Archive | Health Care Bill – Washington

CALIFORNIANS TO SEE STEEP HEALTH INSURANCE PREMIUM INCREASES, STATE POWERLESS TO STOP HIKES

Real Estate & Investment Business –

July 08: More than 1,500,000 Californians will face health insurance premium increases on July 1 averaging 3% to 17.4%, according to state filings. Some patients with Aetna small business plans will see premium increases as high as 92.5%.

California insurance regulators need the power to protect consumers and deny such steep rate increases when they are found to be excessive or unjustified, said Consumer Watchdog.

AB 52 (Feuer) would require a health insurance company to get approval from the elected insurance commissioner before a health insurance rate hike takes effect subjecting health insurance rates to the same strict rate regulation that auto, homeowners and other insurance companies already comply with in California. The bill will be heard in the California State Senate Health Committee Wednesday afternoon. The majority of states have the power to reject unreasonable premium hikes, but not California.

“This is an urgent life and death issue for those Californians who face premium hikes Friday as high as 92% because California is one of the few states without premium regulation,” said Consumer Watchdog president Jamie Court. “Californians will continue to be held hostage by profiteering health insurance companies if the legislature does not grant the elected insurance commissioner the power to stop arbitrary and unnecessary premium hikes.”

In recent years, health insurance policyholders in California have seen repeated massive rate hikes like those set to take effect Friday, even as medical inflation has been fairly low. Consumer Watchdog noted that these skyrocketing rates have coincided with ever-increasing profits for insurance companies. According to Aetna’s rate filing, the insurer’s 2011 company-wide rate of return is projected to be 24.8%.

A Consumer Watchdog report finds that rate regulation is necessary to hold down excessive rate increases. In Massachusetts for example, where health reform including an exchange and individual mandate was the model for national reform, insurance premiums continued to increase until prior approval rate regulation was enacted to moderate increases.

AB 52 would require insurance companies to get permission before implementing any hike and would allow state regulators to deny or modify rate changes determined to be excessive. Health insurers that are increasing rates on patients July 1 have lobbied heavily against the bill, which authorizes insurance regulators to review insurance company profits and overhead as well as company projections about future health care costs in order to determine whether or not to allow a rate increase to take effect. It also allows members of the public to challenge proposed rate hikes.

AB 52 would enact rules for health insurance that are similar to Proposition 103, which requires the Insurance Commissioner to regulate auto and other property/casualty insurance rates. Under those rules California motorists have saved more than $62 billion on their auto coverage over the past two decades, according to a 2008 report by the Consumer Federation of America.

0

WILL EMPLOYER-SPONSORED HEALTH INSURANCE SURVIVE OBAMACARE?

Forbes.com – 

June 20: Reports from consulting firms don’t normally make national news.

Then again, most such reports don’t predict the downfall of the American health care system.

Earlier this month, the consulting group McKinsey projected that tens of millions of Americans could find themselves without the health coverage they now get through their employers.

McKinsey is only the latest organization to make a mockery of President Obama’s solemn promise to Americans that “if you like your health care plan, you will be able to keep your health care plan. Period.”

Make no mistake: ObamaCare is behind many employers’ plans to drop their health insurance. At the beginning of the year, McKinsey surveyed more than 1,300 employers from a variety of industries about the effects of the president’s health law. They found that ObamaCare was primed to blow up much of the market for employer-sponsored health insurance.

According to the survey, almost a third of employers say they will “definitely or probably” put a halt to their health coverage by 2014.

Among employers that know the most about Obama’s health law, the number is even higher. More than 60 percent say that they will pursue alternatives to conventional job-based coverage.

McKinsey isn’t the first to sound the death knell of employer-sponsored insurance. The Congressional Budget Office Congress’s official economic scorekeeper estimated that four million individuals would lose their employer-provided health insurance over the next decade thanks to ObamaCare.

And last year, the Urban Institute, a center-left think tank, released a report saying that “droves of employees potentially tens of millions are likely to shift out of employer-provided insurance” because of ObamaCare.

With 156 million Americans currently enrolled in employer-sponsored health insurance, according to the Employee Benefit Research Institute, a mass exodus from employer-coverage would represent a sea change in American health care.

