A growing number of employers are moving Medicare-eligible retirees to special retiree medical exchange platforms. Mercer’s National Survey of Employer-Sponsored Health Plans found that 27% of retiree plan sponsors are using an exchange to provide coverage to Medicare-eligible retirees in 2016, up sharply from just 15% two years ago. The programs are attractive because they offer a wider range of choices for retirees and also take on benefit administration.
Now, the combination of the public exchange and expansion of the individual market off-exchange has opened up opportunities for pre-Medicare-eligible retirees as well. The individual marketplace for pre-65 retirees is evolving. Characteristics typically associated with the Medicare marketplace -- rate stability, standardized plans, carrier availability and longevity -- appear to be more challenging in the pre-65 market.
Recently, several insurance companies have announced their plans to exit the public exchange in certain markets, raising questions with employers about the availability of exchange coverage and off-exchange coverage for pre-65 retirees. Michelle Andrews recently addressed this question in Kaiser Health News. While some states, like the District of Columbia, require the insurance company to offer coverage on the public exchange in order to offer coverage off-exchange, that is not true in every state. But while carrier participation in the pre-65 market has fluctuated, with some national carriers leaving the market or scaling back on their higher value plans, the total number of carriers has remained relatively balanced, as new entrants and smaller, regional carriers gain market presence.
Typically, employers considering a move to a pre-65 retiree exchange are seeking reductions in cost, risk, and administrative burden for this population. Or, based on a geographic footprint analysis, they have found that their pre-65 retirees will likely see savings and choice in the individual market. Often both are the case. It’s important to keep in mind that pre-65 individual coverage options may offer advantages over traditional group insurance in terms of participant personalization of choice and employer administration relief. Issues arising in a handful of markets around the country shouldn’t necessarily mean putting the brakes on a strategy to move retirees out of group plans when there may be a better alternative for them and the organization.
Given that this is an election year and the political landscape surrounding health care reform has been heating up, we can expect little change or significant change in the Affordable Care Act regulations depending on which party gains control of the Senate, House of Representatives, and the White House. For now, the public exchanges are in flux and could create challenges in the pre-65 retiree demographic. For employers looking for alternatives to a traditional group plan for pre-65 retirees, it’s important to do your homework.
Today nearly one in five Americans over the age of 65 are still working, according to recent data from the BLS, and that’s a new record. As the Baby Boomers hit retirement age, an unprecedented number are deciding to stay on the employment path. In addition, according to this article in Bloomberg (citing a Federal Reserve study), 27% of working Americans say they plan to keep working for as long as they can.
Some of the factors at play are positive – better health, greater longevity, and employment satisfaction. But one study found that almost half of retirees surveyed said they had worked longer than they wanted to because of financial concerns, and according to Mercer’s own Inside Employees’ Minds survey, having enough money to pay for health care in retirement is a top financial concern. We consistently find that the average retirement age is lower in companies that offer medical benefits to early retirees than in those that don’t (62 and 64 years, respectively, in 2014). It’s also telling that retirement age first started to fall after Medicare was established, easing concerns about paying for health care in retirement. While many employers have established HSA or HRA accounts to help employees to save for health care expenses in retirement, these tend to be underutilized. Providing education about value of these accounts, as well as support for financial and retirement planning, can help ensure that employees don’t stay in the workforce longer than they want to.
Even so, changing demographics alone are likely to keep people working longer. Speaking at Mercer’s Global Investment Forum in Singapore this March, Sarah Harper, professor of gerontology at University of Oxford and director of Oxford’s Institute for Population Ageing, raised some questions for employers to consider. “How are we going to adapt workplaces to cope with [an older workforce]?” she asked. “How are we going to ensure, in a really technologically driven world, that we keep our skills upgraded across the life course?”
New regulations issued by the Equal Employment Opportunity Commission (EEOC) provide much needed clarification for employers offering wellness programs. Our research shows that 60% of large employers (those with 500 or more employees) have financial incentives in place for their programs. In a recent article on CNBC.com, Mercer’s Leslie Anderson explains that the new rules now “…recognize the value of incentives,” and that "wellness programs that ask employees or their spouses to complete health risk assessments or undergo biometric screening will need to comply with the notice and other rules required by the EEOC, including the 30 percent incentive limit." The rules state that the incentive for an employee may not exceed 30% of the total cost of self-only coverage. The maximum incentive attributable to a spouse's participation may also not exceed 30% of the total cost of self-only coverage, the same incentive allowed for the employee.
