When the Affordable Care Act (ACA) raised the maximum allowable wellness program incentives from 20% to 30% of an employee’s total premium — and to 50% as an incentive for not using tobacco — it seemed to signal that the federal government approved of employers’ taking a more aggressive approach to improving workforce health.
But then the Equal Employment Opportunity Commission (EEOC) sued a large employer in late 2014, which sparked considerable confusion regarding what penalties or rewards might be used for participating in wellness programs that include biometric screenings, meeting health status targets, or exhibiting health-conscious behavior. Although the employer’s surcharges in the 2014 case were within the parameters of the ACA, the EEOC maintained that the programs could not be considered voluntary and thus violated the Americans with Disabilities Act (ADA).
Republicans in both the House and Senate recently crafted bills to clarify the discrepancy, arguing that ACA-compliant wellness incentives do not fly in the face of the ADA. Last week the EEOC sent a Notice of Proposed Rulemaking on the interplay of the ADA and the ACA with respect to wellness programs to the White House Office of Management and Budget for clearance. And just this week, the House held a hearing aimed at advancing the legislation. While these attempts to align regulatory and congressional intent are pending, employers need some sort of guidance to help them interpret the law and establish an appropriate strategy.
But this development may provide impetus to consider other means of building employee engagement that go beyond the use of cash rewards tied to a health plan. Research shows that while financial incentives may motivate employees to take short-term action, they’re not very effective for sustaining healthy behavior change over the long run. Behavioral science suggests that employers need to shift from extrinsic rewards like cash, gift cards, or lower premiums, to intrinsic motivation — helping employees uncover personal reasons for committing to healthy behaviors.
The fact is that people are motivated differently. Some prefer rewards, while others do better with camaraderie, competition, and game mechanics. There’s also a segment in every employee population that likes the idea of wellness activities that lead to a contribution to the greater good — for example, actions that result in corporate giving to a charity. The most successful programs may allow for individualized incentives for behavior change, rather than any one cookie-cutter approach.
The passage of the Affordable Care Act (ACA) five years ago has had a tangible effect on the stop-loss premiums paid by self-funded health plans. The ACA’s elimination of annual and lifetime dollar limits and pre-existing conditions and the provision authorizing coverage of clinical trials have exposed the stop-loss carriers to greater risk. In response, employers have seen, on average, about a 15% increase in stop-loss premiums over the last three years.
The ACA’s expanded coverage requirements are not the only market force affecting stop-loss premiums. We’re seeing more interest in self-funding from smaller employers seeking to avoid some of the more onerous ACA provisions required of fully-insured plans. This market expansion is costly because smaller groups tend to accept less risk. In the long-term, the market may contract to pre-ACA levels if more states join those already regulating minimum individual deductibles and aggregate limits. This regulation is being driven by the states’ interest in discouraging younger and healthier groups from self-insuring while older and less healthy groups remain in insured plans — on or off the exchanges.
Finally, there’s been an increase in the severity of catastrophic claims largely due to specialty pharmacy, transplants, cancer treatments, neonatal care, and advances in medical technology. Employers with catastrophic claims obviously rely on stop-loss insurance to help manage those costs, and with stop-loss carriers now bearing more risk in the absence of cost caps, the pressure on premiums is expected to continue for the long-term. We are seeing claims in excess of $10 million in the marketplace. Those costs will largely be borne by the stop-loss insurer.
Although these are three formidable market forces, employers aren’t without options. Benefits professionals should:
- Explore or enhance health care strategies that aggressively manage your enrollees’ health.
- Help individuals with complex conditions to better negotiate the health care system and ensure they are getting cost-effective, quality care.
Ideally, you’ll be able to use the resulting decreases in your plan’s claims experience to negotiate better rates with your stop-loss carrier.
Today is a big day! Five years ago, the ACA was signed into law. For most people, it may not have been the type of momentous event that has them remembering where they were when it happened – although I certainly do! I was on vacation and had just finished a round of golf when I reached for my BlackBerry and saw the news. It was definitely the end of my vacation and the start of a journey for all of us. Many, many hours have been spent by employers understanding what the law entails and the implications of all the guidance, regulations, delays, and FAQs that followed. Compliance has not been easy.
When the law was first passed, some predicted employers would decide to drop coverage and just pay the penalty. In fact, right from the start, most employers remained committed to offering coverage to their employees, and among large employers especially the number has only grown since then — from 91% in 2010 saying they were unlikely to terminate their plans to 97% in 2015.
This week, we will run a special series of posts for the five-year anniversary of the ACA. Several Mercer colleagues will share their views on how the ACA has affected different aspects of employer-sponsored coverage over the past five years, and their predictions for what lies ahead.
