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Mercer

The stalled House ACA repeal and replace effort means the next crucial decision about the ACA’s future will probably be made by the White House. Following the canceled vote on the American Health Care Act (AHCA), the immediate concern on the health reform front is whether President Trump is serious about his threat to let the ACA “explode” – to use his term.

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Before the ACA, many self-employed individuals found it challenging to find a health plan on the individual market that met their needs, let alone to pay for it. Post ACA, the ability to obtain affordable coverage not tied to an employer has givenentrepreneurs in the growing ‘gig’ economy the flexibility to pursue their goals without having to worry about maintaining health coverage.  These days may be coming to an end if the new GOP health care bill passes, however.  Under theAmerican Health Care Act or AHCA, subsidies are dependent on age, as opposed to income (like under the ACA), and are not adjusted for geography, even though health costs vary widely depending on where you live.  This could mean big changes in the amount of assistance an individual would receive under the AHCA compared to under the ACA.  As cited in the article, a 40 year-old in San Francisco making $30,000 a year would receive $800 less a year under the new plan, and a 40 year-old living in Santa Cruz County, CA would see a $2,490 less per year -- potentially putting coverage out of reach. 

 

A study published by the McKinsey Global Institute estimates that U.S. has between 54 million and 68 million ‘independent workers’, with some working independently full-time and others using independent/freelance work to supplement their primary income. With the proposed changes under the AHCA, some individuals may try to seek traditional employment for the purpose of healthcare coverage, or they may just choose to go without coverage completely. While critics of ACA subsidies have said they discourage people from seeking employment or advancing their careers since an increase in income would result in a decrease in subsidies, this new plan could have the same discouraging impact on the next generation of entrepreneurs.  

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A campaign promise to repeal the ACA is one thing, while figuring out how to dismantle the massive law with its many far-reaching elements is quite another. This Washington Post article discusses the paths Trump and Congress could take to walk back various parts of the healthcare reform law. According to the article, the GOP majorities in both chambers are likely to use the reconciliation process to overturn key aspects of the ACA that involve federal spending, such as the subsidies granted to millions of working Americans to help them pay for health coverage. But reversing other parts of the law, such as its insurance marketplaces, or instituting various Republican-backed healthcare approaches, would require a political path that could be more arduous. The ACA rules that affect employer-sponsored health plans are not grabbing the headlines and don’t get much ink in this article, either.  But the message for employers that’s emerging is that this Band-aid will be coming off slowly. It’s not too soon to start thinking about how to position your program for the changes ahead. 

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The reports of steep premium hikes in the public exchanges keep rolling in, raising concerns about their long-term viability. But should we really be worried?  Two recent news items make the case for and against a pessimistic view. 

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First, let’s put public exchange enrollment in perspective. It’s a relatively small piece of the pie, although you wouldn’t know it from the amount of attention it gets. In a Wall Street Journal article, Drew Altman reminds us “about 11 million people are enrolled in the marketplaces. More than 13 times that many, around 150 million, have coverage through employers, and there are 66 million people in Medicaid and 55 million in Medicare.  The marketplaces are an important part of Obamacare. However, more uninsured people have been covered by Medicaid expansions than in the marketplaces, even though 19 states have not expanded Medicaid. Millions of young adults have been covered on their parents’ employer plans.”  Another important point: 24 million Americans still do not have coverage, a number that would be smaller if all states had expanded Medicaid.

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This New York Times article offers an interesting “compare and contrast” analysis of public exchange plans versus employer-sponsored plans. Whether you’re satisfied with benefits on the public exchange really comes down to your perspective. If you were among the millions who were previously uninsured, you’re likely to be happy with your exchange coverage. If you came to the exchange after having had employer-sponsored coverage, the story is very different. A more limited choice of providers in the health plan network and higher out-of-pocket requirements are among the chief differences noticed by those coming off employer plans. In the end, a typical plan on the public exchange “looks more like Medicaid, only with a high deductible.” So while the public exchange is helping to fill a gap in the U.S. health care system, it’s not proving to be a source of comparable coverage for early retirees or those who would like to quit a corporate job to freelance or start a business. And each year, as these plans get skinnier, we’re seeing fewer employers that would even consider dropping the company plan to send employees to the public exchange.

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Public exchange notices are coming soon to a mailbox near…well, we’re not really sure where they will land, but they are coming soon.

