One possible fix for the public exchanges? Repeal the ACA provision expanding dependent coverage. Allowing young adults up to age 26 to be covered under their parents’ plans has been one of the law’s most popular provisions, especially since it went into effect at a time when many young people were struggling to find full-time work in the wake of the recession. But it also took these same people out of the potential pool of enrollees when the exchanges opened in 2013. While many factors have contributed to premium spikes in exchange coverage in some states, one quoted across the board has been that fewer young people than expected signed up for coverage. Had young adults not been able get coverage through their parents’ plans, it’s possible a portion of them would have signed up for exchange coverage. And having these younger, and generally healthier (i.e., lower risk) individuals in the pool might have helped to keep the premiums down.
Leading up to Thursday’s vote in the House on the AHCA, the GOP’s repeal and replace bill, lowering the dependent eligibility age to 23 was on the list of possible amendments but then withdrawn. As acknowledged in thisPolitico article, repealing the provision would be political suicide for anyone that proposes it; people don’t react well to losing a benefit they’ve gotten used to having. Yet the upsides for removing this provision are, in principle, aligned with GOP repeal and replace goals, namely, removing additional costs imposed through the ACA and helping to stabilize the individual market.
One approach might be to phase out this provision, or grandfather individuals born before a certain date, so that families have time to prepare and plan for alternative coverage for their older children. Of course, this only works if there’s an affordable health care option for these young adults on the exchanges. If the current subsidies are reduced to the levels proposed under the AHCA (an individual under 30 would only receive $2,000 towards health coverage per year regardless of income or location beginning in 2020), then leaving these individuals to the mercy of the individual market may not be wise; it could create a “black hole” of coverage from age 26 perhaps until the age when people are starting their families and see an absolute need for care. So while employers as well as the individual market could benefit from a rollback of this provision, adequate subsidies on the exchanges would need to be in place to help these individuals purchase and maintain continuous coverage.
We got a question in response to our post Checklist: Want to Increase Your CDHP Enrollment? Try This.
Q: How? If my execs are enamored with PPO.
A: One of the key tenets we pursue in helping clients develop a CDHP strategy is to focus stakeholder attention on what would change, and what would not. In the case of moving from a traditional PPO to a CDHP, the change could be focused entirely on just a couple elements. For example, there’s no requirement for a change in:
- Plan actuarial value
- Covered expenses, or
- Out-of-pocket maximums.
In fact, one preferred approach is to install CDHPs that are approximately equal in actuarial value (AV) to a competing traditional plan, but which offers employees lower premium contributions (because their utilization will generally subside in a CDHP vs. a PPO) and, in the case of an HSA-compatible plan, the opportunity to contribute to and accumulate a portable, tax-protected account that’s generally superior even to their 401(k).
While many employers hesitate to pursue a CDHP strategy because account-based plans can appear to simply be (or, if poorly-designed, can actually be) a means of cost shifting to members, they don’t have to be so, at all. In fact, we generally try to avoid use of CDHPs as “low value” plans, but rather encourage clients to position their CDHP offering(s) to compete with more traditional plan options on AV as well as premium contribution. Further, we see and help many employers move to strategies that reward positive health behaviors through HRA/HSA funding by the employer. These strategies provide first-dollar HRA/HSA funding to offset higher deductibles for those exhibiting healthy behaviors.
Finally, with the rapid expansion of CDHP offerings we’re seeing among employers, it’s likely your company will begin competing for candidates who’ve been enrolled in a CDHP and may even have an HSA balance they’d like to port with them to your company, and in which they’d like to continue contributing. By not offering them the opportunity to enroll in a CDHP – particularly an HSA-compatible version – you may inadvertently be inhibiting your ability to attract quality candidates whom you’d like to hire.
Every year when we tabulate our survey results, we eagerly dive into the results for jumbo employers (those with 20,000 or more employees) to identify and measure movement in the latest health benefit management trends. The jumbo employers have long been the pioneers driving health care innovation. They cover more people, so more at stake. They also tend to have more resources - people and financial - to devote to the cause. Their focus is not just cost, but also includes the other two components of the triple aim - quality and engagement. How do we know it works? Historically they have demonstrated lower rates of increase in health care cost than the overall averages and at the same time maintained richer benefits (lower deductibles, etc). But the real proof is in an analysis we do of 25 best practices across large employers in three areas – plan design, workforce health, and care delivery – where those in the top quartile for most best practices outperform those in the bottom quartile with about one percent lower trend.
