While I spend most of my work days helping large employers with their health benefit programs, this past week I wore my Mercer health reform leader hat at my own personal version of health policy summer camp in Washington. I spent two days with the American Benefits Council’s policy board, took some meetings on Capitol Hill, and visited with Julie Rovner and Julie Appleby at KAISER Health News.
While employers have their hands full managing health benefits for their own employees and their families, don't underestimate their interest in the individual market and their concern for the public exchanges. In a series of meetings that ABC arranged on Capitol Hill and with Trump administration staff to discuss key issues for employers, the topic of the federal government’s commitment to cost-sharing reduction subsidies for individual policies sold on the exchange came up every time. CSR subsidies are central to the financial success of exchange business, and, though continuing them for now, the Trump administration won’t commit to future payments. Earlier this week, Republicans received another 90-day delay to consider how they’d like to proceed in the appeal of a case the House brought last year challenging the CSR subsidies. Without these payments, the insurance companies writing these policies are at risk for reimbursement that the federal government is contractually obligated to pay.
Employers do not want the individual market to crumble. Not only is that bad for people who depend on it -- including early retirees and former employees -- but cost pressures in the individual market will inevitably lead to cost shifting to private payers. My colleague Geoff Manville and I had a great conversation with Julie Rovner and Julie Appleby at KAISER about the problems creating instability in the individual market. My top three coming out of that discussion:
- Small risk pools. It was clear going in that the risk pool was not going to be ideal, but on top of that, many states are not big enough on their own to generate enough lives to create a stable risk pool. While 100,000+ lives may sound like a big group, when you divide it across multiple insurance companies and a variety of products, the "law of large numbers" doesn't work because the numbers aren't large enough. Look back 15 years when the biggest employers offered multiple self-insured plans and 10-15 insured HMOs -- and look at what they offer now. The past 10 years have seen a lot of plan consolidation.
- Young insureds MIA. One of the most popular ACA provisions, expanded group plan eligibility to include dependents up to age 26, was detrimental to individual plans. The biggest decrease in the uninsured occurred in the younger end of the market. Unfortunately for insurance companies, most of these younger Americans got coverage through their parents, not by purchasing it in the individual market.
- Federal government missteps. The government has not been the best business partner to insurers. To pick one example, think back to how essential health benefits were handled. As the public exchange implementation was coming down to the wire, there was an outcry from current individual policy holders facing significant premium increases for broader coverage that included all EHBs. At the last minute, the White House decided to "grandmother" those plans, which meant that insurance companies lost the additional revenue they were counting on from those policies. And now they face possible nonpayment of promised CSR subsidies.
What is the long-term future of the individual market? Some insurance companies have already declined to continue offer coverage in the public exchange in 2018 and others are still deliberating. We are in dire need of some leadership from the government to uphold their end of the bargain with the insurance companies. The individual market -- and people's lives -- are at stake.
Earlier this week, we hosted a Mercer Select Briefing and asked participants to ponder changes they might make to their health benefits if the ACA’s employer mandate were fully or partially repealed. Of the 175 employers taking the poll, relatively few anticipate making any particular change. The largest number of respondents – 21% – said they would be likely to set higher employee contributions for individual coverage than currently permitted under the affordability requirement. Given that many employers have added lower-cost plans since the ACA was signed, most don’t have an issue with affordable contributions. Just 19% said they would be likely to resume a 40-hour work-week requirement for eligibility (rather than the 30-hour requirement under the ACA) and the same percentage said they would likely revisit lifetime benefit dollar limits. Fewer than one in ten employers thought they might impose pre-existing condition limitations, and almost none said they were likely to require more than a 90-day waiting period for benefits.
The truth is, in employer-sponsored plans the burden of compliance was greater than the impact of compliance. Now that we are there, it is unlikely there will be a race to unravel the changes. Probably the two biggest ACA issues for employers that remain are the excise tax (delayed until 2020) and the ongoing reporting requirements. The current version of the AHCA further delays the excise tax, and regulators are well aware of employers’ desire for relief around reporting. We keep hearing that change is coming, but change takes time in Washington DC.