One thing I know we can agree on. Much of the progress we have made over the past five years, as health benefit cost growth has fallen to historic lows, is the result of changes already in motion — although without a doubt the ACA has been the impetus to move a little faster. Before the ACA and after, our goals for employer-sponsored health plans have remained the same — an engaged and healthier workforce, cost-effective care, and quality outcomes.
While it’s difficult to measure the Affordable Care Act’s impact on provider payment reform, we’ve seen sweeping changes in the financing and delivery of health care among commercial health insurance carriers, as well as parallels in Medicare.
Historically, providers have been reimbursed on a fee-for-service basis. Under this model, there are no meaningful incentives for providers to limit supply. Volume drives revenue and compensation increases as more complicated procedures are performed. But the system is clearly evolving.
The trend is toward value-based reimbursement, which shifts the revenue stream to better align provider reimbursements with cost and quality outcomes. For example, a care-coordination fee is paid to providers to fund clinical resources for total population health management. Other new revenue sources include shared savings pools, in which providers are rewarded for holding down cost below a target threshold while also improving clinical outcomes. It’s estimated that 20% of carrier payments to providers currently feature some amount of value-based reimbursement incentives, and we can expect that percentage to more than double by 2020.
An important aspect of provider payment reform is the movement away from today’s heavily fragmented system. In the current model, primary care physicians and specialists independently manage their patients’ care, often leading to duplicative testing, failure to manage gaps in care, and incomplete knowledge of the patient’s medical history. The new focus is on quality of care and member satisfaction, featuring a more holistic integration of physical and behavioral care to eliminate redundancies and care gaps, and ensure that the most cost-effective care is being delivered. This integrated approach can lead to improved health outcomes and lower the cost of care for employers and their employees.
The call to action for employers on provider payment reform is to advocate for greater transparency around local value-based care options and their associated outcomes. Value-based care has the potential to drive meaningful cost savings and improved outcomes if appropriately structured and deployed. But it also introduces additional provider revenue streams, which could increase costs. Put another way, it’s important for employers to understand what sort of results they are getting for these new investments in employee health care benefits, and whether provider incentives are driving meaningful change.
Private benefit exchanges and the Affordable Care Act (ACA) are tied together in several ways. Most obviously, the ACA introduced the concept of the public health exchange. But it also created new challenges for employer health plan sponsors that called for new solutions. It added serious administrative complexity, as employers were required to comply with new tracking and reporting requirements. It added cost by imposing new standards for plan value and coverages. At the same time, it greatly increased the need for employers to reduce cost by creating a future 40% excise tax on high-cost plans. For the many employers that see their benefit program as a key tool to attract and retain talent, this has meant rethinking fundamental strategies.
Our private benefit exchange, Mercer Marketplace™, was designed to let employers take advantage of group purchasing power and marketplace competition while retaining the flexibility to offer a benefit package tailored to the needs of the organization and the workforce. Without adding to their administrative burden, employers can offer multiple health plans with a range of values, allowing employees to choose just the level of coverage they need. Most Mercer Marketplace employers offer at least three options, and almost a quarter offer five.
As we’ve seen in our first two years of operation, employees tend to buy down, suggesting that overinsurance has been a factor needlessly inflating cost for both employer and employee. Nearly 60% of our clients’ employees selected a high-deductible plan for 2015. Offering an array of voluntary coverages helps employees fill any gaps in coverage and makes it easy to direct the money they’ve saved on medical coverage to pay for other insurance needs. In Mercer Marketplace, employers have the option to set defined benefit or defined contributions and choose between insured and self-funded medical. We continue to innovate to ensure that Mercer Marketplace clients sustain a long-term cost advantage.
The most recent data from Mercer Marketplace tells us we got it right. Employers moving to Mercer Marketplace for the first time typically see immediate cost savings of up to 15%. Our clients are seeing sustained savings in year two as well. The total average cost increase for Marketplace clients with January 2015 renewals was just 1.5% with no plan design changes, compared to the national increase of 4.9% after plan design changes (approximately 7% before design changes) projected by employers in Mercer’s most recent National Survey of Employer-Sponsored Health Plans.
The ACA may have been the initial catalyst for private exchanges, but they in turn have become a catalyst for change and innovation in employer benefits. The phenomenal growth we’ve seen in Mercer Marketplace in 2015 — with enrollment increasing five-fold in just one year — shows that employers are more than ready for what we’re offering: an easier way to provide choice, so that consumers can better manage their benefit dollars; superior customer service; and, most importantly, a truly competitive marketplace that drives innovation.