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www.mercer.com
Guiding you through US Health Reform:Charting a new course
21 January 2010
Linda Havlin, Chicago
Geoff Manville, Washington
Kelly Traw, Washington
George Wagoner, Richmond
2Mercer
Today’s speakers
Linda HavlinChicago+1 312 917 [email protected]
Geoff ManvilleWashington+1 202 263 [email protected]
Kelly TrawWashington+1 202 263 [email protected]
George WagonerRichmond+1 804 344 3740 [email protected]
3Mercer
Agenda
■ Legislative state of play
■ Key elements that impact employer-sponsored plans
■ Case studies
■ Looking ahead
Legislative state of play
5Mercer
Health reform hangs in the balance after Democrats’ Senate setback
■ Republican Scott Brown’s win in Massachusetts dramatically alters outlook
■ Democratic leaders now weighing legislative/procedural options
■ Option 1 – try to move comprehensive reform largely as drafted– Rush a merged House/Senate bill through before Brown is seated
Appears to be off the table– Move major elements of current bills though Senate by budget
“reconciliation” process that requires just 51-vote majority Political, procedural problems abound
■ Option 2 – move scaled-back health reform “light” with bipartisan support– Could include Medicare doctors payment fix and quality incentives, scaled-
down insurance reforms, no employer mandates
■ Option 3 – drop reform effort altogether– Blame Republicans and pivot to jobs and the economy
6Mercer
Meanwhile, leaders say talks on final bill to continue
■ House bill (HR 3962) approved on November 7, panned by employers
■ Senate bill (HR 3590) approved December 24 less objectionable– Employer-friendly changes in Senate-passed bill
Public plan option dropped Maximum 30-day enrollment period extended to 60 days ‘Full-time’ employee threshold raised to 30 hours per week New incentives, programs for value-based purchasing
- Controlled release of Medicare claims data– New and retained provisions opposed by employers
Employer “vouchers” to help workers buy coverage in Exchanges Adverse tax changes related to employers’ Part D retiree drug
subsidies
7Mercer
Democratic negotiators had been making substantial progress
■ Tentative deal on excise tax on “high cost” plans – Coverage thresholds raised to $8,900 individual/$24,000 families– Collectively-bargained, state and local government plans exempt until 2018– For all plans, value of dental, vision coverage excluded beginning in 2015– Not changed: indexing of thresholds at CPI+1%
■ But lawmakers, President must find more revenue– Raising fees, cutting reimbursements to certain industries– Applying Medicare tax to unearned income
■ Changes in coverage provisions may also be in the mix – Subsidies for individuals– Medicare Advantage, Medicaid provisions in flux– National vs. state insurance Exchanges
8Mercer
Employers pressing for host of changes in any merged bill
■ Many open issues, so time remains to affect final outcome
■ Employer to-do list includes – Keep Senate’s modified “free rider” penalties– Drop Senate’s employer voucher proposal– Keep Senate’s grandfathering for self-insured plans– Drop House’s curbs on changing retiree health benefit– Drop House and Senate provisions to tax employers Part D subsidies– Drop House’s expanded COBRA rights– Keep Senate’s expanded incentives for employer wellness plans– Increase $2,500 caps on FSA, index to medical inflation– Keep House’s extension of tax-free benefits to domestic partners
■ Employer involvement, perspective important to Congress, White House
■ But employers, other groups ready to oppose final bill if changes aren’t made
9Mercer
Several steps ahead even if Democrats push ahead with reform
Possible action on broad or scaled-down
bill later this year
Action could last well into 2010 under either a budget “reconciliation” strategy or an effort to move a scaled-
back bill.
Lawmakers, public given at least 3 days to review final
bill, CBO report
As promised by Democratic leaders. Additional potential
procedural hurdles could delay final House, Senate votes.
Scott Brown (R-MA) is formally seated in Senate
Strength of Brown’s victory likely to result in his taking office with little/no
delay.
Assume deal is reached on final bill, which heads to CBO
Congressional Budget Office and Joint Committee on
Taxation would likely need at least a week to assess
the proposal’s budget impact.