The anxiously awaited CBO score of the AHCA – reflecting the last round of changes made to the bill before it was passed – was released yesterday afternoon. The nonpartisan scorekeeping office forecast the AHCA would cut the federal deficit by $119 billion over the next 10 years, down from $150 billion in the prior score. From a process perspective, the bill still easily passed the test to save at least $2 billion to qualify for consideration under a reconciliation process that is filibuster-proof by requiring only 51 votes in the Senate, not the typical 60-vote threshold.
What else changed in the report? There was a very small decrease in the projected number of uninsured, which had been 24 million over ten years and was revised to 23 million. That’s not much of a ROI for the additional $38 billion aimed at keeping people covered. The largest savings stem from reductions in Medicaid funding and from the replacing ACA’s subsidies for individual health insurance with new tax credits for individual/non-group health insurance.
Of particular interest to employers are the waivers that could be granted to states starting in 2020 allowing them more flexibility on age rating and essential health benefits. In scoring the bill, the CBO and JCT examined three general approaches states could take to implement H.R. 1628 and estimate that about half the population resides in states that would not request waivers regarding the EHBs or community rating; about one-third of the population resides in states that would make moderate changes to market regulations, and about one-sixth of the population resides in states that would obtain waivers involving both the EHBs and community rating. There’s a table showing the estimated impact on premiums by age group in states that would and wouldn’t obtain waivers in this Vox article, and the story isn’t good for older Americans. It’s not yet clear how, or whether, state waivers – which are targeted for individual and small group coverage – would affect employer-sponsored plans.
Politico summed it up best, “…the report highlights the central dilemma that Republicans are grappling with now — how to write a health care bill that preserves peoples’ coverage at a reasonable price, without resorting to government mandates and billions in federal spending. And it drops that problem right on the Senate’s doorstep.”
While working women continue to earn less money than their male counterparts, the gap is narrowing when it comes to health benefits. Three years ago, we used data from Mercer’s National Survey of Employer-Sponsored Health Plans to examine the difference in benefits between large employers with workforces that are 65% female or more to those with workforces that are 65% male or more. Just under half of the mostly female companies are in health care and a quarter are in the services sector, while mostly male companies are found predominately in the manufacturing industry (52%). The percentage of employees in collective bargaining agreements has remained about the same for the two groups (13% for companies with mostly female employees and 15% for companies with mostly male employees). One workforce statistic has seen some movement since 2013, when the average salary for mostly female companies was about $10,000 less than when the workforce is mostly male; data from our 2016 survey shows the difference is now over $15,000. That’s right – the gap in the average salaries of companies with mostly female vs. mostly male workers has only gotten wider.
The health benefits at organizations with predominantly female workforces continue to be less generous than in those with predominantly male workforces. In addition, the employee contributions for these less generous plans are higher than those for the richer benefits offered to employees at mostly male companies. For coverage in a PPO, the most common type of medical plan, the monthly contribution for family coverage is 17% higher ($484 for mostly female companies and $415 for mostly male companies), which is down from a 31% difference in 2013.
In addition, average in-network and out-of-network deductibles and out-of-pocket maximums are consistently higher. For example, the average in-network PPO deductibles in mostly female companies are $844 and $1,936, respectively, for individual and family coverage, compared to $767 and $1,729 at mostly male companies. While the average deductibles for mostly female companies are still higher, the gap has narrowed when compared to 2013 average deductibles.
While benefits for mostly female companies continue to be less rich and more expensive overall, the gap between these benefits and those for mostly male companies does seem to have narrowed since 2013 and since the implementation of the ACA’s employer shared responsibility affordability and minimum values rules, which set thresholds for the amount an employer can charge an employee for their health plan and for the percent of charges the health plan must cover, broadly speaking. However, the gaps in health plan benefits and costs still exist -- and are compounded by the lower salary levels for employees in companies with higher concentrations of women workers.