 

The 38 federally run public health insurance exchanges are preparing to send employer notifications when their employees have enrolled in individual exchange coverage and claimed advance premium tax credits (APTCs) under the Affordable Care Act. To receive APTCs an individual completes an application for health coverage that asks for employment status, employer contact information, and details about employer-provided coverage and how much the employee must pay for the lowest-cost self-only coverage option with minimum value. Where the exchange mails the employer notice depends on the address the applicant puts on the form. If the employee provides an incomplete address, the employer may not receive a notice at all.

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The HMO is making a “comeback,” claims a recent article in The New York Times. HMOs, once “emblematic of everything wrong with health insurance” due to lack of provider and hospital choice, are now looking to re-brand themselves as high-performance care delivery vehicles for lower cost and better managed care.  In an effort to escape the negative connotations, some insurers are going to great lengths to avoid the term “HMO” altogether: Health Care Service Corporation considered lobbying state lawmakers to change the acronym to H.I.O. for Health Improvement Organization.  Although these emerging HMOs generally share the same philosophy of managed care as their predecessors, they are less likely to include the unpopular gatekeeper feature, in which access to specialist care is controlled by a primary care provider.

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2016 will see fewer PPO plans available on the public exchanges according to a recent analysis by the Robert Wood Johnson Foundation (RWJF). Not only will there be fewer PPOs available due to certain insurers dropping the plan(s) or, in some cases, leaving the marketplace altogether, more of the remaining PPOs will have no cap on out-of-network care.  The RWJF analysis finds that 45% of silver level PPOs will not have a limit on out-of-network services. This may catch many consumers unaware, as their reason for choosing a PPO may be to utilize out-of-network care for certain services (or at least have the option).  When a cap is in place, the average individual limit for a silver level PPO is $16,700, much higher than a typical PPO plan offered through an employer; according to Mercer’s National Survey of Employer-Sponsored Health Plans the median out-of-pocket limit placed on individual out-of-network care was $6,000 in 2015. Inside the article, find out which plan sponsors have dropped or reduced their offerings and how out-of-network costs can sneak up on even the informed consumer.

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Robert Pear wrote a piece in The New York Times that has been widely carried by many news sources. He reported that insurance companies are seeking 20-40% rate increases in the public exchanges, saying the new customers are sicker than they expected. Of course, federal officials are pushing for lower increases. They could probably learn a lesson or two from employers who have become very skilled at negotiating with insurance companies over the years.  

 

A few days before Pear’s article appeared, the Centers for Medicare and Medicaid Services disclosed a report on the revenue and pay outs from the first year of the Transitional Reinsurance Fee Program. Funding for this program comes from plan sponsors over a three-year period. In 2104, plan sponsors paid $63 per plan participant for an estimated $9.7 billion in first-year fees. That amount decreases to $44 per participant in 2015, and then to an estimated $27 in 2016. The program reimburses insurance companies participating in the public exchange for individual claims between a $45,000 attachment point up to a maximum of $250,000. The target reimbursement is 80% of the actual expense. However, the first-year claims experience is reported to have been better than expected and the program reimbursed 100% of the eligible claims in 2014, leaving a $1.7 billion surplus in the fund to be carried forward for the 2015 benefit year.


Hard to tell which players are making out the best here!

 

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Following the recent Supreme Court decision in King v. Burwell that upheld premium subsidies for all public exchanges, Mercer polled employers on their reaction to the ruling and how the public exchanges may or may not factor into their health benefit strategies. Nearly 600 employers responded: 24% with fewer than 500 employees, 47% with 500-4,999 employees, and 29% with 5,000 or more employees.

 

Thinking about your organization’s best interests over the long-term, do you believe this decision will have a positive or negative effect? More employers believe the decision will have a positive effect than a negative effect — 29% compared to 17% — although a slight majority (54%) doesn’t believe this ruling affects them one way or the other. The larger the employer, the more likely they are to see the ruling as a positive for their organization (41% of those with 5,000 or more employees). Those favoring the ruling may see advantages to having part-time employees (those averaging less than 30 hours a week) or early retirees obtain their coverage from the public exchanges. Those that believe it will have a negative impact may have concerns about cost-shifting from health care providers in low-cost exchange plans that accept lower reimbursement, or about pressure on their employees’ access to health care providers as more Americans gain insurance.

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This is an interesting piece on the potential for some retirees to take advantage of subsidies in the public exchange even after they turn 65. Most won’t qualify for subsidies after becoming eligible for Medicare, however, which could cause problems for a pre-Medicare-eligible retiree who has been receiving a subsidy and doesn’t realize their status changes at age 65. The government doesn’t provide much warning, so this might be a good topic to address in retiree medical communications.

 

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