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.
It was my privilege to meet last week with Senators Rob Portman (R-OH) and Tom Carper (D-DE), both members of the Finance Committee; Senator John Cornyn (R-TX), Majority Whip and Member of the Finance Committee; and Senator Orrin Hatch (R-UT), Chairman of the Finance Committee. I urged them, first and foremost, to preserve the health benefit tax exclusion, and secondly, to liberalize HSA rules. I also discussed the potential impact of proposed cuts to the Medicaid program, and our concern that a surge in uncompensated care would cause providers to shift cost to private group plans – making it harder for employers to continue to provide adequate coverage to their workers.
Our work is far from done. I look forward to returning to Washington as the legislative debate continues – to advance the goal of preserving and enhancing the employer-sponsored healthcare system that is a stable source of good health coverage for approximately half of all Americans.
Join me on LinkedIn to continue the conversation. How will changes in healthcare policy have an impact on your organizations and people?
Today is the seven-year anniversary of the signing of the ACA, and we spent it with our eyes glued on the House, waiting for a vote to repeal the law. It looks like the vote is delayed, so too soon to call if it’s lucky number seven for the Republicans or the Democrats.
Meanwhile, there’s no question that the ACA has had a big impact on the US healthcare system -- particularly for the relatively small segment of the pre-65 population that doesn’t have access to care through an employer-sponsored plan. Many millions of people have gained insurance because of the law, which was its primary goal.
But the ACA has had an impact on employers, too, and it’s less clear what that has accomplished in that arena. A look at our survey data is a reminder of the hoops we’ve jumped through since the law was passed. Two big ones:
- In 2013, nearly one-third of employers did not offer coverage to all employees working 30+ hours per week. By 2016, virtually all of them had taken steps to make the offer of coverage to their formerly part-time workers, and all employers were tracking and reporting employee hours to demonstrate compliance. At the end of the day, all this administrative effort appears to have resulted in little benefit -- enrollment levels overall barely budged.
- Administrative burden is one thing -- the Cadillac tax is another. We can’t say it enough: the tax is not an effective method of penalizing rich plans because plan design is only one factor affecting plan cost and often less important than location and plan-member demographics. We initially projected that 33% of employers were at risk of being taxed in the first year, a number that would increase every year as benefit cost rose faster than the threshold amounts. Many employers responded by implementing and steering employees into consumer-directed health plans. While such a move might have been a sound strategy in any case, unfortunately about a third of employers have said they have made changes they would not have made in the absence of the tax, such as unbundling medical and dental/vision coverage, raising deductibles and other cost-sharing provisions, and eliminating healthcare FSAs.
Yet all along, employers have continually reaffirmed their commitment to offering health insurance. In 2010, just 6% of large employers said they were likely to terminate coverage within five years. By 2016, that already small number had shrunk to just 2%. In other words, the vast majority of employers really didn’t need a law to get them to offer coverage.
Whenever the vote and whatever the result, we’ll continue working with employers and policymakers on making a better, more efficient healthcare system for all.
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.
You can access the survey here. Your response will be kept strictly confidential.
The survey will close Wednesday, March 22. If you provide us with an e-mail address, we’ll send you the results. You’ll also be invited to register for a free webcast about the AHCA which will include a discussion of the survey findings.
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.
While most of the projected coverage losses are in the individual market and under Medicaid, CBO projects that fewer people -- 2 million in 2020 and 7 million in 2026 – would enroll in employer coverage under the bill as a result of eliminating individual and employer mandate penalties while making tax credits available to a wider range of people (e.g., people with higher incomes). The GOP bill’s tax credits would only be available if an individual does not have an offer of health coverage from their employer or elsewhere. While these changes might cause some employers to offer coverage to fewer employees, CBO said employers may adapt slowly to the legislation given the uncertainties.
The projected coverage losses are heightening concerns by moderate Republicans - particularly in the Senate - about the House bill, while conservatives are demanding changes that could further increase the number of uninsured. Congressional GOP leaders and President Trump are discussing potential revisions to the bill ahead of a House vote that could happen within weeks, and the CBO is expected to issue new projections as the legislation changes.
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.
None of this bodes well for employer-sponsored medical plans. At the time the CBO score was released, I was speaking at the Society for Human Resource Management's 2017 Employment Law & Legislative Conference. We asked the employers in the audience to respond to a polling question – “If healthcare reform were to occur this year, what are your concerns?” Overwhelmingly, the top concern was that a rise in the number of uninsured will lead to cost shifting by providers to employer-sponsored plans.