Cost-management best practices
Plan design and delivery infrastructure
|Contribution for family coverage in primary plan is 20%+ of premium||Offer optional (paid) well-being programs through plan or vendor||High-performance networks|
|PPO in-network deductible is $500+||Provide opportunity to participate in personal/group health challenges||Surgical centers of excellence|
|Offer CDHP||Offer technology-based well-being resources (apps, devices, web-based)||On-site clinic|
|HSA sponsor makes a contribution to employees’ accounts||Worksite biometric screening||Telemedicine|
|Voluntary benefits integrated with core||Encourage physical activity at work (gym, walking trails, standing desks, etc.)||Value-based design|
|Mandatory generics or other Rx strategies||Use incentives for well-being programs||Medical homes|
|Steer members to specialty pharmacy for specialty drugs||Spouses and/or children may participate in programs||Accountable care organizations|
|Reference-based pricing||Smoker surcharge|
|Data warehousing||Offer EAP|
|Collective purchasing of medical or Rx benefits|
|Transparency tool provided by specialty vendor and/or used by 10% of members|
|Use private health benefits exchange|
While we like to pay attention to what jumbo employers are doing and use it as a lens to predict market movement, it does not mean they are the only employers doing innovative things. Let's take a look at some newer practices that we all could take advantage of:
- Provide access to Accountable Care Organizations. While the ACOs are still very much in the developmental stage, the move from fee-for-service to value-based care is starting to take hold to deliver better care.
- Expansion of the scope and reach of Centers of Excellence (COE) is another emerging trend. While we see the list of conditions for COE expanding, there are two schools of thought about how many facilities are best to offer. Some programs identify a small number of best-in-class facilities nationally and others take a regional best-in-class approach to provide access a little closer to home.
- Use technology to engage employees in caring for their health. Employers are incorporating wearables and mobile apps into their well-being programs to help
- Telemedicine is one of the fastest growing trends. It offers employees a way to access care at a significantly lower cost in the convenience of their homes.
- Onsite services are another way to "meet employees where they are.” Worksite clinics, although not without their challenges, have been implemented by a growing number of larger employers. But smaller employers have new options to consider in this space, like shared or near-site clinics.
Where to start? One of the best practices that has been on our list since the very beginning is access to claims and utilization data in a data warehouse. It is likely not feasible or even practical, to try to do everything. Use your data to identify where the greatest opportunities are to focus your efforts and get you on the right path to tackle the triple aim.
A few weeks ago, we provided a list of five considerations for open enrollment regarding Affordable Care Act (ACA) compliance, focused on avoiding shared responsibility payments, imbedding deductibles in out-of-pocket limits, and complying with the new ACA reporting requirements. Today’s list addresses some requirements that expand beyond the ACA — including a few items you’ve probably checked off your list but might need to look at again because of recent guidance.
- Preventive care. Ensure that nongrandfathered group health plans comply with the final ACA rules and recent guidance on cost-free preventive services.
- Other ACA reporting and disclosure. In addition to the new ACA reporting requirements, review delivery operations for summaries of benefits and coverage (SBCs) and watch for revised SBC templates. Prepare for round two of online submission and payment of ACA’s reinsurance fee.
- Midyear changes to cafeteria plan elections. Decide whether to permit midyear changes to cafeteria plan elections for either or both of the status-change events in IRS Notice 2014-55.
- Same-sex marriages and domestic partnerships. Assess how the US Supreme Court’s Obergefell v. Hodges ruling legalizing same-sex marriage nationwide affects your benefit programs and employment policies. Also consider the decision’s indirect implications for domestic partner coverage.
- Mental health parity. Check that plan designs and operations provide parity between medical/surgical and mental health/substance use disorder (MH/SUD) coverage. Federal audits of health plans now evaluate compliance with the final Mental Health Parity and Addiction Equity Act (MHPAEA) rules that took effect in 2015. In addition, state legislative activity and litigation around parity issues continue.
- Wellness. Review employee wellness programs against the proposed Equal Employment Opportunity Commission (EEOC) rules requiring voluntary participation and restricting incentives for completing health risk assessments and/or biomedical screenings. Be prepared to make changes after the EEOC finalizes these rules for nondiscriminatory wellness plans under the Americans with Disabilities Act.