Republican senators will continue discussions this week on revisions to legislation narrowly approved by the House -– the American Health Care Act – to repeal and replace much of the Affordable Care Act (ACA). Passing a bill out of the Senate may be an even tougher fight for Republicans, who can’t afford more than two defections.
The talks are driven in part by concerns of moderate GOP senators about the House bill’s creation of a waiver system that could substantially raise premiums for certain individuals. The waivers would let states opt out of ACA insurance standards for age rating and “essential health benefits” (EHBs) and, in certain cases, community rating protections related to pre-existing conditions. A number of centrist senators also want to make the bill’s refundable tax credits more generous -- particularly for the elderly -- and delay its phase-out of the ACA’s Medicaid expansion.
While much of the discussion aimed at bridging the conservative-centrist divide is being led by an official working group of 13 lawmakers appointed by Senate Republican leadership, members of the group say they are soliciting the views of all GOP members. Senate Republican leaders say there is no set timeline for legislation but face immense pressure to produce a proposal in short order so they can move to tax reform and other parts of their legislative agenda.
The debate will likely intensify next week, when the Congressional Budget Office is expected to release its analysis of the House-passed bill. The forthcoming score will reflect the language creating the state waiver system added to the bill just before House approval. To avoid a Democratic filibuster, Senate “reconciliation” rules will force the GOP to remove provisions that do not affect the budget.
If a bill passes the Senate, House Republicans could finish the process by passing the Senate’s bill without amending it. Alternatively, Republicans could iron out differences in a “conference committee” comprised of members from both chambers. Hard-line conservatives in the House may object to the Senate’s changes, which are likely to water down some of the American Health Care Act’s major provisions. The two chambers must agree on a uniform bill, however, before it can be sent to the president.
Earlier this week we learned that the CBO will release their “score” of the AHCA the week of May 22. This revised projection will reflect the most recent changes to the bill – allowing states to opt-out of certain provisions including essential health benefits, aspects of community rating and changes to age banding ratios as well as $8 billion in funding to help states that choose to waive the ACA's community rating for individuals who don't have continuous coverage.
This CBO score will play a key role in how the bill moves through the Senate. The Senate Parliamentarian determines which provisions of the bill qualify for repeal under the budget reconciliation process, and she cannot begin that review without the CBO analysis. If she decides that certain parts of the AHCA bill can’t be part of the reconciliation bill, that would affect the CBO score, especially the estimated savings that impact the amount of deficit reduction. This deficit reduction estimate – $150 billion for an earlier version of the bill – will constrain how the Senate crafts their bill. The reconciliation rules require the Senate bill to achieve the same level of savings as the House bill.
As this article from The Washington Post points out, if Senate Republicans want to reinstate some of the Medicaid spending cut by the House, they’ll need to find revenue to pay for it, meaning they may have to reconsider when and which of the ACA’s long list of taxes can be repealed – the AHCA would delay the Cadillac tax until 2026 but would repeal most of the ACA's other taxes starting in 2017. This budget constraint rule also almost guarantees an uphill battle for the Senate to repeal the Cadillac Tax. Not only would Cadillac tax repeal raise a budget “point of order” requiring 60 votes to waive, it would come with some costs which they might not be able to offset if the Senate wishes to walk back some of the savings generated from changes the AHCA would make to Medicaid and the individual market. If the new CBO score continues to project a large increase in the number of uninsured – 24 million more uninsured by 2026 in the last report – the Senate will be under pressure to keep ACA changes to Medicaid and the individual market or simply make smaller fixes to these provisions. All eyes will be on the CBO score that comes out the week of May 22 as the starting point for the Senate debate.