In addition to setting a limit on incentives in wellness programs that use health risk assessments, biometrics screenings, and certain other methods of collecting data on an employee’s health risk factors, the regulations also establish new guidelines around access to coverage and health data privacy. An employer may not deny any employee access to health coverage or prohibit any employee from choosing a particular plan because they don’t complete wellness program steps. Employers must also let employees know what will happen with their health data, ensure that data is encrypted and notify employees in the event of a data breach. Even if your program is in compliance regarding capping incentives for wellness program participation, it’s important to take this opportunity to review the new EEOC regulations (which go into effect in 2017) and how they operate in relation to the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA) to ensure your program remains fully compliant.
Final disability and genetic nondiscrimination rules issued May 16 by the Equal Employment Opportunity Commission (EEOC) clarify how employer-sponsored wellness programs can condition incentives on an employee's or a spouse's undergoing a medical exam or disclosing details about current or past health status in response to disability-related inquiries. The rules, effective as of the first day of the plan year beginning in 2017, retain largely the same requirements as the original proposals, but the EEOC has clarified that the new rules apply to all employer-sponsored wellness programs — whether tied to or independent of any group health plan — that include medical exams or disability-related inquiries. EEOC continues to assert that employer wellness programs must satisfy these rules and cannot rely on the Americans with Disability Act’s statutory safe harbor for insurance underwriting and risk practices of benefit plans.
On May 13, the Department of Health and Human Services (HHS) published final ACA “Section 1557” nondiscrimination regulations. The rules give group health plans and insurers until the first plan or policy year starting on or after Jan. 1, 2017, to bring benefit designs into compliance. ACA Section 1557 broadly prohibits age, race, sex, disability, and national origin discrimination in any health program or activity that receives federal financial assistance. While that definition generally applies to organizations such as hospitals and health systems, even employer-sponsored plans that don't receive federal financial assistance may feel the impact if their insurer or third-party administrator has other health programs or activities that receive federal funds, such as public exchange subsidies.
Treasury payments to insurers — to cover reduced cost sharing available under the ACA to some individuals with health insurance from a public exchange — aren’t proper because Congress didn’t appropriate funds for that purpose, a District of Columbia federal district court has ruled (US House of Reps. v. Burwell). But Treasury can continue the payments until an appellate decision is reached, which will take some time. The lawsuit doesn't involve premium tax credits, which can trigger employer shared-responsibility assessments. While the lawsuit's final outcome is uncertain, an eventual House Republican victory could lead to higher exchange premiums and reduced enrollments, and may prompt some insurers to exit the public exchanges. Employers whose ACA strategies rely on the public exchanges will want to follow developments in the suit.
Having made it through the first year under Employer Shared Responsibility requirements, you may be ready for a break from the subject of ACA compliance. As we discussed in an earlier post, in a recent survey of 644 employers, very few believed they would be liable for penalties for 2015. That’s the good news. But while it’s one thing to achieve compliance, it’s another to consider how best to get there.
How you handle the affordability requirement may be one aspect of compliance that evolves over time. The survey found that 38% of all respondents -- but 63% of those with 20,000 or more employees -- used the Federal Poverty Line safe harbor to demonstrate that their plans are affordable. About a fourth of all respondents took action to meet the FPL safe harbor, by adding a new low-cost plan (13%) or lowering contributions in an existing plan (9%).
You might consider the creative use of salary bands for setting contributions. For example, if you set the lowest band at 400% of FPL, you don’t have to worry about demonstrating affordability for employees in salary bands above that. While only 15% of employers in our survey say they are using salary bands, another 13% indicate they are considering.
One in 10 survey respondents had to take action in 2016 because the “offer of coverage” threshold was raised from 70% of full-time employees to 95%. And about a fourth of all respondents have experienced an increase in health plan enrollment because of ACA requirements -- including almost half of hospitality employers and over a third of health care and retail employers. As enrollment grows, so does the importance of getting your contribution strategy right.