- Fixed-indemnity and supplemental health insurance. Review fixed-indemnity and supplemental health insurance policies to ensure they qualify as excepted benefits under the ACA and the Health Insurance Portability and Accountability Act (HIPAA).
When finalizing health benefit designs and contribution strategies, be sure to update all employee communications materials as well as terms and agreements with your vendors.
As you finalize medical plan designs for 2016, make sure you consider these five compliance elements of the Affordable Care Act (ACA).
1. Embed individual out-of-pocket (OOP) limits. The ACA’s annual in-network OOP statutory limit for self-only coverage ($6,850) applies to all individuals, whether enrolled in self-only coverage or another tier (e.g., family). Be sure to confirm your medical carrier’s capabilities to adjudicate this benefit design feature. The penalty for non-compliance is $100 per day per individual.
2. Offer MEC to 95% of full-time employees. Under the ACA employer mandate, large employers must offer minimum essential coverage (MEC) to “substantially all” full-time employees and their dependent children (not spouses/domestic partners). In 2016, the “substantially all” percentage increases from 70% to 95%. Employers could be subject to assessments if at least one full-time employee receives tax-subsidized public exchange coverage. The assessment is an annual payment of $2,160 for each full-time employee minus the first 30 full-time employees.
3. Update FPL affordability safe harbor (generally $93 per month). The IRS established three affordability safe harbors employers may use to show coverage is affordable — Federal Poverty Level (FPL), W-2 wages, and rate-of-pay. For plan years beginning on or after July 22, 2015, the FPL safe harbor is $93 per month based on the 2015 FPL of $11,770 (higher in Alaska and Hawaii). The potential assessment for non-compliance is the lesser annual payment of:
- $3,240 for each full-time employee receiving tax-subsidized public exchange coverage
- $2,160 for each full-time employee minus the first 30 full-time employees
4. Consider treatment of opt-out credits in affordability calculations. A recent IRS FAQ regarding HIPAA’s health status nondiscrimination rules states that the required contribution of any employee eligible for a cashable opt-out (in this case, targeted “unhealthy” employees) would be the premium contribution plus the opt-out amount — raising the required employee contribution by the amount of the cashable opt-out. It’s unclear if this same analysis applies when calculating the affordability of coverage under the ACA’s play-or-pay requirements, individual mandate, and eligibility standards for public exchange subsidies. Employers with opt-out designs should review their plan’s affordability with their legal advisors. The potential assessment is same as for #3 above.
5. Prepare for play-or-pay and MEC reporting. The IRS will use the information from Forms 1094 and 1095 filings to confirm subsidy entitlement and assess payments under the individual coverage mandate and the employer shared-responsibility provisions. The first year for which the reporting is required is 2015, due in early 2016. Rules allow for a 30-day deadline extension for both furnishing the individual statements and filing the IRS transmittal, but each requires timely employer action. Employers filing late or inaccurate Forms 1094 and 1095 are subject to penalties of $250 per return, up to a $3 million maximum.
Last year saw the biggest one-year enrollment increase ever in account-based consumer-directed health plans – from 18% to 23% of all covered employees – as employers added plans at a rapid pace. All the growth is in plans with Health Savings Accounts – HSAs – and yet the other type of account, the Health Reimbursement Account, hasn’t gone away. About one in ten employers still offer an HRA, as they have for the past three years. In this informative article "HSAs Surge, Leaving HRAs in a Niche" in Managed Care Magazine (p.27), Mercer’s own Jay Savan explains the pros and cons of HRAs and why some employers prefer the doughnut to the bagel.
Final rules released last week on the mandate for nongrandfathered health plans to cover preventive services without cost sharing largely consolidate and clarify existing guidance. For closely held for-profit entities with religious objections to covering all or certain contraceptive services, the regulations give new details on how to obtain the same accommodation available to nonprofit religious organizations and their affiliates. The regulations will apply for plan years starting on or after 60 days from the date of publication in the Federal Register (Jan. 1, 2016, for calendar-year plans).
President Obama has officially nominated Andrew Slavitt to become CMS Administrator. Slavitt has been serving as Acting Administrator since Marilyn Tavenner stepped down earlier this year. He previously was an executive with Optum, a division of United Health, and was involved in ACA implementation in that capacity. Slavitt needs Senate confirmation and will face tough questioning from Republicans who want to grill the administration over the ACA in addition to drilling down on Medicare and Medicaid issues.