The vote to pass the AHCA in the House – a first step on the road to repealing the ACA – has raised questions about how employers might respond if the ACA requirements affecting employer-sponsored plans were to be lifted. One way to approach that question is to look at how employer plans changed – and how they didn’t change – under the ACA. We went back to past Mercer National Survey of Employer-Sponsored Health Plans databases to find out.
- Eligibility. While 22% of employers with 50 or more employees (and 37% of those with 500 or more employees) said they would need to make changes because of the ACA’s 30 hour rule in 2015, we’ve seen no evidence that enrollment in employer plans has risen as a result.
- Mini-meds. Before the ACA, 7% of all large employers (and 21% of large retail employers) offered mini-med plans, generally to their part-time employees. The 60% plan value rule effectively put an end to mini-meds.
- Affordable contributions. Only 14% of respondents to our 2014 survey on health care reform said they would need to take steps to meet the ACA’s affordability rules. Employers have historically been slow to raise contributions as a percent of premium. The average contribution for employee-only coverage in a PPO plan was 24% in 2009, the year the ACA was signed, and it was 24% in 2016. The average dollar contribution has risen along with plan costs, but proportionally, contributions have not increased.
- Deductibles. Whether this was an intended or unintended consequence, deductibles have risen sharply under the threat of the ACA’s excise tax. Since 2010, the average individual PPO deductible has risen by an average of 7% annually, faster than overall growth in medical plan cost.
- Lifetime limits. In 2009, 71% of large employers had lifetime benefit maximums in their PPO plans and the median limitation used was $2,000,000. While it was rare that a plan member would reach the maximum benefit amount, the ACA outlawed the use of lifetime limits entirely.
Would a repeal mean that employers revert back to pre-ACA plan designs? Not necessarily, and certainly not at once. Some employers might reinstate mini-med plans as a way to provide some type of health benefit to part-timers not eligible for the company’s comprehensive plan. It seems unlikely that employers that have raised deductibles would lower them – but it also seems unlikely that employers would take away coverage from any employees or reduce plan values below the current 60% minimum. Before the ACA, most employers voluntarily offered comprehensive health benefits that already met the ACA minimum requirements; by and large, the requirements targeted plans that were the exception rather than rule.
The repeal and replace bill that just passed in the House faces tough challenges in the Senate. Even so, with the Senate reportedly working on a bill of their own, it’s a good bet that this Congress will make some changes to the ACA – and, one way or another, that will mean change for employer plans too. This process may take some time. We’ll keep you posted.
Well, it happened. House Republicans got the votes to send the AHCA on to the Senate. The bill will face tough challenges in the Senate, so this is far from a done deal. For now, it is business as usual under the ACA.
Highlights of what is in HR 1628
- The “Cadillac” tax remains, although delayed from 2020 to 2026
- Employer and individual mandate penalties eliminated for 2016 and later years
- Age-based tax credits starting in 2020. Credits phase out for those making more than $75,000 per year ($150,000 joint filers). No credits for those offered employer coverage
- Most other ACA taxes are repealed for years beginning after 2016
- HSA enhancements – Increase limits to max deductible/out-of-pocket limits for HDHPs (Based on Mercer estimates, $6,650 single/$13,300 family for 2018)
- No additional states can expand Medicaid after March 1, 2017 and Medicaid funding significantly changed with per enrollee capped payments, option for block grants
- Employer’s ACA reporting not repealed (this would need separate legislation or regulatory action); after 2019 offers of coverage would be reported via W-2
- Subject to certain requirements, states could opt out of essential health benefits, aspects of community rating and age banding requirements
- Most recent amendment provides additional $8B to help states pay for pre-existing condition claims
The Congressional Budget Office has not scored the version of the bill passed by the House. Earlier, they projected the number of uninsured would increase by 14M in 2018, 21M in 2020 and then 24M in 2026 relative to projections under the ACA. CBO has not released revised numbers to reflect the most recent changes. The combination of more people without coverage and cuts in Medicaid funding could potentially result in cost shifting to employer-sponsored plans. Another concern is that employers may have less ability to transition certain populations (early retirees, part-time employees) to individual coverage as a design option.