Why are so many employers who currently offer health insurance eyeing the exits? The law makes coverage prohibitively expensive. Indeed, McKinsey says that dropping coverage “will make sense for many companies.”

McKinsey reports that “at least 30 percent” of employers would actually see economic gains from ceasing coverage and that’s even if they provided employees with higher salaries or additional benefits to compensate for the loss.

As the study explains, ObamaCare “imposes several new requirements on employer benefits,” including mandates to cover an employee’s dependents up to age 26 and eliminating caps on annual and lifetime reimbursement limits.

Each of these changes will add to the cost of insurance. Plans that offer the most coverage, meanwhile, will be subject to new taxes. The law attempts to discourage employers from dropping coverage by forcing those who do to pay a penalty. But given ObamaCare’s expensive new mandates, many will find it cheaper to pay the $2,000 per-employee fine and rid themselves of the burden of providing insurance. But that burden won’t vanish entirely. Instead, it will fall to taxpayers.

Most employees who lose their employer-sponsored coverage will be dumped into the new government-run health insurance “exchanges” created for individuals and small businesses by ObamaCare.

These exchanges will offer taxpayer-funded subsidies to families earning up to 400 percent of the federal poverty line currently almost $90,000 a year for a family of four. More people losing their employer-sponsored insurance means more people in the exchanges, and more people in the exchanges means more subsidies.
Back to top


0

MCKINSEY DEFENDS SURVEY ON HEALTH CARE LAW’S EFFECTS

New York Times –

June 21: After nearly two weeks of widespread queries and criticisms, McKinsey & Company, the management consulting firm, posted on Monday the questionnaire and methodology of an online survey it had released that was denounced by the White House and others for contending that nearly a third of employers would definitely or probably drop coverage for employees when provisions of the health care law took effect in 2014.

The White House responded on Monday night. “As we learn more, it’s become clear that this one flawed study from McKinsey is truly an outlier,” Nancy-Ann DeParle, an assistant to the president and deputy chief of staff, said in a blog post.

The White House initially pointed to forecasts by the Congressional Budget Office and other experts whose estimates were much smaller in terms of whether employees would lose some or all coverage. For example, an Urban Institute study to be released on Tuesday suggests that employees in small businesses may receive more coverage, not less.

McKinsey also came under fire for not providing access to the survey’s authors, and for not publishing the questions, the types of employers taking part or the survey methodology.

In posting “details regarding the survey” on its Web site Monday, McKinsey acknowledged that its survey was “not comparable” to the studies by the budget office, Urban Institute or others using economic modeling.

Rather, it surveyed business owners using an online panel. McKinsey said it paid for the survey by Ipsos, a French marketing firm, “to capture the attitudes of employers,” large and small.

In addition, McKinsey seemed to be trying to address the criticisms by the White House and others, asserting that its report was not intended to be predictive.

McKinsey’s explanations did not satisfy Senator Max Baucus, chairman of the Senate Finance Committee, and several from the House who have inquired.

“This report is filled with cherry-picked facts and slanted questions,” he said in a statement. “It did not provide employers with enough information for them to make honest choices and fair evaluations. Rather than correct the major deficiencies in their report, McKinsey has chosen to again stand by their faulty analysis and misguided conclusions.”

Several other reports have focused on small businesses, the group having the hardest time dealing with rising medical costs.

The latest, issued on Tuesday, is by the Urban Institute, a Washington research center. Its study, based on analysis of Census Bureau and Department of Health and Human Services surveys, estimates that employer coverage will increase modestly for workers and their dependents in firms with 50 or fewer employees.

By contrast, Douglas Holtz-Eakin, who was an economic and health policy adviser to Senator John McCain’s presidential campaign, predicts that more than 35 million people will lose employer insurance. “We figured they would all end up in the exchanges,” the state-sponsored insurance agencies to be set up under the new law, he said in a telephone interview.

Over all, including all employers, analyses by a number of widely cited researchers predicted little or no change in employer-sponsored insurance in 2014. They include the Congressional Budget Office, RAND, Lewin Associates and Mercer.

