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)
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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.
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.
Let’s start with the good news, which came in the form of an analysis conducted by the Urban Institute of the actual cost of coverage in public exchanges across the country. The headline? After adjusting for actuarial value and enrollee age, individual unsubsidized premiums on the public exchanges are about 10% lower than the average premium in an employer-sponsored plan. In head-to-head comparisons, the exchange plans cost less in 80% of the markets examined. While the study adjusted for actuarial value, it did not address such differences as network size or provider participation and we know that narrow networks are one of the ways exchange plans are keeping prices low. It does explode the myth that exchange premiums are sky high, because, of course it's all relative -- compared to employer plans, they're not. But compared to the deal that most people get in an employer plan – a 75% to 80% premium subsidy – unsubsidized coverage will seem extremely expensive to anyone who has been covered through an employer plan, or anyone buying coverage for the first time. (And the lack of any tax break for obtaining coverage – only the threat of a tax penalty for not doing so – is not going to help that perception.)
So maybe many exchange plans were priced too low to begin with and increases will stabilize once premiums reach a certain level, closer to that of group plans. The argument against this view was presented in a New York Times article that addressed the pent-up demand for services of many exchange enrollees, comparing it to a high-school football team at a buffet table. Whatever you might think about that metaphor – I can’t quite equate seeking diabetes treatment with seeking a third plate of baked ziti! – the exchange risk pools do present serious challenges. My colleague Tracy Watts had this to say about that: “Everyone knew that the people who really needed access to care would be the first to sign up and use healthcare services. The assumption was that over time, as the individual mandate penalty increased, more healthy people would join. Unfortunately, they have not. While employers experience turnover and changes in the workforce, the risk pools are much more stable than the public exchange.”
There’s a lot of buzz about the health care cost report from the Obama administration just published in Health Affairs. Robert Pear in The New York Times provides a balanced take, but the news is being spun in many different directions. The report estimates that national health spending increased 5.5 percent in 2015, to a total of $3.2 trillion, and will easily surpass $10,000 per person this year. That’s faster than the historically low increases we’ve seen in the recession and years of slow recovery (bad), but still slower than during the two decades prior to the recession (good). One reason for the faster growth is a stronger economy, allowing more people to afford the care they need (good); another is soaring prescription drug costs (bad). The report predicts that health spending will grow an average of 5.7 percent a year from 2017 to 2019 and then 6 percent a year from 2020 to 2025. Our National Survey of Employer-Sponsored Health Plans finds that employers, with a lot of hard work, have been holding average annual increases in health benefit cost per employee to about 4% and expect to do so this year as well. That’s also both good and bad – it’s slower than national spending growth overall, but still faster than inflation and in the long run unsustainable. The most sobering number in the government report? The prediction that by 2025 health care spending will account for 20% of the GDP, a far higher percentage than any other developed country in the world (ugly). Of course, back in 1993, it was predicted we would hit that milestone in 2003 and we didn’t – that’s the good news, if you want to call it that.