That was the theme of a recent article I co-authored with Terry Stone from Oliver Wyman. We argued that cost-shifting fails to address the underlying causes of cost growth – it may even worsen it. Moreover, increasing the cost burden on employers will simply make it harder for them to provide affordable coverage to the many millions of health consumers – 177 million, to be precise – who receive benefits through work. You can read more about our recommendations from health reform in this report.
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.
Two bills collectively named The American Health Care Act included some surprises for employers -- the biggest of those being the delay, not repeal, of the Cadillac Tax from 2020 to 2025. The cap on the employee tax exclusion included in a “leaked” version of the bill was not included.
The proposed legislation repeals much of the ACA by 2020. In addition to the Cadillac tax, key provisions of interest to employers are:
- Employer and individual mandate penalties eliminated for 2016 and later years. Individuals or small groups with coverage gaps would pay a 30% premium surcharge to their insurers beginning as earlier as 2018.
- Age-based tax credits starting in 2020. Credits begin to phase out for those making more than $75,000 per year ($150,000 joint filers). Credits won’t be available to those with access to employer coverage, but can be used for unsubsidized COBRA coverage.
- Most, but not all, ACA taxes, assessments, and fees eliminated
- Several changes would affect account-based plans, including increasing HSA limits to the maximum deductible/out-of-pocket limits for HDHPs ($6,550 single/$13,100 family for 2018).
- Medicaid expansion eliminated after 2019
The bill leaves intact most of the ACA’s plan design mandates, such as the ban on lifetime and annual dollar limits, plan eligibility to age 26, the ban on insurers’ charging more or denying coverage based on pre-existing conditions, caps on out-of-pocket expenditures, and essential benefit provisions.
The employer shared responsibility reporting can’t be repealed through the reconciliation process and continues for now. Employers can expect new W-2 reporting in 2020 which will help the IRS administer the restructured premium tax credits for individuals.
The Republican leaders’ goal is to pass the bill out of the house the week of March 20 and – less feasibly -- out of the Senate by April 7. But the timeline, and the language of the bills, could change. The Congressional Budget Office hasn’t yet scored the bill to determine any future impact on the deficit. The bills have also met stiff opposition from some Congressional Republicans, governors, medical groups and the AARP. Despite the opposition, Republicans pushed legislation through the House Ways and Means Committee in the wee hours of Thursday morning and the House Energy and Commerce Committee Thursday afternoon. Meanwhile, Speaker Paul Ryan is giving the hard sell and President Trump is negotiating.
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.
Other big issues? The Medicaid expansion would be frozen in 2020 and then phased out, and Medicaid funding would be converted to block grants. This is a concern for employer health plan sponsors because of the likelihood that an increase in uncompensated care would result in cost-shifting to group plans by hospitals and other health care providers. How Medicaid is treated in the bill also looks to be the biggest potential roadblock to its passage: four GOP senators have already said they won’t sign on to changes in Medicaid funding that “could result in a reduction in access to life-saving health care services.” That would be enough to stop the bill if no Democratic senators vote to pass it.
Of course, the current bill is likely to change, especially since the Congressional Budget Office hasn’t yet scored the bill to determine any future impact on the deficit. “Mark-up” begins in the House on Wednesday. That’s the period during which lawmakers can amend the bill before putting it to a vote. We’re busy reading the bill ourselves and evaluating the impact it will have on employer-sponsored plans – where, as we keep reminding Congress, 177 million Americans are now covered.
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.
On Monday, the White House hosted a meeting with executives from the insurance companies to discuss government action required to "save" the failing individual market and convince (or perhaps, strong-arm) the carriers to stay in the game. Earlier this month, HHS announced revisions to the deadlines to file individual products to be offered in 2018 on the public exchange. This allows more time for legislative and regulatory action that might influence carrier decisions.
On Tuesday, the POTUS addressed the full Congress for the first time. He took a few minutes to lay out his five requirements for a replacement strategy. I’ll give you the short version below, but I recommend you also check out this Vox article, in which Sarah Kliff decodes the actual wording of each:
- Ensure Americans with preexisting conditions have access to coverage
- Help Americans purchase coverage through the use of tax credits and expanded health savings accounts
- Give states the resources and flexibility they need with Medicaid to make sure no one is left out
- Implement legal reforms to protect patients and doctors from unnecessary costs (presumably malpractice lawsuits) -- and bring down drug prices
- Allow the sale of health insurance across state lines
Meanwhile, it is widely reported that the Republican version of the reconciliation bill is changing constantly as various contributors attempt to balance the requirements of a very divided party -- all the while knowing that the Senate is working on its own replacement plan. We understand members of the House are reviewing the new bill and it is scheduled to go to committee for mark up next week.
Like I said, it’s been a busy week -- and there is no sign of the pace slowing anytime soon.