January
February
No deal yet on merging House, Senate bills
Democratic leaders and the president have yet to strike a
deal on merging House-, Senate-passed bills. Several contentious issues remain in
play.
March
Key elements for employer-sponsored health benefit programs
11Mercer
Senate bill (unless noted): General effective date timelineExcluding group health plan mandates
Employer W-2 reporting of employee health coverage
Cap on health FSA contributions
Bar OTC drug reimbursement
Tax change related to Medicare Part D RDS payments
Industry fees
Employer mandate
Free choice vouchers
Auto-enrollment
HIPAA wellness incentive limit increase
Individual coverage mandate
Health insurance exchanges
Medicaid expansion
201420132011
40% excise tax
Comparative effectiveness research fee
Medicare tax increase for high-income individuals
Temporary early retiree reinsurance program
(Retiree anti-cutback rule-House bill)
2010
(2012 is an election year)
12Mercer
Top tier issues for employer-sponsored plansCurrent House and Senate bills
IssueHouse: HR 3692
Affordable Health Care for America ActSenate: HR 3590
Patient Protection and Affordable Care Act
Employer mandate
■ Play-or-pay provisions apply to employers with annual payroll higher than $500,000
■ Contribute 72.5% for single coverage and 65% for family coverage (pro-rated for part-time employees)
■ Employers that do not offer qualifying coverage pay 8% of payroll, capped at the minimum contribution levels
■ Employers offering coverage must pay 8% of payroll, capped at the minimum contribution levels, for employees opting out and enrolled in Exchange-based coverage
2013
■ Shared responsibility provision apply to employers with more than 50 employees
■ Employers not offering coverage $750 annually for every full-time employee (i.e.,
working at least 30 hours a week, determined on a monthly basis) if at least one FTE receives income-based premium assistance to buy coverage through new health insurance Exchanges
■ Employers offering coverage that is unaffordable (i.e., contribution constitutes more than 9.8% of household income) or does not meet minimum standards (i.e., 60% minimum actuarial value)
$3,000 annually for each FTE receiving income-based assistance for health insurance Exchange coverage
Penalties capped at $750 times total number of FTEs
■ No penalties for employees receiving free-choice vouchers
2014
13Mercer
Issue House Senate
Free choice vouchers
■ No provision ■ Offer vouchers to employees with household incomes at or below 400% of the federal poverty level (FPL) if their contribution for employer-sponsored coverage would be 8%* to 9.8% of household income
Voucher amount equal to highest (percentage) employer contribution to any of its own plans
■ Vouchers to be used for purchasing Exchange-based coverage
■ Employees could keep any excess amounts2014
* Individual coverage mandate penalties do not apply if over 8%
Top tier issues for employer-sponsored plansCurrent House and Senate bills
14Mercer
Issue House Senate
Excise tax on high cost coverage
■ No provision ■ 40% excise tax on “high cost” coverage, including medical, dental, vision, health FSA contributions, onsite medical clinics, and employer contributions to HSAs
■ Initial cap set at $8,500/single and $23,000/family■ Higher thresholds for retirees and individuals
in high risk professions - $9,850/single and $26,000/family
■ Temporary higher thresholds for people in highest cost states
■ Indexed to CPI + 1%2013
Top tier issues for employer-sponsored plans Current House and Senate bills
15Mercer
Proposed: 17 states would have delayed excise tax Three are below the average cost per active employee: $8,945
SOURCE: 2009 Mercer National Survey Of Employer-sponsored Health Plans
$8,500 – 8,712
17 highest cost states
>$11,000
$10,000 – 10,999
$9,000 – 9,999
$8,736 – 8,999
Next 3 states:
16Mercer
Top tier issues for employer-sponsored plans Current House and Senate bills
Issue House Senate
Excise tax on high cost coverage
■ No provision Possible agreement - same as previous slide, except:
■ Initial cap set at $8,900/single and $24,000/family
■ Exemption until 1/1/2018 for■ collectively bargained plans■ state and local plans■ VEBAs
■ Higher thresholds if plan’s gender and/or age demographics are greater than “average”
■ Exclude dental and vision coverage as of 2015
17Mercer
Estimated percentage of employers with medical plans that will trigger excise tax if no changes are made to current plan design
Source: 2009 Mercer Survey of Employer Sponsored Health Plans; medical premium trended at 6%, excise tax threshold trended at 4% (CPI + 1%). Based on employers’ largest medical plan (highest enrollment) of any type.