The recent US Supreme Court decision legalizing same-sex marriage seems likely to affect employer offerings of domestic partner (DP) coverage. Many employers that now offer DP benefits chose to do so because their employees did not have a legal right to marry their same-sex partners and thus could not qualify for dependent coverage. But more often than not, DP benefits are also extended to unmarried opposite-sex domestic partners, so a change in policy could affect those couples as well.
Offerings of DP coverage have been growing steadily. According to Mercer’s National Survey of Employer-Sponsored Health Plans, over the past five years offerings of domestic partner coverage have risen from 39% to 55% among large employers (500 or more employees). Among jumbo employers – those with 20,000 or more employees – 76% offer DP coverage. There is still a wide variation by geographic region, however. Fewer than half of all large employers in the South and Midwest provide DP benefits (46% and 45%, respectively), compared to solid majorities of large employers in the Northeast and West (60% and 78%, respectively).
With the issue of marriage equality decided by the Court, some employers are debating whether to stop offering domestic partner benefits, which would eliminate the administrative burdens associated with the offering. Mercer polled employers about their thinking on this issue during a webcast conducted about a week after the decision was announced. Of about 150 employers responding, 19% offer DP benefits to same-sex couples; 55% offer it to same-sex and opposite-sex couples, and 25% don’t provide it at all. When we asked those currently extending coverage to domestic partners if the decision will cause them to rethink this policy, 4% said they have already dropped DP coverage in states permitting same-sex marriage, and 15% said they will drop it for the next open enrollment period. While another 28% said are at least considering it, the majority – 53% – said they are not considering it.
Those that provide it to same-sex couples only are more likely to drop it – in fact, 8% say they have dropped it in states that had already legalized same-sex marriage. Another 23% say they will drop it for the next open enrollment period, while 23% are at least considering it. The rest (44%) say they are not considering it. Employers that offer DP to both same-sex and opposite-sex partners are moving more slowly. The majority of these employers – 62% – say they are not considering dropping it. Only 8% plan to drop it for the next open enrollment period, and few – just 4% – have already dropped it in states that legalized same-sex marriage. About a fourth says they would consider dropping it within the next 2-3 years.
The recent ruling will require employers to take some immediate steps to ensure compliance. For example, you’ll need to revisit your definition of “spouse” in plan documents to ensure it covers same-sex spouses and your eligibility rules. And if you offer domestic partner coverage, you may also want to take this opportunity to review your objectives for the program and weigh your employees’ needs and preferences. This decision should reflect your organizational culture and attraction/retention strategies. If you decide to drop DP coverage, couples will essentially be required to marry or lose coverage. For the couples who prefer not to marry – same-sex or opposite-sex – a change in policy could have far-reaching impact.
In light of last week’s US Supreme Court decision legalizing same-sex marriage, some of the large employers offering domestic partner benefits may decide to reevaluate their benefits offerings. The original intent of domestic partner benefits was to provide coverage to same-sex spouses who did not have a legal right to marry. With that issue removed by the Court, employers may decide to stop offering domestic partner benefits and eliminate the administrative burdens associated with the offering. However, employers should consider carefully their organizational culture, attraction/retention strategies, and the end date for offering domestic partner benefits -- after which couples will essentially be required to marry or lose coverage. Keep in mind that it’s the couples who prefer not to marry -- same-sex or opposite-sex -- who stand to lose the most.
A recent article in The New Yorker entitled “OverKill” by Atul Gawande describes the harmful effects of unnecessary medical care, with a focus on the resulting adverse medical consequences. It framed the issue of medical waste using a different lens than I typically apply, and I find myself thinking about the implications frequently.
As Mercer’s Chief Actuary for Health and Benefits, I have spent nearly a year leading an internal initiative aimed at understanding how value-based care is changing the health care landscape. Value-based care is a term used to describe a number of strategies for reducing unnecessary care and encouraging the practice of evidence-based medicine by changing incentives for providers and patients. In particular, I’m looking at the implications for the employers with whom we consult. My focus, first and foremost, is on all things financial. Studies point to the large degree of waste in the medical system, and as employers look at ways to flatten the medical trend curve, eliminating waste seems a logical place to start.
I am also a spouse and a parent, though, and will admit to the tiny voice in my head that asks if it were my child or spouse who was ill, wouldn’t I want to exhaust all possibilities to cure them? How do we find the right balance between personal and global interests?