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:
- Tax exclusion for employer-provided coverage capped. The draft would repeal the ACA's “Cadillac” tax now slated to begin in 2020. Instead, a cap would limit employees' federal income tax exclusion for the value of employer-provided coverage starting in 2020. (Employers would have additional payroll taxes if cost exceeds the cap.) Cost determinations for the cap would apply many of the same coverage inclusions and exclusions used for the Cadillac tax, but contributions to health savings accounts (HSAs) would not count. The cap is set at the 90th percentile of the employee and employer cost of group health coverage, as determined by the Department of Health and Human Services. The draft doesn't call for any cost adjustments for age, sex, or geography.
- Shared responsibility eliminated. Employer and individual shared-responsibility assessments would be effectively eliminated after 2015.
- Premium tax credits modified. Beginning in 2020, enrollees could get age-based premium tax credits ranging from $2,000 to $4,000 per year for individual coverage and unsubsidized COBRA. Individuals with access to employer coverage could not receive any tax credit.
- Employer's ACA reporting not addressed. The draft does not address ACA's current employer reporting responsibilities, so employers should plan to report for 2016. Beginning in 2020, health coverage providers would report on covered individuals and employers would report on premium costs to enable IRS administration of premium tax credits and the capped tax exclusion for employer coverage.
- ACA taxes repealed. ACA-related taxes would be repealed -- some at the end of 2016 and others in later years.
- Relaxed HSA limits and rules. Starting in 2018, permitted annual HSA contributions would increase to the maximum deductible/out-of-pocket limits for high-deductible health plans, and HSA rules would be eased in several respects.
- Medicaid expansion eliminated. Medicaid expansion would be repealed after 2019 and replaced with per capita Medicaid payments up to capped amounts.
These proposals will likely change before lawmakers introduce a bill, likely within weeks. In the meantime, Mercer will continue to advocate on behalf of our clients. Our recently released public policy point of view -- Health Reform and American Businesses: Critical Partner for Success -- demonstrates how important it is that the collective voice of employers be heard during the ACA ‘repeal and replace’ discussions and planning. You can make your voice heard through membership in plan sponsor and business groups or by contacting your congressional representatives in the House and Senate.
Starting the day after the Presidential election, I have devoured every bit of information about the fate of the Affordable Care Act as we know it. From “repeal and replace” to the new “r” word – repair – there has been an abundance of positioning and pontification on the topic. Meanwhile, we have just published a Marsh & McLennan Companies Health Policy Paper that reflects our best thinking from both Mercer and Oliver Wyman as it relates to the road ahead for healthcare reform.
We’ve built our position on the basic premise that businesses in the United States provide health care for 177 million Americans and spend more on healthcare than the federal government spends on Medicare. We believe therefore that any efforts to improve the current system should simultaneously take action to preserve and expand employer-sponsored health coverage, and enact policies that promote efficiency and quality in the larger US healthcare system. You can read our policy paper here. We will be blogging on our four specific recommendations over the next few days.
While working on the policy paper, we have also been busy talking to lawmakers and staffers on Capitol Hill and in the administration. Check out Beth Umland’s post on our participation in “Hill Day” and how we have been sharing our own research and projections with lawmakers to help them understand the implications of various proposals that would affect employer-sponsored health insurance. We know they are listening because the themes we are promoting have started to surface in news articles and attributed quotes. A shout out to our friends at the American Benefits Council, Alliance to Fight the 40, ERISA Industry Committee, and the Council of Insurance Agents & Brokers for all they are doing to advocate for employer-sponsored health coverage.
Now is the time for employers to make sure their voice is heard. While many aspects of what we have seen so far in the Republican outline address other segments of the marketplace, it is important to remember that additional cost pressure in the individual market and Medicaid could lead to new sources of uncompensated care that will undoubtedly result in cost shifting to private payors. In addition, while everyone agrees that the excise tax should be repealed, lawmakers are looking for other options to replace that tax revenue. Employers have a stake in all of these policy issues.
Businesses across the US and their benefits teams work tirelessly to provide the best benefits possible by making efficient use of the budget dollars available to support these programs. We are in the early stages of a major transformation in how people access care and how care is delivered. It is being led by employers and innovative providers that are focused on the best ways to harness technology, consumerism, and advances in value-based reimbursement. The potential quality improvements and savings are vast. We are on this journey together – and everyone in America wins when we are successful.
