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There’s been an ongoing debate since reform was first enacted about the possible merits of employers eventually exiting health care benefits altogether and moving employees en masse into the public marketplace. Stirring the pot most recently is financial industry research firm S&P Capital IQ, which estimates that by 2020 — just five years from now — 90% of American workers who currently receive health insurance through their employers will be shifted to government exchanges. S&P authors cite rosy bottom lines, trickle-down increases in employee pay and benefits, and the lure of federal subsidies for low-wage workers as the impetus for the grand exodus.

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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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Last week on Mercer/Signal: US Health Care Reform, Tracy Watts explained the King v. Burwell case that will be heard by the Supreme Court starting next month, including possible fixes. Today, she discusses the consequences — both intended and unintended — of a decision to disallow federal subsidies for federally facilitated exchange (FFE) coverage, including the potential impact on employers.

 

In what could be a long list of consequences if the Supreme Court disallows federal subsidies for FFE coverage as a result of the King v. Burwell case, the biggest is a huge increase in the number of uninsured from the number today. The estimated 8 million people currently getting subsidized coverage in a FFE only foot 24% of the cost, on average, with the federal government picking up the rest. Without the subsidy they will most likely not be able to afford coverage. Here are a few of the consequences of most concern to employers:

 

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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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John Larew is the leader of the Office of Reform for Oliver Wyman, a leading strategy consulting firm and a sister company to Mercer. John’s guest commentary here provides a broader glimpse into the health insurance market and the forces affecting product pricing.

 

Have the public exchanges put downward pressure on individual health insurance premiums? The architects of the Affordable Care Act (ACA) made a bet that managed competition among issuers could tame the growth of premiums even as millions of previously uninsured individuals were welcomed into the risk pool. The public exchanges, or “marketplaces,” were a central pillar of the managed competition strategy. In a transparent marketplace, so the theory goes, health insurers would start to behave like airlines matching the lowest fares available on Expedia or Travelocity. But is that happening in reality?

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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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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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The latest analyses predicts that 2015 public insurance exchange plan premiums may widely vary from their 2014 rates. Changes for the second-lowest cost silver plan – the one which the IRS uses to determine the amount of premium subsidy for eligible enrollees – range from a 15.6% decrease in Denver to an 8.7% increase in Nashville. Across the 15 cities Kaiser Family Foundation examined, the premium for that silver plan level is expected to decrease by an average of -0.8%.

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There were several articles last week about the significant decline in the uninsured rate in some states — with Arkansas, Kentucky, and Delaware at the top of the list. Arkansas reported a 45% decrease in its uninsured (from 22.5% to 12.4%). The state sent a letter to those enrolled in the food-stamp program that made it easy to enroll in "health insurance with no monthly premium cost" by sending back a form. Two things for employers to consider in thinking about their state's uninsured rate. First, as the uninsured rate drops, hospitals experience less uncompensated care — which should mean less cost shifting to private payors, including employer-sponsored plans. Second, keep in mind that some of your lower-paid, variable-hour employees may stand to benefit from access to the exchanges or Medicaid. Check back on Wednesday for Mercer's perspective on Medicaid expansion and employer-sponsored health benefits.

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There have been more than a few stories in the media lately about the possibility of employers giving their sickest workers incentives to leave the employer health plan and enroll in a plan through the public exchange. Patients with chronic illnesses, major procedures, and expensive drug therapies drive up the cost of health care for everyone, and certainly so for employers — particularly large, self-insured ones, for which shifting even one high-cost employee could translate into a savings of hundreds of thousands of dollars.

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Given that national health reform was more or less modeled on Massachusetts' program, it's always tempting to look at how reform has unfolded in the Commonwealth to try and predict what will happen nationally. The latest news from Massachusetts is that the new federal reforms, layered on top of the existing state reforms, has resulted in the number of the uninsured falling to near zero. Problems with the state website have complicated the issue, however -- most of the new enrollees are in a temporary coverage plan because it hasn't been determined yet if they qualify for subsidized coverage (and if they don't, they may not be willing to pay a premium). Part of the new wave of enrollees in 2014 were low-income workers. Under the previous Massachusetts health care law, individuals weren't allowed to sign up for state-subsidized insurance if they had access to insurance through work, and the affordability rule in the federal law lifts that restriction in part. While no one expects universal coverage in the US as a whole any time soon, if ever, it is interesting that enrollment has continued to grow over time in Massachusetts.

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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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