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.
Ricardo Alonso-Zaldivar, AP (Published by The Washington Post)
- Don’t overlook the concerns raised by key healthcare industry stakeholders. Within the healthcare system nothing happens in isolation, and repealing and replacing the ACA will certainly have an impact on employer-sponsored plans. *A must read*
Margot Sanger-Katz, The New York Times
- The Republican’s ACA repeal and delay plan assumes the sustainability of the current healthcare system while they put a replacement plan in place. This article questions that assumption and warns that even a carefully planned delay may result in an unintentional quick repeal for some Americans. *Worth the time*
Haeyoun Park and Troy Griggs, The New York Times
- If your employees have questions about repealing the ACA, give them this link. It’s the simplest explanation that we’ve found. *Quick and easy*
Mercer’s Washington Resource Group
- House Republican leaders, President-elect Trump, and HHS nominee Tom Price have all have ACA repeal and replace proposals. This article compares the proposals' key features, which offer some indication of what a final ACA replacement plan may look like. *Skim this one* (Mercer Select Intelligence membership required. Not a member? Learn more)
While it’s far from clear where the incoming administration and Congress will land on the “replace” part of “repeal and replace” with regard to the Affordable Care Act, they are signaling interest in promoting the use of health savings accounts by expanding eligibility and allowing funds to be used for more purposes. High-deductible HSA-eligible plans already feature in many employer health benefit programs. In 2016, 21% of all covered employees were enrolled in an HSA-eligible plan. Enrollment has been rising over the past decade as employers -- especially large employers (500+ employees) -- have added HSA-eligible plan choices to their health programs. The threat of the excise tax was a big motivator for employers to move employees into lower-cost plans; while the excise tax may go by the wayside, there is now discussion of capping the individual tax exclusion for employer-provided health coverage, which could still drive cost pressure on employer-sponsored health plans.
It is relatively uncommon for a large employer to offer an HSA-eligible plan as the only plan. Many are concerned that these plans might not be a good fit for all employees in their population. In fact, among employers that have offered an HSA as a choice for at least three years, average enrollment has only reached 38% of covered employees -- even though employee paycheck deductions for these plans are significantly lower. Among large employers, for employee-only coverage in an HSA-eligible plan, employees contribute $84 per month on average, compared to $132 for PPO coverage. For family coverage, the difference is $321 vs. $467. In addition, 75% of large employers offering HSA-eligible plans make a contribution to the employees’ HSA -- typically $500 for an individual.
While per-employee cost for these plans is 22% less, on average, than cost for a traditional PPO, some employers question whether the savings are due largely to selection -- the tendency of younger, presumably healthier employees to choose the HSA plan over a richer PPO or HMO. It is true that when the HSA plan is offered as a full replacement, the average HSA cost is higher than when it is offered as a choice. But perhaps the more meaningful comparison is total health cost per employee -- the cost for all enrolled employees across all medical and dental plans. Among large employers offering an HSA-eligible plan as a choice, total health benefit cost averages $12,529; among those offering a full-replacement HSA, it averages $10,732. Plan design and other factors may account for this difference in cost, but not selection. Studies have shown that the higher cost-sharing levels in an HSA-eligible plan are associated with lower utilization of health services. It has not been demonstrated if, or how, this lower utilization affects the health of enrollees.
Changes in health policy may well have employers reconsidering a full-replacement strategy. And while many employers that already offer these plans also provide financial planning resources, transparency tools, and resources such as telemedicine to help mitigate employees’ growing financial risk, the fact remains that for employees without sufficient savings and significant health expenses, a high-deductible plan can result in financial hardship. On the other hand, for many employees, the HSA is an extremely efficient way to save for future health expenses, and may become even more so under the new administration. The key to making the decision to offer an HSA alone or as a choice is understanding employee needs and preferences, as well as the new resources that are available to help make HSAs work better for everyone.
Final Department of Labor (DOL) rules require ERISA plans processing disability claims to treat coverage rescissions like benefit denials, impose more detailed denial notices written in a "culturally and linguistically appropriate manner," and expand claimants' response and litigation rights. The new rules generally apply for claims filed on or after Jan. 1, 2018, but transitional notice requirements apply for claims filed from Jan. 18, 2017 -- the final regulations' effective date -- through Dec. 31, 2017. While the new administration or Congress might delay, change, or even try to overturn the disability regulations, employers should still plan their next steps as the rules may remain intact.
While it’s an exciting time to be in our business, staying on top of all the news about the Trump transition and Republican priorities for the 115th Congress can be a little overwhelming. We’d like to help you with that by periodically posting links to key articles. Here’s the first list to keep you up to date -- with our thoughts on which articles to make a priority.