Important context of this bill in the process of becoming a law
The bill faces significant hurdles in the Senate. The Senate requirements for what qualifies for reconciliation legislation are expected to result in some trimming of provisions that don’t have an impact on the federal budget, and GOP senators will want to make other changes, including more generous tax credits and more time to unwind the ACA’s Medicaid expansion. A Senate-passed bill may be difficult to pass again in a conservative House – both chambers will need to agree on the final version before it can be sent to President Trump.
We will continue to track and provide updates.
House Republican leaders are working to win the votes needed to pass a revised version of their health care reform bill, the American Health Care Act (AHCA), that aims to lower health insurance premiums for some individuals by letting states obtain waivers to opt out of the Affordable Care Act's (ACA) essential health benefits, community rating, and age banding requirements.
The latest revisions reflect negotiations between leaders of the conservative House Freedom Caucus and the moderate "Tuesday Group" since the March collapse of Republicans' first attempt to pass the bill, which Speaker Paul Ryan, R-WI, pulled from floor consideration because it lacked support. Other changes to the AHCA since its introduction include the addition of a risk-sharing program to help insurers cover high-claims costs.
These latest revisions brought an official endorsement from the Freedom Caucus, and GOP leaders had hoped to rush the bill to a floor vote this week before the 100th day of President Donald Trump’s presidency on Saturday. But many moderates, leery of what they see as a lessening of consumer protections by the new changes, are not rushing to sign on to the bill, and some have announced opposition. Leaders are trying to secure enough support to pass the bill the first week of May, but the outlook is uncertain.
It has been a month since the American Health Care Act was pulled because House Republicans lacked the votes to advance it to the Senate. Here’s a run-down of all that has happened since then, including our perspective on what it means to employers.
Individual Options in the Public Exchange
Over the past month, after Humana announced that it will no longer offer plans on the public exchange and Anthem announced that it is nervous, we have been seeing articles about parts of the country where Obamacare options could go from one to zero. Insurance companies are trying to decide whether to participate in the exchange market in 2018 as they wait for Washington to provide some much-needed clarity and stability.
Last week, health insurers met with Seema Verma, the new Medicare administrator. Their biggest concern is the future of cost-sharing reductions (CSRs) paid by the administration that now go to the companies covering about seven million individuals to help lower deductibles and co-payments. While the Obama administration paid the subsidies, House Republicans sued, arguing that payments made by the executive branch and not appropriated by Congress were unconstitutional. A federal district court judge agreed but allowed the subsidies to continue while the case is being appealed, and the next court date is May 22. Interestingly, Kaiser Family Foundation released an analysis that showed eliminating the CSRs would actually result in a net increase of $2.8 Billion to the Federal government in 2018 for higher premium subsidy payments. In addition to the CSRs, insurers also worry about enforcement of the individual mandate penalty. Without it, healthier people might consider going without insurance, which drives up costs for the insured.
What employers need to know: The funding for the CSRs is critical for the insurance companies because it will saddle them large immediate costs and affect their pricing of future policies. Without the subsidies, rates are estimated to increase an additional 20% on top of required increases for 2018. The health of the individual market is important to employers as outside options for COBRA coverage and pre-65 retiree medical coverage. In addition, shortfalls in the individual market will result in cost-shifting to other markets, most likely employers since they cover the largest portion of the US population.
Attempts to Revive the AHCA Continue
Following the failed attempt to pass the AHCA in the House, the White House urged continued efforts aimed at bridging differences between GOP moderates and conservative Freedom Caucus members who believe the AHCA did not do enough to drive down insurance premiums. Just before Congress left town on Friday, April 7, for its two-week Spring recess, House Republicans agree to add language to the bill that would establish a federal risk-sharing program providing $15 billion to states over nine years. The change did not convince the Freedom Caucus members, who had earlier met with Vice President Mike Pence to discuss their support for getting rid of three ACA regulations -- essential health benefits, which mandate what services insurers must cover; community rating, which says insurers can't charge sick people more for insurance; and guaranteed issue, which says insurers must cover people with pre-existing conditions.