John Arensmeyer, a small business advocate who supports the law, the Affordable Care Act, calls it “a big step in the right direction.” But he said a poll by his group, Small Business Majority, found that more than half of respondents did not know what was in the law.

“Once they learn about tax credits and the exchanges option, they are more inclined to participate,” Mr. Arensmeyer said.

Linda J. Blumberg, an Urban Institute researcher, said, “Contrary to a lot of statements that have been made in the press and elsewhere, the impact of the law on small employers is going to be positive in great degree.”

Mr. Holtz-Eakin headed a group of 105 economists who filed a brief supporting the lawsuit by Republican officials from 26 states seeking to have the Affordable Care Act overturned.

But Dr. Blumberg said Virginia and other states with Republican governors were working to set up the exchanges. Republicans prefer state exchanges to the probability of a federal version if they do not act.

Four states, West Virginia, Maryland, California and Colorado, recently passed laws to establish exchanges, and similar bills have been adopted by one house in a number of other states, she said. “There is a division between what the attorneys general are doing and what governors’ offices are doing,” she said.

Gerry Harkins, who owns a small construction company in Atlanta and is a spokesman for the National Federation of Independent Business, said he would try to “figure out a way to game the system.”

“This whole plan is really slanted toward large employers,” he said. Firms with 10 and fewer workers also should benefit. “The burden falls in the middle.” His company, Southern Pan Services, had 1,200 employees before the economic crisis. It now has “under 100,” he said.

He is considering splitting his company into two units to get under 50 employees each and reduce the $3,000 penalty, for each worker, he will face for his current health plan, which is entirely paid for by employees. Joseph R. Antos, a health policy expert at the American Enterprise Institute, criticizes the health law. He says it has “too much central direction and not enough appreciation for our fiscal situation.”

But Mr. Antos said large employers, who cover the majority of American workers, would probably wait several years after 2014 to see how the new system worked before deciding what to do. Those with union contracts will take much longer, he said.

He said the many variables in the law made predictions difficult. “Whatever you assume, is what you get out of it,” he said.

0

1 in 3 Employers Will Drop Health Benefits After ObamaCare Kicks In, Survey Finds

Thirty percent of employers will definitely or probably stop offering health benefits to their employees once the main provisions of President Obama’s federal health care law go into effect in 2014, a new survey finds.

The research published in the McKinsey Quarterly found that the number rises to 50 percent among employers who are highly aware of the health care law.

McKinsey and Company, which identifies itself as a management consultant that aims to help businesses run more productively and competitively, conducted the survey of more than 1,300 employers earlier this year. It said the survey spanned industries, geographies and employer sizes.

But the White House pushed back against the report.

“This report is at odds with the experts from the Congressional Budget Office, the Rand Corporation, the Urban Institute and history,” a senior administration official told Fox News. “History has shown that reform motivates more businesses to offer insurance.”

“Health reform in Massachusetts uses a similar structure, with an exchange, a personal responsibility requirement and an employer responsibility requirement,” the official said. “And the number of individuals with employer-sponsored insurance in Massachusetts has increased.”

According to the survey, at least 30 percent of employers would reap financial gain from dropping coverage even if they compensated employees for the change through other benefit offerings or higher salaries.

The research notes among the new provisions that could spur employers to drop coverage is a requirement of all employers with more than 50 employees to offer health benefits to every full-timer or pay a penalty of $2,000 per worker. Those benefits must also be equal between highly compensated executives and hourly employees – requirements that will increase medical costs for many companies.

The findings are distinct from a Congressional Budget Office estimate that only about 7 percent of employees who currently get health coverage through their jobs would have to switch to subsidized-exchange polices in 2014.

The group said its variance is so wide because shifting away from employer-sponsored insurance “will be economically rational” given the “law’s incentives.” The law requires employers to make insurance available to low-income or part-time employees that may not otherwise be covered.

The research found that contrary to what many employers feared, most employees — more than 85 percent — would stay at jobs that no longer offered health benefits. But 60 percent of employees would expect higher compensation.