Robert Pear, Jennifer Steinhauer, and Thomas Kaplan, The New York Times
- It appears a Republican “repeal and replace” strategy may be morphing into a “repeal and delay” strategy. Recent reports indicate that the complexities of unwinding the ACA may take two to three years. *A must read*
Sarah Kliff, Vox
- Check out this easy to read summary of seven ACA replacement plans. We’ll be watching how Republicans coalesce around one option, presumably taking pieces from many, if not all seven, of these proposals. *Long but worth the time*
Jake Novak, CNBC
- This is an opinion piece on a development that didn’t get much publicity: President-Elect Trump’s appointment of David Higbee, an antitrust expert, to his transition team. The article points out that Higbee has interest in what anti-competitive forces do to health care costs. We think that makes the Higbee appointment one to watch. *Skim this one*
- This article reviews the likely priorities for the next president and Congress in the areas of employer-sponsored health care, retirement income, executive rewards and worker protections -- and suggests steps employers can take now to prepare for coming change. *Long but worth the time* (Mercer Select Intelligence membership required. Not a member? Learn more)
We hope you consider this site your go-to trusted resource in the weeks and months ahead. If you’ve seen something you thought we should have included OR have suggestions/feedback, please leave a comment or send us an e-mail.
Last week, The Henry J. Kaiser Family Foundation released new data showing only one in four Americans favor repeal of the ACA. About half of the respondents want Congress to leave the ACA alone or make it bigger and stronger. Contrast that with the results from our latest Mercer poll, where 63% of participating employers said they favored repeal-and-replace of the ACA; only 15% said they oppose; and 22% said they don't have an opinion yet. Why the difference? When pondering repeal, employers may be hoping for elimination of the cost and administrative burdens imposed by the ACA, where individuals may be concerned about losing some of the protections afforded by the ACA – for example, the ban on pre-existing coverage exclusions and coverage eligibility to age 26.
Now that ACA repeal seems imminent, the Kaiser data may indicate the ACA individual protections are more important to Americans than we realized. The data shows that among Republican voters those favoring repeal declined from 69% in October to 52% in November and those who would prefer Congress merely scale back the law increased from 11% in October to 25% in November.
Whatever Congress ultimately decides to do with the ACA, it’s important for employers to know what employees want from their health plan. If you don’t already know, find out what your employees value. Under a repeal scenario, you may choose to retain some of the ACA’s individual protections to promote your organization’s recruitment and retention efforts. Now’s the time to explore how repeal may impact your health strategy so you’re ready to respond to the changes Congress and the incoming Administration will make to the ACA.
Signaling that he is serious about rolling back the ACA, President-elect Donald Trump has chosen Rep. Tom Price (R-Ga.), one of Capitol Hill's fiercest critics of President Obama's health care law, to be Secretary of Health and Human Services. Price, an orthopedic surgeon and Chair of the House Budget Committee, is the author of one of the Republican ACA replacement plans, Empowering Patients First, which you can read about here.
Employers should be aware that Price calls for capping the tax exclusion. According to the article, “Price’s bill proposes limiting the employer-tax exclusion for insurance to $8,000 for individual policies and $20,000 for families... As popular as this provision will be with economists, you can bet that the public will hate it, as it would make some health plans significantly more expensive -- and face similar pushback to Obamacare’s Cadillac tax.”
It’s not a slam-dunk that his plan will be the replacement plan, but it does provide insights to what his preferences are. (Other Republican replacement plans that include a tax exclusion cap set a higher threshold -- $12,000 for individuals and $30,000 for families). As with the ACA’s excise tax, a cap on the tax exclusion would be a major focus of lobbying efforts for employers and advocacy groups like ABC, ERIC, and Fight the 40.
While Price’s replacement plan calls for eliminating Medicaid expansion, Trump selected Indiana health policy consultant Seema Verma to run the Centers for Medicare and Medicaid Services. Veerma has worked on redesigning Medicaid programs in states that have chosen to expand the program. She also spearheaded Indiana's healthcare reform efforts after the ACA passed to help health agencies prep for its implementation. So there could be some push and pull there.
There are significant differences between Price’s plan and those of other Hill Republicans. As HHS Secretary, Price won’t have the authority to replace the ACA himself. But he’ll be a key player in negotiations with Congress over which parts of which replacement plans they will choose, and he’ll control the replacement’s implementation. With this appointment, it seems the question now isn’t whether Republicans will move to repeal and replace the ACA -- it’s how quickly will they be able to coalesce around one option.
With the election behind us, the news is full of speculation about what will happen next. We hosted a webcast for employers two days after the election and had a record turnout, taking the opportunity to conduct a quick opinion poll about repealing and replacing the ACA and other possible legislative actions by the new president and the 115th Congress.
Employers have strongly supported repealing the excise tax and the employer mandate since they were first enacted. In our poll last week, 63% of the more than 650 employers participating said they favored repeal-and-replace of the ACA; only 15% said they oppose; and 22% said they don't have an opinion yet. Admittedly, we don't have any real details on what repeal looks like, so this response can be interpreted as interest in something different from what is currently in place.
