Fortune: Healthcare Is the Elephant in the Room

Monday, 07 Jan 2013 08:01 AM

By John Morgan

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The key issue facing the United States in 2013 is healthcare, as it will end up eclipsing fiscal cliff and debt ceiling talks because it is so central to those debates, according to Geoff Colvin, Fortune’s senior editor at large.

Unless changes are made, healthcare will eat up more of the federal budget than all of the government’s discretionary spending does now — including defense, law enforcement, federal courts and all regulatory agencies.

While state insurance exchanges mandated by the Affordable Care Act are scheduled to open for enrollment on Oct. 1, only 20 states so far have agreed to set them up. The federal government will operate many of the remaining states’ exchanges, but it remains unclear how they will work.

Editor's Note:
Use This Single Loophole to Pay Zero Taxes in 2013

Experts predict some employers that currently offer health insurance will drop it when they realize they can save money by simply paying the required federal penalty instead.

“There will be a transition from employer-based [coverage] to more consumers as purchasers,” said Lori Beer, executive vice president at Wellpoint, the nation’s largest private medical insurer.

Each time Washington lawmakers address taxes and spending, approve a federal budget or raise the debt limit, they will bump up against the need to cut Medicare’s and Medicaid’s growth, Colvin wrote.

To make matters worse, he predicts some small business owners may replace full-time employees with part timers to avoid paying for either employee coverage or the penalty — a double whammy.

The Congressional Budget Office recently estimated that “spending on the major health care programs would grow from more than 5 percent of [gross domestic product] today to almost 10 percent in 2037 and would continue to increase thereafter.”

Towers Watson estimates that in 2013, the average cost of health benefits per employee for companies will rise to $11,507, a 5 percent increase from 2012.

A separate study from Aon Hewitt finds that only 40 percent of employers expect to participate in the healthcare exchanges in the next three to five years, meaning 60 percent are either not interested in healthcare exchanges or do not have fully developed plans to allow their employees to enter one.

Editor's Note: Use This Single Loophole to Pay Zero Taxes in 2013

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