0

Twentysomethings should weigh health insurance options

Graduates under age 26 can go (or stay) on their parents’ plan, buy an individual policy or be covered by their employer. A little homework will help decide which plan is right.
By Kathy M. Kristof Personal Finance

May 8, 2011

Jay Carey, 23, had the option of going back on his parents’ health insurance plan when he left his last job to become a freelance graphics designer.

But that didn’t mean he should have.His family, and its health insurer, were based in Chicago. That meant a long commute for the Los Angeles-based Carey to see a plan physician. Besides, his dad, who probably would have to pay more for “family” coverage if Carey were to boomerang back onto the policy, wasn’t wild about the idea.

“It seemed like it would be a lot easier for me to get my own plan,” Carey said.

In this post-health reform era, millions of twentysomethings are likely to be faced with a similar choice. Thanks to changes implemented in the nation’s health law, people under the age of 26 can rejoin their parents’ healthcare plans. But they might have better options.

“You can’t just assume that going on your parents’ plan is the best choice,” said Carrie McLean, manager of customer service at EHealthInsurance in Mountain View, Calif. “There are a lot of things to consider.”

How do you wisely evaluate health insurance choices?

• Know your options

There are three good ways to get coverage if you’re a graduate under the age of 26. You can be covered by your own employer; you can go (or stay) on your parents’ plan; or you can buy an individual policy for yourself.

• Consider your health

If you have chronic health issues — diabetes, asthma, a heart condition or bipolar disorder, to name a few — you can make the evaluation simpler by dropping the individual policy option from consideration.

Individual policies are individually “underwritten,” which means they’re cheap when you’re young, healthy and not likely to use much in the way of medical care. Carey, for example, pays just $107 a month.

But they can be prohibitively expensive, if available at all, for those who are on medications and need regular medical attention.

Health insurance offered through employers, on the other hand, is group coverage. Group plans usually charge the same to every member of the group, regardless of whether they’re sick or healthy. That can make group insurance a great deal if you’ve got medical issues. But it can make it comparatively expensive if you don’t — even, in some cases, when the employer is subsidizing the coverage.

That’s one of the reasons that 20-year-olds should shop before joining a group plan. They might pay less on their own.

• Health insurance plans are not all alike

Some provide sweeping coverage, small co-payments and minuscule deductibles, while others restrict coverage for certain conditions (most commonly pregnancy) and require policyholders to pay a significant amount of costs upfront through substantial co-payments and deductibles.

Getting familiar with the details of each plan is pivotal to figuring your annual cost. That cost will hinge on five things: the premiums you pay, your deductible, your co-payments, the cost of filling prescriptions and whether all the health services you need are covered.

Be sure to pay attention to any restrictions the plan might impose on where you get care, particularly if you’re planning to piggyback on an out-of-town parent’s plan.

• Add up the parts

To evaluate your annual cost of coverage, make a grid with the plans you’re considering listed horizontally. On the vertical axis, you’ll want to leave ample space for several categories — premiums, deductibles, co-payments, prescriptions and projected cost for uncovered services. Your final line will be for the section totals.

To figure out your total cost, you have to project your healthcare use over the course of the coming year. Unfortunately, the only cost you know for sure is the monthly premium, so start there. Multiply each plan’s premium by 12 and put the annual cost in the total for premiums.

You’ll have to guesstimate the other costs, based on how often you typically use healthcare and what you use. For example, if you normally see a doctor just once a year for a check-up, you’d examine the plan details to see if that visit is covered completely (which is increasingly common) or whether it would be subject to a deductible and co-payments.

If a plan covers it, note the item and a zero. If the plan wouldn’t cover it or would impose a co-payment or deductible, plug in the appropriate amount. Do the same with any other anticipated healthcare use, from prescriptions to surgeries.

Of course, you can’t foresee all your possible healthcare needs for the year. But this exercise can give you the opportunity to make apples-to-apples comparisons of plan costs. And that can help you make a wise decision about which health insurance plan works best for you.

business@latimes.com

0

OBAMA SIGNS REPEAL OF HEALTHCARE LAW’S ‘1099’ TAX-REPORTING RULE

The Washington Post –

Apr. 14: President Obama on Thursday signed into law a measure that repeals the unpopular 1099 tax-reporting provision of the national health-care law.