We also asked respondents how much of a priority they would like to see the new administration place on some issues of concern to employers. Here are the top three:
- Prescription drug cost and price transparency was considered the highest priority of the issues, with a rating of 4.3 (using a scale of 1-5). As we mentioned in an earlier post, a Kaiser Family Foundation survey found that prescription drug costs were the Number One health care issue for voters, ahead of Obamacare. Rising drug costs are currently one of the biggest drivers of employer health plan cost. With 40 new high-cost specialty drugs projected to hit the market each year for the next five years, it is easy to see why this tops the list.
- HSA expansion was the second priority, with a rating of 3.6. Implementation of high-deductible health plans has accelerated in recent years, and enrollment reached 29% of all covered employees in 2016. Employers support changes that would make these plans more attractive to employees, such as higher annual contribution limits and allowing funds to be used for OTC drugs and telemedicine visits.
- A national uniform paid leave framework was the third priority (3.3). With 42 different paid leave laws now on the books (in seven states and 34 municipalities), employers with operations spanning many locations face huge compliance and administrative challenges and many would welcome relief.
While this list is by no means everything being discussed in Washington related to health and group benefits, it is representative of some of the top issues for employers. With change in the air, you have an opportunity to influence the debate. Now is an especially important time for employers to make their voices heard in the policy debate, either independently or as part of several organizations such as the American Benefits Council, the ERISA Industry Committee, the National Business Group on Health, and the US Chamber of Commerce, to name just a few. Your congressional representatives and the incoming Trump administration need and want to hear from you!
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.
Last night’s vote was about change, but what will Donald Trump’s presidency mean for healthcare benefits? The ACA will almost certainly change, although it is unclear if we will see full repeal or a major overhaul. With that said, Republicans won’t want to risk the backlash of kicking 25 million constituents off their plans. The task at hand is to “fix” the parts of the ACA that are ineffective. At this point, here’s what we think we know:
- The popular features of the ACA will likely remain, such as expanded eligibility for dependent children to age 26; the ban on pre-existing condition limits; and the closed gap in Medicare prescription coverage
- Repeal of the excise tax could become a reality -- but would a cap on the employee tax exclusion take its place?
- We’ll see a laser focus on how to create new, competitive markets for individuals who don’t get coverage through their employer or public programs, with Trump favoring individual tax preferences
Recent Mercer survey results found employers divided on repealing and replacing the ACA, with clear variation by employer size. While a majority of small employers favors repeal and replace (65% of those with 10-499 employees), that falls to just 36% of those with 20,000 or more employees. Our interpretation is that it is not the “repeal” as much as it is the “replace” that makes employer support uncertain. Given a Trump presidency and a Republican-controlled Congress, here are key issues for employers as they consider the impact on their health program strategies:
- Many employers welcome the promise of repeal of certain ACA requirements, especially the excise tax, the employer mandate, and reporting. But be prepared; it could take time -- a year or two -- for all the transitions to take place. These changes may need to be part of a larger plan for covering the 25 million uninsured who went to the public plans and Medicaid.
- Enrollment in high-deductible health plans continues to grow and there is keen interest in expansion of HSAs. Legislation has been proposed to increase funding limits and allow funds to be used for OTC medications, telemedicine visits, and onsite clinic visits to support further growth.
- While the rise of consumer-directed health plans has been an effective cost-management strategy, it has put financial pressure on employees and their families, so employers need to keep pushing for greater health care price transparency.
- Employers will also need to double down on Rx strategies. Republicans are less likely to go after pharma to control drug prices, and projections are for an additional $25B annually in new drug spend.
- More states passed time-off/sick leave laws. At the same time, employers are working on a proposal to get the federal government to pass ERISA-like safe harbor rules to ease the administrative burden of compliance with state and local laws.
Employers have done a great job of holding health benefit cost growth mostly below 4% in the years after the passage of the ACA, and 2016’s increase of just 2.4% was one of the lowest we’ve seen in decades. The threat of the excise tax was certainly a factor, and some employers made benefit cuts they didn’t want in order to hold down cost. To keep health care cost growth at sustainable levels in the years ahead will mean changing the health care system for the better, to ensure people get the right care, in the right place, at the right time -- and error-free.
Employers provide health care coverage for more than half of the American people and are uniquely positioned to be a driving force for meaningful change in how care is accessed and delivered. It is important that your voice is heard as the new policy debates begin. But don’t wait for the government. All of us must keep working to drive cost-effective care and better outcomes for our employees and their families.
Final ACA rules issued Oct. 28 essentially adopt proposed rules on short-term insurance, certain excepted benefits, and essential health benefits subject to the ban on annual/lifetime dollar limits. The rules do clarify some deadlines. But regulators are postponing action to finalize earlier proposals on the excepted-benefit treatment of certain types of indemnity insurance and expatriate health plans. For now, employers and insurers offering expatriate health coverage can continue to rely on guidance in the proposed regulations.
Compliance with the Mental Health Parity and Addiction Equity Act is the focus of a host of federal initiatives announced Oct. 27. Along with releasing a final report from President Obama's Mental Health Parity and Substance Use Disorder Task Force and new ACA FAQs, regulators are stepping up MHPAEA enforcement reviews and consumer outreach efforts.