A group of employers urged White House officials at a recent meeting to alter HHS's proposed insurance nondiscrimination rules under ACA Section 1557 as it undergoes final review. Section 1557 prohibits age, race, sex, disability, and national origin discrimination in any health program or activity that receives federal financial assistance. However, the proposed rules suggest that all operations -- not just ones receiving federal funds -- of any covered organization must comply with these nondiscrimination standards. This could subject some employer health plans and their third-party administrators to the rules.
Workplace stress is an issue that virtually every organization faces. Whether it stems from personal or financial matters, or is generated by the work environment itself, stress can have a substantial negative effect on an organization’s performance. A recent report by United Nations’ International Labour Organization (ILO) examined several studies to quantify the impact of stress in workplaces around the world. Work-related depression in the European Union alone is estimated to cost a whopping €617 billion. In the face of such staggering costs, what can employers do? The ILO identifies several measures employers can implement to mitigate these costs, ranging from social support systems where workers feel comfortable discussing conflicting demands between work and home, to training and education that provides information on psychosocial risks. It also provides a comprehensive list of tools for the assessment, management and prevention of risks and work-related stress for various countries and in multiple languages that employers can readily utilize. And while it’s important to be aware of what tools are available to help manage workplace stress, recognizing potential barriers for implementation is also key: taking a regional perspective, the study found that while limited understanding of psychosocial factors and work-related stress is one of the most prevalent barriers to implementation in the Americas, it’s less of a factor in Europe and Central Asia. The strategies described in the report, which are summarized in a recent Huffington Post article, provide a valuable checklist for international employers in particular to evaluate their efforts to create a positive and healthy work environment.
Hand in hand with stress management practices, health management policies are vital to the overall well-being of an organization’s workforce. The HERO Health and Well-Being Best Practices Scorecard in Collaboration with Mercer© - International Version (an online assessment tool designed by the Health Enhancement Research Organization and Mercer) provides an up-to-date inventory of best practices that can help employers identify gaps and opportunities, assess their programs against industry norms, and assist in strategic health management planning for companies based outside of the U.S. With the US and International versions of the HERO Scorecard available, organizations now have a consistent tool to assess their health and well-being efforts in worksites around the world.
Employee Benefit News recently recognized 50 visionaries who are “driving technology innovation, overcoming organizational and technology barriers, deploying leading-edge technology, and shaping benefit technology regulation and policy” – including our own Dr. David Kaplan, leader of Mercer’s Innovation LABS team. More than ever before, employers are keenly interested in the latest innovations as they realize the value of creativity and forward-thinking solutions to stay competitive in this tight labor market. Mercer’s LABS team has worked with quite a few innovative companies this past year – Rethink Benefits, Kurbo Health, and ConsejoSano, to name a few – to facilitate the process of bringing their solutions to market. Innovation is more than just a buzzword, and the latest benefits and perks aren’t just for Silicon Valley start-ups. Innovation is absolutely key for any organization when it comes to talent attraction and retention; your organization’s value proposition needs to reflect the expectations and dynamics of today’s workforce and their families.
We caught up with Dr. Kaplan for a quick conversation on how innovation – in particular, technological – will change the employee benefits landscape over the next 10 years.
Dr. Kaplan: Digital technology will allow employers to offer personalized benefits that are both broader and more meaningful than the benefits offered today. Despite the huge financial commitment that employers have made in benefits, they too often go underappreciated by participants.
Us: How so?
Dr. K: The classic scenario for this underappreciation is when a specific benefit configuration does not cover an individual’s most important issue and is therefore viewed as an “inadequate” benefit program despite the “value” of the coverage. For example, if an employee has a child with autism and an employer offers nothing to support a family facing this challenge, the employee may not feel like they have “good benefits”.
Us: What’s the role of technology in addressing this problem?
Dr. K: Over the next 10 years, digital technology will make personalization of benefits possible through two mechanisms. The first is administrative simplification which allows employers to offer much more complex and flexible plans including true “flex” plans that will allow employees to choose the coverages that matter most to them. The second is digitalization which will empower the development of a much broader range of point solutions that can be offered at an attractive price point for employers and employees alike.