The move marked the first successful effort by Congress to repeal a portion of Obama’s signature health-care legislation. The Senate earlier this month voted 87-to-12 to repeal the 1099 provision. The House passed the measure in March on a bipartisan 314-to-112 vote.

The White House released a statement announcing the Obama had signed the measure, which it said “repeals the expansion in the Affordable Care Act of requirements for businesses to report information to the Internal Revenue Service on payments for goods of $600 or more annually to other businesses and increases the amount of overpayment subject to repayment of premium assistance tax credits for health insurance coverage purchases through the Exchanges established under the Affordable Care Act.”

Obama’s signing of the legislation into law marks the end of a nearly eight-month-long effort by lawmakers to do away with the 1099 tax-reporting provision. Sen. Mike Johanns (R-Neb.) had led the effort in the Senate, but each time repeal seemed close, the parties reached an impasse over how to pay for the repeal, which would result in the loss of an estimated $22 billion over the next decade.

The law signed by Obama on Thursday would pay for repeal by forcing greater repayment of health insurance subsidies for families whose income unexpectedly exceeds certain thresholds.

Johanns lauded the signing in a statement Thursday evening. “Job creators can finally celebrate: the 1099 tax paperwork mandate is officially off the books,” Johanns said.

“Because of the resilience of small business owners everywhere in keeping this issue at the forefront, because of the good judgment of my colleagues in both houses in recognizing the foolishness of this mandate, and now because of the President’s signature, our job creators can go about their business without fear of being hammered by mountains of additional, unnecessary tax paperwork.”

0

High-Deductible Plans Not More Risky for Medically Vulnerable

Tuesday, April 19, 2011

Medically vulnerable individuals enrolled in high-deductible health plans are not at a greater risk for cutting back on necessary health services than non-vulnerable enrollees in high-deductible plans, according to a new study by RAND Corporation, Modern Healthcare reports (Vesely, Modern Healthcare, 4/18).

The California HealthCare Foundation provided support for the study. CHCF publishes California Healthline (RAND release, 4/18).

For the study, researchers analyzed data on more than 360,000 U.S. families enrolled in high-deductible health plans through 59 large employers between 2003 and 2007.

In particular, researchers examined how high-deductible plans affected families living in low-income areas and families that had a member with a serious chronic condition.

Key Findings

Some health advocates have expressed concern that high-deductible plans could spur low-income families and people with chronic illnesses to forgo necessary medical care.

However, Amelia Haviland — lead author of the study and a statistician at RAND — said researchers “did not find greater cutbacks for medically vulnerable families.”

The study found that some high-deductible plan enrollees with chronic illnesses were more likely to obtain certain preventive services than low-income and non-vulnerable enrollees (Tocknell, HealthLeaders Media, 4/19).

Researchers noted that policyholders of all income levels tended to use recommended preventive services less frequently after switching to a high-deductible plan (Hobson, “Health Blog,” Wall Street Journal, 4/18).

In addition, the study found that the size of the deductible affected spending on health services among non-vulnerable families. According to Haviland, medically vulnerable families reduced spending on prescription drugs only when deductibles were at least $1,000 per person.

Implications

Haviland said the study “suggests that non-vulnerable families, low-income families and high-risk families are equally affected under high-deductible plans.”

Researchers noted that the findings could become more pertinent over the next few years because the state health insurance exchanges mandated under the federal health reform law could start offering high-deductible health plans in 2014 (HealthLeaders Media, 4/19).

0

Health law cost still a wild card

By DAVID NATHER | 3/29/11 4:42 AM EDT

Anyone who claims to know how much the health care law will cost is missing one big piece of information: the exact cost of the benefits.

They can’t know it, because the benefits package is still being worked out, and its final shape will determine whether the Congressional Budget Office estimate was in the ballpark or not even close.

Starting in 2014, all health plans offered through the state health insurance exchanges will have to offer the “essential health benefits package” — a set of minimum services all individuals and small businesses are supposed to have in their coverage. That package will have a direct impact on the cost of the law, because people will get subsidies to help them buy coverage if they can’t afford it on their own.

