiple alliances, are going to need a lot of help sorting through the confusion. As CPA consultants, we generally deal with all aspects of the problem. We work with employers, providers, suppliers, carriers and states, so we see the problem from all angles. With this particular issue, companies will need to understand all the angles.

Reed Tinsley, CPA, director, medical practice group, Haynes O'Neal, Houston.

What ends up in the law will be nothing like what's been proposed. So what we're doing is helping physician clients prepare for integrated delivery, because that's what's coming down the pike. No matter whether we have reform or not, that's at the market is moving toward.

Everyone is concerned about cost control, and the best way to do it is to develop integrated delivery systems that group health care providers.

In some states, hospitals and insurance companies are buying physician practices. Hospitals and physicians are forming joint ventures. Physicians who don't want to be tied to a hospital are forming group practices or independent practice associations.

To help clients, CPAs must assess what sort of cost-containment measures are prevalent in their areas. CPAs really need to be the eyes and the ears for the clients to determine what changes are happening in the local market. In some areas, the movement is very slow, but here in Houston, for example, change is coming quickly. If doctors don't react, there's a real concern they'll be left behind.

Physician clients and hospital administrators are the two best sources of information on local trends in reshaping health care practices. Once CPAs have gathered this information, they will have to find different solutions for each client. A proactive approach will put clients in a stronger position in light of changes already taking place and those that will be mandated by any reform package, which I believe must include integrated delivery. CPAs should be aware that insurance companies seem to be a growing new source of consulting business for those with health care expertise. For example, Aetna has a pilot program in Atlanta in which it is buying physician practices and setting up its own primary care businesses.

CPAs need to absorb as much information as possible and get as much health care expertise as they can to help clients and keep up with opportunities for new engagements. Because of the pace of change, practitioners need to take those steps now.

William F. Easley, CPA, principal, Tri-Cord Group, Inc., Riverside, California.

Large accounting firms will benefit greatly. Employers will need plenty of technical consulting help, since there's little doubt the plan will be very complicated. There is equally little doubt that the large firms will be ready to provide special consulting services since they already are immersed in that activity. Ditto the regional firms.

For smaller firms, the situation will vary. Some, of course, will not be able--or may not wish--to offer such services since it will take a major allocation of resources to become sufficiently expert in the field to do so. Also, many of their clients will be lost to mergers. Others, however, will opt to specialize in the field. It may even be necessary for the profession to designate a specialty in managed health care accounting. The field involves some very difficult areas of measurement akin to actuarial determinations.

In addition, the health care proposal certainly will trigger more accounting services, especially in the area of audits.

The situation will vary for employers, too. From a dollar-outlay point of view, I don't see large employers being affected terribly much. However, there is one area where the impact may be huge. My instinct is that the reform plan could produce a substantial windfall for many large businesses that accrued liabilities for retired employees' medical benefits under Financial Accounting Standards Board Statement no. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions. After all, if their retired employees have health care cards, they no longer will have the same liability for which most companies already have recorded a financial hit.

The Clinton plan also may affect medium-sized employers that developed self-insurance plans instead of turning to outside insurers since it will obviate self-insurance except for the largest employers.

Small employers--those with 20 to 30 employees who don't currently provide coverage--will be severely affected by the Clinton plan. In fact, some may be so hurt they will fold. Many small businesses are under a great deal of pressure already. This may be the straw that breaks their back.

Small businesses have something else to worry about in addition to higher costs. Insurance premiums probably will be assessed like payroll taxes--that is, they'll have to be paid up front. That means before the companies have collected the cash to pay out. It's going to be very tough on businesses with thin capitalization.

Finally, how will Clinton's plan affect the CPA who's employed by a professional corporation, makes, say, $100,000 a year and pays 7.9% of his or her annual income for health insurance? I haven't seen any mention of a wage or earnings cap.

Abraham Serotta, CPA, partner, Serotta, Maddocks, Evans & Co., Augusta, Georgia.

My overall impression is that the Clinton plan will have little effect on our firm. We do have the problem of being small and having an employee whose spouse is filing for disability. This may lock us into one insurance company, even if we want to change, affecting our ability to get group discounts and not be penalized for one illness.

I work mostly with closely held businesses--from the corner retailer to a $150 million self-insured company with 1,500 employees. The Clinton plan defines self-insured at 5,000 employees. I think the number should be set at about 400 employees or even lower. Our largest client probably would be hurt by the Clinton plan. And for employers with a contributory plan, sharing premiums on a 50-50 basis is a better way to start instead of the proposed 80-20.

For a look at where we might be going from here, look at the recent experience with the Omnibus Budget Reconciliation Act of 1993 and the North American Free Trade Agreement (NAFTA). Those bills were written from a political standpoint, making implementation a nightmare. I have the same fear about health care.

We represent a number of health care providers and the question they are asking is, Why not go ahead and deal with the malpractice issue and pass those provisions now so they can be in effect as the other provisions come in? So much of the cost of medicine is defensive-doctors run extra tests, put patients in hospitals and leave them there longer for fear of malpractice.

As for the uniform filing form, why can't that pass tomorrow? If it's such a good idea, why does it have to go through the political process and be debated along with who pays the premiums?

What can small CPA firms do to prepare themselves for the plan? First, it's important to recognize that larger firms won't be any better equipped to deal with the outcome. You can tell your clients to start "preparing," but for what? You have to define what the compromise is going to be--the Democratic plan, the Republican plan or some combination. As NAFTA shows, important decisions usually are made in the last few votes.

We have to educate our clients to be prepared to incur part of the cost of providing health care. Companies with large numbers of low-skilled and low-paid workers, especially part-time workers, probably will be hit hardest. If they and the trade associations that represent em are ready to compromise, I think we'll get a better bill. For companies that currently don't cover any health care costs, it's all or nothing. If they agree to cover perhaps half the health care costs of people who work at least 20 hours per week, they'll end up paying 50% of 50%. Wouldn't they be better off than having something mandated? Trade associations should work for compromise, not just represent their own points of view.