What this article points out, though, is that medical waste is not just a case of better safe than sorry. In many cases unnecessary medical procedures are actually harmful to the patient. Beyond throwing dollars down the drain, we are actually putting health and, in some cases, lives at risk.
As consultants, we continually work with employers to identify cost-effective solutions that improve the health and well-being of their employees and dependents. The value-based care movement has the potential to do just that, by creating financial incentives and accountability within the health care delivery system. These incentives, part of a broad payment reform movement, reward providers for managing cost, improving quality, and increasing patient satisfaction with the health care system.
Many aspects of our current health care system are broken, and it needs transformative change in order to address the fundamental problems that Gawande describes. There are grass-roots movements under way focused on driving this transformation, led by organizations like Catalyst for Payment Reform and National Business Group on Health, and as employers, you can lend your voice to the collective call for action. Wasteful spend for unnecessary tests and procedures not only pressures our profit margins and competitiveness in a global economy, it can harm the people we are looking to help — our employees and their families.
Learn more about value-based care and how you can help to drive this transformation.
Right now, consumer-directed health plans (CDHPs) are at the top of the list of key cost management strategies. For employers looking to build a health program that’s sustainable over the long term, a plan that’s designed to change employee behavior — to make them better health care consumers — has a lot of appeal. So much appeal that we’ve seen the percentage of covered employees enrolled in CDHPs more than double over the past four years. In 2014, nearly half of all large employers offered a CDHP, and 23% of their employees were enrolled. By 2017, 66% of large employers expect to offer a CDHP.
Fueling both the growth in offerings and the growth in enrollment is a better understanding on employers’ part regarding how to make consumerism work. Employers are asking employees to take on an increasing amount of financial responsibility in all types of plans, not just CDHPs. In a consumerism strategy, high deductibles are meant to give employees a financial incentive to shop more carefully for health services. The growing availability of transparency tools is allowing employees to compare health provider price and quality information and factor cost into their decision-making.
In our latest Mercer survey, more than three-fourths of large US employers say their employees now have access to this type of information, either telephonically, on the web, or through a mobile app. While the transparency tool is most often provided by the health plan, 12% of large employers contract with a specialty vendor to provide these services.
Despite the availability of transparency tools, a new Kaiser Family Foundation poll shows consumers are not using the available data to make health care decisions. Here are a few interesting findings from the poll:
- 23% reported seeing information comparing the quality of doctors and hospitals in the past 12 months; only 10% used the information.
- 12% reported seeing prices among different doctors and hospitals in the past 12 months; only 5% used the information.
- 64% say it is difficult to find out how much medical treatments and procedures would cost.
But the difficulty in locating price information may not be the only hurdle employers face in increasing employee usage of transparency tools. The poll found that people are overconfident in their ability to pay for health care expenses. The majority of people said they have enough insurance or money to pay for usual medical costs and an unplanned hospitalization. But when asked how they would pay for a $500 medical bill, 27% would have to use a credit card or borrow money, and 20% said they wouldn’t be able to pay it at all.
There are a few things employers can do to increase utilization of transparency tools:
- Don’t be afraid to over communicate. Employees don’t need this information until they have a health event. You can’t expect a once and done communication campaign to work. Communicate the availability of this information and repeat several times throughout the year.
- Make sure it’s easy to find cost information. If the transparency tools offered by your health plan aren’t easy to use contract with a specialty vendor to provide these services.
- Educate and reeducate your employees about the costs associated with your health plan. Make sure that they understand how the deductible, coinsurance, and out-of-pocket maximums get applied. You don’t want your employees to be overconfident in their ability to pay medical bills.
The US Preventive Services Task Force (USPSTF) issued draft advice on Monday recommending that women ages 50–74 get a mammogram every two years. Citing concerns about the risks associated with false positives, the USPSTF recommends women in their 40s make individual decisions after consulting with their physicians. This draft is mostly a restatement of the USPSTF 2009 recommendation but it remains at odds with the 2002 recommendation regulators used to define a “recommended preventive service” that non-grandfathered health plans must cover with no cost sharing. For purposes of the ACA, the current breast cancer screening recommendation allows mammography for women age 40 years and older, with or without clinical breast examination, every one to two years. It’s unclear if this new recommendation will result in a change to the ACA rule. Keep an eye out for any developments, and be prepared to consider the pros and cons of a plan design change should the ACA rule change.