Make the benefits package too stingy, and consumer advocates will say the law failed in its goal of protecting people from big gaps in coverage. Make it too generous, though, and the premiums for those plans will go up — and the federal government will have to spend that much more on the subsidies.

If that happens, the CBO projections that the law will pay for itself — and actually reduce the deficit by $143 billion over 10 years — might underestimate the actual costs. That’s critical, because Democrats are making so much of the CBO’s estimate that the law will reduce the deficit while Republicans suggest it will actually drown the nation in red ink.

Or the higher premiums could just scare people away from buying coverage and make them decide the fines under the individual mandate would be cheaper. In that scenario, there wouldn’t be as many subsidies to pay — but not as many newly insured people, either.

“If you make the benefit package rich, you make the premiums high, and that makes it more likely that people will skip health insurance altogether,” said Mark Pauly, a health care economist at the Wharton School of the University of Pennsylvania. “From my point of view, it’s more important to get takeup.”

The law doesn’t try to spell out the exact package. Instead, it lists several categories of benefits and leaves it to the Department of Health and Human Services to figure out exactly what to cover within those categories and what kind of limits the coverage should have. So the exact cost of the package won’t be known until HHS makes those decisions.

The department is getting some help. The Institute of Medicine, an independent, nonprofit health care analysis group, has put together a committee of health care analysts, consumer advocates and other experts to look at how the package should be designed. They held a conference call to discuss draft recommendations on March 21. The final report is expected in September.

But even though the committee is keeping a tight lid on its deliberations — with strict orders to members not to make even general comments about the trade-offs they face — the institute’s report won’t actually recommend what should be in the package. All it will do is suggest what HHS officials should think about when they design the package.

The committee members are gathering important information to pass along to HHS, though. Jonathan Gruber, an economist at MIT, told the committee that for every 10 percent increase in the cost of the essential benefits package, the cost of the government subsidies would rise by 14.5 percent — or $67 billion over 10 years. It would also cause the number of insured people to fall by 1.5 million, he said.

The law says the benefits package should be roughly equal to the coverage in “a typical employer plan.” HHS would define that, too, though most health economists believe it’s going to be based on what’s covered in typical large employer health plans.

The problem is that there is no good data available on what a typical large employer plan covers and what the limits are, according to Gary Claxton, director of the Henry J. Kaiser Family Foundation’s Health Care Marketplace Project. The law requires that the Department of Labor conduct a survey to find out.

The CBO cost estimate doesn’t actually say how its analysts figured out what the benefit package would cost and how it would affect the federal spending on subsidies. And the budget office wouldn’t make any of its analysts available to talk about its assumptions on the record or even on a not-for-attribution basis.

“It’s a guess, like a lot of things,” said Joseph Antos, a health care analyst at the American Enterprise Institute and a former CBO analyst.

But Kenneth Thorpe, an expert on health care costs at Emory University, said there are plenty of surveys that would have given CBO a key piece of information: the average premiums for large employer plans. For firms with 200 or more employees, the average premiums in 2010 were $5,050 for single coverage and $14,038 for family coverage, according to an annual survey by the Henry J. Kaiser Family Foundation and the Health Research & Educational Trust.

The other issue is that the kind of coverage usually available only at large companies will now be extended to small group and individual coverage — many of which would have to add entire categories of benefits that they haven’t previously offered.

Some of the benefits categories required by the law are fairly standard: doctor visits, emergency care, other hospital coverage and pediatric care. But as CBO pointed out, the law also requires the package to include services that aren’t always covered by individual policies, including prescription drug coverage, maternity care, and mental health and substance abuse services.

And mental health is one of the classic benefits that can be open-ended if an insurance plan doesn’t limit it. Gruber said, however, the package can place limits on certain benefits that could become too costly, for example, capping the number of outpatient mental health visits or physical therapy sessions.

“You’re going to see benefits covered now that typically have not been covered in this market,” said Claxton. “It doesn’t mean they can’t be managed.”