A new report from the Conference Board signals tough days ahead for employers. In the next 10-15 years, they project the demand for labor in the US will exceed supply. A labor shortage puts added pressure on organizations to retain existing employees – something that is already a top concern of human resources leaders. In a recent Human Resources Executive survey – What’s Keeping HR Up at Night? – respondents reported eroding levels of employee engagement as their #1 concern. Of the 12 strategies to boost employee engagement and retention that the survey asked about, only three showed an increase in usage: enhancing employee benefits, offering/enhancing wellness programs and increasing/improving leadership training. As the war for talent escalates, it will be increasingly important for benefits professionals to understand their organizations’ staffing projections and plans. This will allow them to respond with benefit and wellness offerings that aid in the recruitment and retention of employees in a tight labor market.
The deadline for ACA reporting to the IRS about coverage in 2015 was extended from March to June, and at this point most employers have a handle on their results. As reported in our recent survey – Living with Health Reform – virtually none of the nearly 650 survey respondents believe they will be liable for the “a” assessment – meaning they all offered coverage to substantially all employees working 30 or more hours per week. And just 8% thought they might be at risk for the “b” assessment – meaning that some of their employees might qualify for and obtain subsidized coverage on the exchange because their employer’s plan did not offer affordable contributions or meet minimum plan value requirements.
However, the requirement to offer coverage to “substantially all” employees working 30 or more hours per week will get harder to meet in 2016 when the definition of “substantially all” increases from 70% to 95%. Employers with limited-duration employees, like long-term temps and interns, might become liable for an assessment. About one in four respondents say they will pull back on use of these workers, and another 16% are considering it.
Are you interested in learning more about the ACA’s impact on employers and how they are responding? Join us for our April 28 webcast where we’ll share more of the highlights and insights from our latest survey.
The latest set of ACA implementation FAQs tackle a variety of coverage, cost-sharing, and disclosure issues and give new details on parity testing under the Mental Health Parity and Addiction Equity Act.
The HHS Office for Civil Rights has launched Phase 2 of its audit program aimed at ensuring compliance with HIPAA privacy, security, and breach notice rules. Covered entities and business associates should be alert for audit notices via email.
A group of employees can proceed with a lawsuit claiming their employer violated ERISA by reducing their work hours to avoid liability under the ACA, a federal court has ordered (Marin v. Dave & Buster's Inc.) This is the first lawsuit to consider whether workforce changes allegedly initiated to limit an employer's anticipated ACA costs unlawfully interfere with affected employees' eligibility for benefits under an ERISA plan. Although the court has yet to decide the ERISA claims, its refusal to dismiss the lawsuit shows that employers should carefully approach workforce changes that negatively affect employees' access to group health plans.
Did you know that, on average, the sickest 4% of the population represents 41% of the total allowed medical and pharmacy spend? It’s hard to believe -- and even harder to manage. That’s why we created Mercer Health AdvantageSM (MHA), a proprietary, high-intensity care management program designed to manage care for employees with serious/chronic conditions -- and we’ve seen some great results. In fact, according to a study released this week, employers who offered MHA realized a combined average return on investment* of $2.70 in health care savings for every $1 spent.
Further, our analysis showed average annual savings of $338 per employee along with significant improvements in the quality of care for the most ‘at-risk’ patients. Based on 2014 clinical results, there was a much sharper decrease in hospital admission rates for the MHA-engaged (-18%) compared to the non-engaged (-5%) population.
MHA drives coordinated patient engagement -- at the right time, with the right providers. Individual health plan programs vary, but the core MHA model is based on a single registered nurse from a given health plan working with a dedicated team of other specialty clinicians, including social workers, pharmacists, physicians, and behavioral health specialists from the plan to coordinate patient care. This holistic, high-touch approach encompasses not only clinical care, but also addresses such important issues as spousal/family involvement, mental/psychological monitoring, and post-care monitoring.
Be sure to check out this case study to learn how a large aerospace company used Mercer Health Advantage to better control costs and improve patient outcomes.
*ROI is based on an analysis of claims data and program activity. Various best-practice methods are used to estimate savings from avoided costs attributable to program activity. The Mercer Health Advantage service was available through Aetna, Anthem, HCSC and UHC in 2014, and, as such, the ROI result herein is based on their combined performance.