Talks between the White House, House GOP lawmakers produced a compromise proposal on April 26 that would let States to opt out of essential health benefit regulations and loosen the rules on when insurance companies can charge higher premiums. In exchange, states would have to set up a high-risk pool where older, sicker people could buy coverage, likely at much higher prices. It remains unclear, however, whether the proposed changes will attract enough votes to move the bill out of the House.
What employers need to know: There is still interest in repeal/replace, but the reality that it will take time seems to have sunk in – especially given that even if the House is able to pass a bill, there will be more issues to navigate in the Senate.
Trump Has Options While Waiting for Lawmakers
There was an interesting piece in the New York Times outlining what the Trump administration could do to the ACA in the absence of legislative changes. It could weaken enforcement of the individual mandate; not fund CSRs and make premium subsidies less generous; allow states to impose work requirements under Medicaid expansion; and redefine essential health benefits (although this would require a lengthy re-write of current regulations). What the administration can’t change is the employer mandate or taxes created under the ACA. Nor can it increase in premiums for older Americans. Most recently, HHS issued a stabilization rule aimed at addressing some of the insurance companies concerns in the individual insurance market. It addresses premium payment requirements, shortening the open enrollment period, pre-approval verification for special enrollment requests, and flexibility on plan designs within the metal categories (essentially, allowing higher cost sharing in order to lower the premium costs).
What employers need to know: The longer it takes for lawmakers to reach consensus, the more important these types of actions will be. Employers should be aware of any actions that potentially could result in cost shifting -- which is everything on the list.
Here’s the bottom line. More than 177 million Americans get their health coverage through an employer. American businesses are a critical partner for success as the Trump Administration and lawmakers navigate the future of health insurance. We strongly support actions that seek to slow healthcare cost growth and limit cost-shifting to private payors.
In our recent policy paper, we recommend the creation of a “President’s Healthcare Leadership Council” to drive transformation and boost transparency in healthcare. In setting health policy for the coming years, the federal government has an important opportunity to support the collaboration needed to drive value throughout the entire health system.
After their failed attempt to pass ACA repeal and replace legislation, President Trump and House Speaker Ryan indicated that they were “moving on” to other legislative priorities. On Tuesday, we learned that Republicans have restarted their conversations about healthcare. On Wednesday, Bloomberg reported the GOP was discussing a new vote as early as next week.
At Mercer, we believe that the current healthcare system is unsustainable, but we urge that changes be made without undue haste and with careful consideration of the many complex factors at play in our system. We are actively advocating for new health savings account rules and the repeal of the Cadillac tax and, as I said in my blog post earlier this week, we stand ready to support lawmakers in shaping policies that will address the underlying causes of healthcare cost growth.
Our conversations with employers across the country echo these priorities. For instance, the morning of the day the bill was pulled, I gave a speech at the North Carolina Business Group on Health annual conference. I asked the group of benefits professionals if they could ask one wish of the President and Congress, what would it be? Responses included:
- Healthcare coverage for all
- Consideration of the consequences of cutting federal funding for Medicaid and public health programs
- Consideration of the consequences of cost-shifting to older pre-Medicare-eligible Americans
- Help addressing unnecessary/inappropriate care, ER visits, and opiate use
- Help with escalating prescription drug costs
- Relief on the ACA reporting requirements
What would your "one wish" be?
A couple of weeks ago (feels like ages) we launched a brief survey to find out where employers stood on specific provisions in the House GOP repeal-and replace-bill, the American Health Care Act (AHCA). We closed the survey on Thursday with more than 900 responses. As I was reviewing the results on Friday, the bill was apparently dying -- but now House leaders and President Trump are signaling that it may be revived. Either way, the health reform debate is far from over, and many of the provisions introduced in the AHCA will likely remain part of the discussion.
