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Mercer

You remember the old algebra formulas from school: 3X + 2 = 11. Solve for X.

 

 

Now you’re solving problems in the business world. If you’re in charge of health benefits, solving for “X” means: Solve for lower premiums. Solve for more choice. Solve for higher quality, more efficiency, and better adherence.

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Despite last week’s cold snap, the bloom of cherry blossoms along Washington DC’s Tidal Basin is now under way – a peaceful sight that belies this stormy moment in Congress, where new healthcare legislation is being debated and the headlines seem to shift from moment to moment. However, one thing is for sure: any legislation affecting the US healthcare system must consider the impact on employer-sponsored health insurance – the source of coverage for 177 million Americans, 16 times the number enrolled in public exchanges.

 

That’s why the leadership of MMC companies Mercer and Oliver Wyman created a health policy group to help formulate MMC’s views on ACA repeal-and-replace legislation. Our efforts led to the issue of a policy paper that showcased original Mercer research on changing the tax treatment of employer-sponsored coverage.  

 

Last month, we took this research to the US House of Representatives to meet with policymakers actively working on the newly proposed American Health Care Act, or AHCA. We demonstrated that the excise tax on high-cost plans, currently law under the ACA, is not an effective method of penalizing rich “Cadillac” plans because plan design is only one factor affecting plan cost and often less important than location and employee demographics. 

 

This would also be true of a cap on the employee individual tax exclusion for employer-provided health benefits, a provision included in an early draft of the AHCA and favored by powerful voices such as House Speaker Paul Ryan (R-WI), House Ways and Means Chair Kevin Brady (R-TX) and new HHS head Tom Price. Mercer had also modeled the impact such a cap would have on the effective tax rates of Americans based on their income. The hardest hit, by far, would be lower-paid workers with families. Some staffers faced with this information for the first time were visibly struck.

 

When the bill was released for mark-up, the cap on the exclusion was not included, and the Cadillac tax was delayed until 2025 (and possibly 2026). But while we were pleased with this outcome, we also knew the bill was a long way from becoming law and the cap could easily resurface.  

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In an effort to garner more support for their ACA repeal legislation, House Republican leaders revealed changes to the legislation on Monday night pending the Rules Committee vote before going to the House for their vote. Of greatest interest to employer plan sponsors is the delay in the Cadillac Tax from 2025 to 2026. The bill’s amendment repeals some of the other ACA taxes retroactively to the beginning of 2017 instead of 2018 as originally proposed. Other changes include additional funding to increase tax credits for older Americans and some Medicaid revisions.

 

In light of the changes, the House Freedom Caucus has indicated they won’t oppose the legislation, but they may still have enough “no” votes to kill the bill. President Trump went to the Hill on Tuesday to help the House Leaders secure support for the bill. In the meantime, the CBO is analyzing the changes and is expected to issue a new CBO score before Thursday’s House vote. The Brookings Institution doesn’t expect a meaningful improvement in the score.

 

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What happens to the ACA has serious implications for employers. In response to the recent introduction of the American Health Care Act, which seeks to repeal much of the ACA and replace it with new policies, we’ve prepared a very brief survey to gauge employer response and ensure your voice is heard. 

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The Congressional Budget Office (CBO) estimates that House Republicans' legislation repeal and replace much of the Affordable Care Act (ACA) will reduce federal deficits by $337 billion and increase the number of uninsured by 24 million -- for a total of 52 million uninsured people -- by 2026.

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On Monday the CBO released its much-anticipated score of the American Health Care Act, the Republican legislation to repeal and replace the ACA. The CBO projection shows a loss in healthcare coverage for 24 million Americans over the next decade, accompanied by a reduction in the federal deficit of $337 billion. The state Medicaid programs are taking the biggest  hit, with a decrease in funding of $880 billion during the same time period. In the short term, the CBO projects that health insurance premiums in the individual market will increase 15-20% and 14 million fewer Americans will have coverage as soon as next year.

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This article discusses the tax conundrum Republicans are facing as they try to repeal portions of the ACA. In short, legislation passed through reconciliation cannot increase the deficit beyond the budget window. With the proposed repeal of most of the ACA taxes, Republicans are using the Cadillac Tax to “smooth over the budget math.” The Cadillac Tax is disliked on both sides of the aisle so there’s still hope for a full repeal before the 2025 effective date. In the meantime, employer groups like the Alliance to Fight the 40, American Benefits Council, and ERIC continue to oppose the tax.

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Employers recognize the important role of healthy communities in employee well-being. The government plays an important role in creating healthier communities through the support and funding of public health initiatives. That’s why we found The American Health Care Act’s repeal of the Prevention and Public Health Fund concerning. The fund provides money to the CDC to support disease prevention programs. The loss of funding is likely to impact:

 

  • The federal vaccines program which ensures healthcare providers receive the vaccination doses they need and mobilizes responses to disease outbreaks.
  • Public health programs aimed at preventing and reducing the risk of heart disease.
  • Programs to reduce the risk of healthcare-associated infections. One-hundred percent of the money the CDC uses for this effort comes from this fund established under the ACA.

 

Prevention and public health funding addresses community health, and communities are where employees live. Well-being is linked to improved productivity, absenteeism, presenteeism and healthcare utilization – all factors that can impact a business's bottom line. For individuals, health and well-being affects both financial security and quality of life. 

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Just FYI. Since the ACA was enacted, there has been a succession of repeal and replace proposals coming out of Washington, culminating in this week’s House Republican bill. The Kaiser Family Foundation makes it easier to compare and contrast the proposed changes to specific ACA provisions with an interactive tool posted on their website. Click on a provision, for example, “Premium subsidies for individual,” to see how subsidies are currently handled under the ACA and how that changes in the proposed American Health Care Act. Take it a click further to see this same provision in any of five other proposals, including HHS leader Tom Price’s “Empower Patients First” Act from 2015. Given predictions that the AHCA will have a tough time getting to the President’s desk as currently written, you may want to bookmark this page.

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Last week’s flurry of activity in DC has turned into a full blizzard following the release of the Republican bills to repeal and replace the ACA. It’s proving challenging to see through this political storm, so I thought I’d share what we know so far.

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On Monday evening, just as those of us on the East Coast were getting ready to call it a day, House Republicans unveiled the repeal and replace bill we’ve all been waiting for.  While we haven’t finished our analysis yet, we have selected a few of the many articles on the bill for your perusal, including a long piece in the New York Times.  One major headline: The bill didn’t include a cap on the tax exclusion for individuals covered in employer-sponsored plans, which was a welcome surprise since it had been included in an earlier leaked draft.  But the unpopular Cadillac tax remains.  The bill “repeals” the Cadillac tax only until 2025, which means it would still cast a shadow over employers’ long-term strategic planning.

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This has been a busy week for healthcare in DC -- and the week’s not over yet! On the heels of the leaked Republican reconciliation bill language last Friday (that is already being described as out of date), the governors arrived over the weekend for a National Governors Association meeting that included dinner at the White House on Sunday. While the President tweeted that they “might” talk about healthcare, you can be sure the future of the Medicaid program and, more specifically, Medicaid funding, was at the top of the governors’ list of topics. Certainly, the 31 states that expanded Medicaid fear the funding implications of a block-grant program.

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A leaked discussion draft of House Republican legislation to repeal and replace much of the Affordable Care Act (ACA) largely tracks earlier GOP proposals, including a cap on the employee tax exclusion for employer-provided health coverage. The February 10 draft includes the following proposals:

 

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