19% 19%21%
24%25%
16%16%16%15%14%
2013 2014 2015 2016 2017
$8,900 indiv./$24,000 fam.
$8,500 indiv./$23,000 fam.
Tax threshold:
18Mercer
Issue House Senate
Health plan standards
Including■ Cover essential benefits■ No aggregate lifetime limits■ No cost-sharing for preventive
services and other cost-sharing restrictions
■ No pre-existing condition exclusions ■ Dependent child coverage to age 27■ Mandated coverage of diagnosis and
treatment of congenital or developmental deformity, disease or injury for children up at age 21
5-year grace period would affect applicability date of some provisions (2013-2018)
Including■ No annual or lifetime dollar limits■ No cost-sharing for preventive services■ No pre-existing condition exclusions ■ Limits annual cost sharing to high-
deductible plan limit■ No waiting periods over 90 days (60-90
days subject to a penalty) ■ Dependent child coverage to age 26
Grandfathering could affect applicability date
Top tier issues for employer-sponsored plans Current House and Senate bills
19Mercer
Senate bill: Effective dates without grandfathering protectionGroup health plan standards only
Ban:
■ annual and lifetime limits
■ emergency services preauthorization
■ OB-GYN preauthorization or referral
Mandatory coverage:
■ unmarried dependent children up to age 26
■ preventive services with no cost sharing
Mandatory internal, external appeals process
Enrollee choice of primary care provider/pediatrician
Insured plans only: ban on rescissions
Ban on:
■ preexisting condition exclusion ban (earlier for kids under age 19)
■ waiting periods over 90 days
Mandatory coverage:
■ clinical trial participation
Health status nondiscrimination
Guaranteed issue and renewal
Plan years beginning six months after date of enactment (Subtitle A)
Plan years beginning on or after Jan. 1, 2014 (Subtitle B)
Plan years beginning on or after date of enactment
Insured plans only: minimum medical loss ratio of 85%
For calendar
year plans:
201420132011
+ MLR But…
20Mercer
Senate bill: Grandfathering provisionsGroup health plan standards only
■ In general: Subtitle A and Subtitle C shall not apply to a group health plan or health insurance coverage in which an individual was enrolled on the date of enactment (certain exceptions, including medical loss ratio for insured plans)
– Family members permitted to enroll– New employees (and family members) permitted to enroll
■ How long would grandfathering protection last?– Other employees permitted to enroll?– Benefit and cost-sharing changes to conform to new requirements?– Other benefit or cost-sharing changes?– Complete pass for self-insured group health plans?