The survey asked health benefit professionals how key provisions would affect their organization’s health benefit program, employees, and business success -- as opposed to how they might affect the individual market or people without access to employer-sponsored health insurance. They could also respond that the provision would not affect their organization one way or the other.
HSA changes, repeal of employer mandate seen as positive
We didn’t ask for an overall opinion of the bill, but employers’ reactions to individual provisions added up to a less-than-ringing endorsement. To start with what they liked: 66% said that liberalizing HSA rules -- such as allowing higher contributions -- would have a positive effect on their organizations. That’s in the ballpark of the percentage of large employers nationally that offer HSA-eligible plans (53% in 2016). If you don’t offer an HSA-eligible plan and don’t intend to, or if you do offer one but none of your employees are likely to hit the maximum account contribution, you might not believe this provision would have much of an impact, like 29% of our respondents.
That was the only provision seen as a positive by more than half of the respondents. Next closest is repealing the employer mandate. Just over a third -- 35% -- said it would have a positive effect on their organizations. Most said it would have no impact. Why? Wouldn’t employers like the option to drop coverage for employees working less than 40 hours per week, or to stop worrying about meeting the affordability and minimum plan value requirements? The fact is that most employers already met the ACA requirements before the law was signed. And if they did make changes to extend coverage to more employees or make it more generous, they may not be able to picture clawing that back. Our earlier surveys found that the employer mandate had very little effect on employer plans because employers were already voluntarily providing comprehensive and affordable coverage, so repealing the employer mandate would likewise have little effect.
Repealing the individual mandate was judged as a positive by just 27% of employers; 18% view it as a negative and most believe it would have little effect on their organizations.
Other provisions expected to do more harm than good
For the rest of the provisions we asked about, the view was much more negative than positive. Nearly two-thirds of respondents (65%) believe that cutting funding for public health initiatives would have a negative effect on their organizations. Such a change would scale back or eliminate programs designed to improve community health (for example, vaccinations), and employers are well aware of the extent to which workforce health is tied to community health. Federal programs to monitor and reduce hospital-acquired infections would also be cut, with obvious negative consequences for health care payers.
Nearly as many respondents (64%) say that the proposed Medicaid cutbacks -- ending Medicaid expansion and moving to block grants -- would have a negative effect on their organizations. This suggests that employers are aware and concerned about the impact that an increase in the number of people without insurance could have on the cost of health care. It may be hard to prove, but it stands to reason that providers wind up shifting the expense of treating those who can’t pay to those who can.
Last but certainly not least, 64% of respondents told us that retaining the excise tax, as the AHCA did, would have negative consequences for their organizations; our health reform leader Tracy Watts described the excise tax as a dark shadow hanging over strategic planning. We also asked about capping the exclusion on the individual tax, which was in an earlier draft of the bill and may well resurface. Not quite as many saw this as negative, but it was close, at 57%. Those who believe that the excise tax or the cap will not affect their organizations may think they will never hit the thresholds. We wish that were true, but given that health cost generally rises faster than the CPI, the index used to raise the tax thresholds, more likely it will only be a matter of time.
Based on their 2016 plan costs, we project that 23% of large employers will be subject to the excise tax in 2020 when it is slated to go into effect, unless they make changes to the plan. That percentage almost doubles when we project it out to 2025.
Cadillac tax remains a focus
For many employers, avoiding the excise tax won’t be a simple matter of downgrading a “Cadillac” plan, because their plans weren’t Cadillac to begin with! As we’ve shown, many factors that drive plan cost are outside an employer’s control -- in particular, location and employee demographics. That’s why Mercer will continue to advocate against the excise tax and a cap on the individual health benefit tax exclusion -- provisions that will make it harder for employers to continue providing affordable, comprehensive coverage to the more than 177 million Americans that now rely on it.