It would be easy for HHS to avoid mandating the kinds of services that would most boost costs, such as chiropractic services and fertility treatments at https://www.advancedfertility.com/choose.htm, according to Paul Van de Water, a senior fellow at the Center on Budget and Policy Priorities. Neither one is required under the law, though the law doesn’t restrict HHS from adding other benefits.

“If you sort of found all of these marginal things and pushed them to the max, I suppose you could affect the costs,” Van de Water said. But it’s more likely that HHS would resist those calls, he said, leaving federal officials with “a fairly small range” of benefit decisions to make.

Antos said that even though HHS could affect the cost of the law by throwing too much into the benefit package, the Institute of Medicine probably will advise the department against getting too specific — and HHS probably will take that advice.

“How deep do you go? I think the answer is, not very deep,” Antos said.

0

Goodbye to Healthcare Benefits?

A recent survey finds about one-third of employers are unsure whether their organizations will offer healthcare benefits to employees in a decade. Indeed, as future elements of the healthcare-reform law kick in, HR and benefits professionals may need to totally rethink what it means to be an employer of choice at a time when employers do not offer healthcare benefits.

By Mark McGraw

A combination of factors — a still-sluggish economy, rising healthcare costs and the projected impact of healthcare reform — have already led many employers to take bold steps to overhaul the design of their current employee-healthcare plans.

If findings from the 16th annual Towers Watson/National Business Group on Health Employer Survey on Purchasing Value in Health Care are any indication, that trend is likely to continue in the future — to the point where they may not be offering healthcare benefits at all.

The survey, which polled HR managers and employee-benefits managers from 588 U.S. companies with 1,000-plus employees, found that only about one-third (38 percent) of respondents are confident their organizations will offer healthcare benefits directly to employees 10 years from now.

That percentage is notably lower than in past surveys conducted by the organizations, says Helen Darling, president and CEO of the Washington, D.C.-based National Business Group on Health, who attributes it to the current business and economic climate.

“[The survey findings] don’t surprise me,” Darling says. “The predominant feeling right now is one of uncertainty.”

It is an uncertainty that is well-founded, says Randall Abbott, senior consultant and North American leader of health and group benefits at New York-based Towers Watson.

“This decline in confidence reflects the convergence of a slow economy, the outlook for continually rising healthcare costs, and the effects — real and perceived — of healthcare reform and its potential impact on business conditions,” Abbott says.

“Given this uncertain environment, it’s not surprising that employers are examining their alternatives while we wait for clarification of many of the details of healthcare reform,” he says.

Historically, HR leaders have taken an incremental approach to plan-design modifications, Abbott says. The post-reform healthcare landscape, however, finds many employers considering sweeping changes to employee-health strategies, and seeking options that move costs outside their organizations.

With an eye on 2012 and beyond, the trend toward consumer-driven benefit plans — which encourage employee engagement and accountability for costs — is bound to continue, and HR professionals are likely to find “the health benefits picture to be very different in years ahead,” says Dallas Salisbury, president and chief executive officer of the Washington-based Employee Benefit Research Institute.

Potentially shaping that picture are the opening of insurance exchanges in 2014, and a possible excise tax on healthcare benefits that is planned to go into effect in 2018.

The proposed insurance exchanges, which are designed to create more competition among providers and subsequently bring down the price of health insurance, would “simply facilitate change and accelerate the pace,” Salisbury says.

“Most of the attributes of health insurance that could be achieved by employers — but were not available in the individual market — would now be available through exchanges,” he says.”And, if and when the tax advantage of employment-based coverage goes away, the acceleration [of employers not offering healthcare benefits] will be even more pronounced.”

Indeed, 70 percent of respondents to the Towers Watson/NBGH survey say the opening of insurance exchanges would have some effect on their active medical programs, and 78 percent say the exchanges would impact their retiree programs.

The implementation of the excise tax is expected to affect both active and retiree medical programs as well, with 24 percent and 20 percent of employers, respectively, anticipating an extensive impact on their benefit offerings.

These potentially significant changes due to healthcare reform will likely impact recruitment and retention efforts — a scenario that HR professionals should prepare for, Darling says.