■ Collectively bargained plans: Subtitle A and Subtitle C shall not apply to plans maintained pursuant to a collective bargaining agreement ratified before date of enactment until the date on which the last of the CBAs relating to the coverage terminates
– Any coverage amendment made pursuant to a CBA solely to conform to Subtitle A and Subtitle C shall not be treated as terminating the CBA
21Mercer
Issue House Senate
Auto-enrollment
■ Employer must auto-enroll an employee into employer’s lowest premium plan if employee fails to opt-out or elect different plan, with 30 day advance opt-out period and notice
2013
■ Employers with more than 200 FTEs must auto-enroll new FTEs and current employees in a health plan offered by the employer, with adequate notice and opportunity to opt out after auto-enrollment
2014
Employer reporting of employee health coverage
■ Yes ■ Yes
Additional tax changes
■ Annual FSA contribution capped at $2,500 (indexed)
■ Bars reimbursement of over the counter medications
■ Tax-free benefits for any covered person■ Higher penalty for non-qualified HSA
distributions2013
■ Annual FSA contribution capped at $2,500 (indexed)
■ Bars reimbursement of over the counter medications
■ Higher penalty for non-qualified HSA distributions2011
Top tier issues for employer-sponsored plans Current House and Senate bills
22Mercer
Issue House Senate
COBRA ■ Extend COBRA beyond 18/36 months until individual is eligible for other employer or Exchange-based coverage
2010
■ No provision
HIPAA wellness incentives
■ No provision ■ Increases financial incentives available to employees from 20% to 30% of premium
2014
Group health plan fees
■ Fees assessed on plan sponsors of private insurance for Comparative Effectiveness Research Trust Fund
■ Generally, $2 per covered life2013
■ Fees assessed on plan sponsors of private insurance for Comparative Effectiveness Research Trust Fund
■ Generally, $2 per covered life2013
Industry fees ■ 2.5% excise tax on sale of every medical device for use in US
2013
■ Fees on health insurers, pharmaceutical manufacturers and medical device manufacturers
2013
Top tier issues for employer-sponsored plans Current House and Senate bills
23Mercer
Issue House Senate
Changes to Part D retiree drug subsidy taxation
■ Changes retiree drug expense tax deduction for employers receiving Part D retiree subsidy payments
2013
■ Same
2011
Retiree medical anti-cutback rule
■ Bar employers from reducing retirees’ health benefits unless reductions also apply to active employee participants
■ Allows “reductions” where individual’s share of total premium (or costs of coverage) increases by less than 5%, or changes in cost sharing result in a decrease in the benefit package’s actuarial value of less than 5%
■ Does not ban cap on total aggregate retiree medical costs■ Hardship waivers could be available 2010
■ No provision
Reinsurance for early retiree plans
■ Temporary reinsurance program to reimburse cost of providing coverage to retirees between ages 55-64
■ Participating plans to submit reimbursement claims, and receive 80% reimbursement of costs between $15,000 and $90,000 for a covered individual; reimbursements can only be used to reduce plan and retiree direct costs
■ Program capped at $10 billion2010
■ Same, except:- requires programs and procedures
to general cost-savings for individuals with chronic and high-cost conditions, and
- program capped at $5 billion 2010
Top tier issues for employer-sponsored plans Current House and Senate bills
24Mercer
Issue House Senate
Individual income tax changes
■ Tax surcharge of 5.4% on adjusted gross income more than $500,000 for individuals, more than $1million for couples
2011
■ Medicare payroll tax increases from 1.45% to 2.35% on workers earning more than $200,000 and couples earning more than $250,000 per year
2013
Individual coverage mandate
■ Individuals must obtain acceptable health insurance coverage
■ Certain exceptions (e.g., “de minimis” coverage lapse, ‘hardship’)
■ Penalty of up to 2.5% tax on modified adjusted gross income
2013
■ Individuals must obtain minimum essential coverage
■ Certain exceptions (e.g., lowest cost plan exceeds 8% household adjusted gross income, no coverage for less than 3 months)
■ Maximum penalty: Greater of $50 per adult or $95 per child (family maximum of $2,250) or 2% of income
2014
Income-based assistance for Exchange coverage
■ Federal premium subsidies for individuals or families with incomes below 400% of federal poverty level
2013
■ Federal premium subsidies for individuals or families with incomes below 400% of federal poverty level
2014
Top tier issues for employer-sponsored plans Current House and Senate bills
25Mercer
Issue House Senate