Be careful what you wish for. Mercer has long been a member of the Alliance to Fight the 40, a group dedicated to convincing Congress to repeal the 40% excise tax on high-cost plans. Now, while the excise tax is likely to be thrown out along with many other parts of the Affordable Care Act, GOP lawmakers are contemplating capping employees’ tax exclusion for employer-sponsored health plan premiums – and many of the threshold numbers being bandied about are more onerous than the excise tax thresholds. Unlike the excise tax, which would be paid by employers or health plans, a cap on the exclusion would mean employees would pay income and payroll tax on the value of their health coverage that exceeds the threshold amount.
Mercer's Beth Umland and Moshe Radinsky pictured on Capitol Hill.
The Alliance to Fight the 40 arranged a “Hill Day” earlier last week – non-stop brief meetings with influential policymakers. Mercer’s healthcare reform leader Tracy Watts had drawn on various resources to assemble compelling data to support protecting the tax-favored status of employer coverage – the source of health insurance for 177 million Americans – and dispatched two of the contributors, Moshe Radinsky and myself, to make the case on Hill Day while she toured mid-western states briefing clients.
Shepherded expertly around the Hill (note to self: leave the heels home next time) by Washington Resource Group veteran Geoff Manville and Alliance colleagues, we attended six meetings with key staffers. Many of these folks seemed to be working around the clock to sketch out the long-awaited ACA replacement plan, which could wait no longer. There was a palpable sense that we were in the right place at the right time – staffers had a “need to know” and the meetings were brief but intense. Our message, in four bullets:
- Benefit richness is only one factor driving cost. A cost-based tax penalizes employers with older workers, more women, in high-cost health markets.
- Capping the tax exclusion at the levels being considered will affect more employers than the excise tax.
- Indexing the cap at CPI when health cost rises at several times CPI guarantees that eventually all employees will be taxed.
- Low-income families will see the biggest increase in effective tax rate under a cap.
The first look at a replacement plan was rolled out last week – by some of the groups we met with – and it did not include a cap. Insiders say it’s still to come. Meanwhile, we’re planning another trip.
You’ve been providing health benefits to your retirees for years. You’re glad you can: It rewards loyalty, protects people that you consider to be valued colleagues, and promotes engagement within your business. But as health reform adds to administrative burdens and the need to control cost intensifies, it feels like each day there’s less time to manage the retiree program.
Maybe the question isn’t whether your retiree health benefits are worthwhile...but whether you’re delivering the benefits in the right way. Take a look at your retiree health benefits plan, and ask yourself if it offers:
- A Variety of Plan Options
Whether you’re working with pre-65 retirees, or those who are eligible for Medicare, your benefits solution should be prepared to meet a wide range of needs.
Instead of a group plan solution, your retirees could benefit from access to individual plans with varying deductibles, out-of-pocket limits, coinsurance, and prescription coverage. Your solution can offer short-term medical, dental, and vision plans. Retirement can bring your employees the opportunity to customize a package of benefits to meet their changing needs.
- Dedicated Support for Retirees
Whether you have 200 people transitioning to retirement, or 2,000, the issues are the same:
- Moving to a new health plan can involve substantial paperwork.
- The retirees’ new deductibles, coinsurance, prescription coverage, and other benefits might vary from their old plans.
- Provider networks can change.
- Even once they’re settled into their new plans, retirees’ benefits can change from year-to-year.
The result? Questions, and more questions. This can create a full-time job for your human resources department—requiring time they don’t have.
The bottom line: Your retiree health benefits solution should have the bandwidth to assign each retiree a counselor. That specialist should guide the retiree from his or her point of enrollment through the remainder of their time on the health benefits plan.
This can create a continuity of guidance and an atmosphere of trust...and give your company the space it needs to focus on current employees while still ensuring your retirees are taken care of.
- A Multimedia Change Management & Communications Strategy
Your solution should go even further than dedicated counselors. It should offer:
- Easy-to-understand enrollment materials
- A call center with extended hours
- A website of its own
- Letters, flyers, postcards, and other updates in the mail
- Social media with tips on how to use benefits wisely
No two retirees are alike, so a wide range of channels is critical in keeping them up-to-date on their benefits. Regular outreach and education should be a priority of your benefits provider.
- Seamless, End-to-End Transitioning For You
Transitioning your retiree health benefits solution should be a seamless process. You need an implementation manager who picks up the ball and runs with it.
That means overseeing enrollment, ensuring your retirees are connected to counselors, making sure claims are being processed smoothly, and being available to answer your questions at any time.
The Mark of a Best-in-Class Solution
If offering retiree health benefits has grown too cumbersome, confusing, or time-consuming for your company, consider reaching out to a different provider for some guidance. It might be the best thing you’ve ever done for your retirees, and for you.
Mercer offers a high-touch experience for retirees transitioning to an individual health care plan with Mercer Marketplace 365 Retiree. Visit our web page for more information.