“Employers feel very strongly that a good benefits package is a competitive asset, and a competitive benefit,” she says. “The recession notwithstanding, we still have a war for talent going on. A talent strategy is foremost in everyone’s mind right now. [Employers] are trying to hang on to people with rare skills and talents.”

The elimination of employer-provided benefits, Abbot says, would require HR leaders and benefits managers to shift their attention to “other elements of total rewards and potentially prompt an evaluation of which rewards programs result in increased levels of attraction, engagement and retention of talent.”

“The elimination of healthcare benefits would likely result in an even more intense focus on workforce health and productivity, as well as focusing efforts more globally,” he says.

As a growing number of companies look to exchanges and other options to defray escalating costs and achieve compliance with new and pending healthcare regulations, an organization’s commitment to the wellness of its workforce should remain the same, Darling says.

“With the evolution of healthcare benefits — or at least the financial side of it — and employers moving on to some other way of providing them, employers will focus on making sure their employees are healthy and productive,” Darling says.

“The importance of ensuring that the organization’s talent is healthy, productive, engaged and able to serve customers is not going to just go away,” she says.

Even before these elements of the reform law become effective, organizations are continuing to refine their healthcare benefits, including redesigning plans to incorporate enhanced point-of-care consumerism, reposition incentives to improve employee engagement, redefine financial commitment to dependent and retiree coverage, and emphasize the use of high-value providers, the survey finds.

For instance, about two-thirds (68 percent) of respondents say their organizations are moving to increase employee contributions for any plans that include dependent coverage.

In addition, 19 percent say they are increasing employee contributions for each new dependent added to a plan, and about one-third (35 percent) of respondents say their organizations are using or planning to implement spousal waivers or surcharges.

One-third of respondents say their companies plan to reward or penalize employees based on biometric outcomes (such as for weight and cholesterol), compared with just 7 percent in 2011 and 6 percent in 2010.

About one-quarter of employers plan to cease employer sponsorship of retiree-medical coverage (26 percent) plan to convert a current subsidy to a retiree-health account (25 percent) or plan to eliminate employer-managed drug coverage for post-65 retirees and rely on Medicare Part D plans (23 percent).

Compared to years past, the survey also finds a significant increase in the adoption of account-based health plans. ABHPs are plans that have deductibles offered together with a personal account (such as a health-savings account or health-reimbursement arrangement) that can be used to pay a portion of the medical expenses that are not paid by the plan.

ABHPs typically include decision-support tools that help consumers better manage their health, healthcare and medical spending.

In 2002, the survey found just 2 percent of all employers offered ABHPs. By 2011, that number had ballooned to 53 percent, and another 13 percent say their organizations plan to add an ABHP by 2012.

March 23, 2011

Copyright 2011© LRP Publications

0

Warning: Dependent Care Mandate Can Cause Tax Headaches

Christian Schappel

The healthcare reform law’s dependent coverage rule doesn’t extend to health savings accounts (HSAs) – and it’s bound to cause some problems.

The new law changes the definition of a dependent child, resulting in a requirement that group health plans that offer dependent coverage to children allow young adults up to age 26 to remain on their parent’s insurance plan.

The problem: While the new definition of a dependent applies to most employer health coverage, it does not extend to HSAs. HSAs must still operate using the old definitions of a qualifying child or qualifying relative.

Pre-health reform definitions

Under the pre-reform definition, a qualifying child is someone who has not attained age 19 (or age 24 if a full-time student).

And a qualifying relative under the old definition is a child of the employee, other relative or member of the employee’s household, for whom the employee provides over half of the individual’s financial support.

Older children don’t qualify

These definitions now cause a problem when an employee tries to enroll a 25-year-old child in a group health plan that uses an HSA.

Because of the expansion of dependent care under the new reform law, the child is allowed into the plan. But the employee can’t submit the child’s uninsured expenses for reimbursement under the HSA because the child is too old to qualify under the rules of an HSA.

In addition, the child won’t be a qualifying relative if he/she doesn’t depend on the employee for the majority of his/her financial support.

So if the employee takes an HSA distribution to reimburse the child’s expenses, it’ll be taxed and could be subject to the 20% HSA penalty on early withdraws.

0