Exchanges ■ Creates national health insurance Exchange within a new Health Choices Administration to facilitate purchase of health insurance by individuals and small employers
■ States may operate a state-based Exchange in lieu of national Exchange
■ States can form interstate compacts to facilitate purchasing coverage
■ Income-based assistance for individuals or families with incomes below 400% of federal poverty level
2013
■ States to create health insurance Exchanges to facilitate purchase of insurance by individuals and small groups
■ States may form regional Exchanges and subsidiary Exchanges within a state
■ HHS to establish Exchange if State does not■ Must be governmental agency or non-profit entity■ Income-based assistance for individuals or families
with incomes below 400% of federal poverty level2014
Public option ■ Creates a public option to be offered through the Exchange with federally negotiated provider rates
■ Must be self-sustaining after initial $2 billion in funding
2013
■ No, multistate private plans to be overseen by the federal Office of Personnel Management
2014
Top tier issues for employer-sponsored plansCurrent House and Senate bills
26Mercer
Issue House Senate
Medicaid ■ Extend Medicaid eligibility to people with incomes at or below 150% of federal poverty level
■ States receive full funding for costs of expanded populations in 2013 and 2014; afterwards, states pay 9% and federal pays 91%
■ Medicaid maintenance of effort requirements
2013
■ Extend Medicaid eligibility to people with incomes at or below 133% of federal poverty level
■ Maintenance of effort required until Exchange available in that state
■ states receive full funding for costs of expanded populations from 2014 – 2016; afterwards, funding is shared based on formula
2014
Top tier issues for employer-sponsored plansCurrent House and Senate bills
Case studies
28Mercer
Employer case studies
■ Case studies– Hospitality employer– Financial services employer
■ Scope of modeling– Determine current cost and coverage– Determine expected cost using the Senate bill provisions– Identify “Red Flags” – characteristics that could increase cost, create penalties– Identify potential solutions to reduce cost and/or administrative impact
■ Financial impact is presented for two out of many possible scenarios– Scenario 1 – maintain current employer program
Change/improve benefits and contributions only as necessary– Scenario 2 – offer minimum qualifying coverage
Reduce all medical benefits/contributions to prescribed minimums– For both scenarios, we assume those currently enrolled maintain coverage and
that 50% of employees who currently opt-out will join the employer plan or Exchange. We also assume employers do not choose to use grandfathering provisions
29Mercer
Case Study 1: Hospitality employer
■ Employer Characteristics– 18,582 full time employees– 6,841 covered (37%)– Average salary: $27,000
Aggregate Annual Health Care Cost for Richest Plans
Coverage Single Family
Highest Value Medical Plan $7,368 $22,664
Dental + Vision $302 $1,072
Sub-total without FSA $7,670 $23,736
Total with $2,500 FSA $10,170 $26,236
Observations
■ All plans have high actuarial value - 83% to 89%; exceeds 60% Senate minimum
■ Significant opportunity to reduce plan value
■ 7,000 part-time employees not covered, but Senate bill does not require coverage for part-timers
Red Flags
■ Low full-time participation– Adding more FTEs will increase total cost – Excluding FTEs will create penalties
■ Large number of low paid FTEs and high employee contributions– Shared Responsibility and Free Choice Voucher risk
■ High cost medical plan combined with FSA– Excise Tax risk
Lowest Value Medical Plan: Actuarial Value 83%
Contributions Single Family
Employer $294 $790
Employee $160 $480
Total $454 $1,270
30Mercer
Case Study 1: Impact of HCR on employer cost for full-time coverage
■ Scenario 1: Maintain current program; minimal change
■ Almost 2,000 employees newly eligible for Medicaid have no employer cost
■ Low income employees become eligible for vouchers and move to Exchange
– Over 40% of employees are in the exchange
Coverage CurrentAfter HCR
Employer Plan 6,841 4,478
Exchange with Subsidy 5,511
Exchange with Voucher 2,480
Opt-outs 11,781 3,905
Estimated Cost in 2014 $
(Millions)
Current coverage, projected $35.6
Cost of employer coverage under HCR $24.1
Shared Responsibility Surcharge $21.4
Free Choice Vouchers $15.3
Excise Tax <$0.1
Total cost with HCR $60.9
Change in total cost +71%
Impact on Enrollment Impact of HCR on Cost
31Mercer
Case Study 1: Impact of HCR on employer cost for full-time coverage
■ Scenario 2: Offer minimum qualifying coverage
Note: Cost in penalties for dropping coverage is $13.9 million (61% reduction)
Coverage CurrentAfter HCR
Employer Plan 6,841 8,805
Exchange with Subsidy 1,016
Exchange with Voucher 3,417
Opt-outs 11,781 3,436
■ Employer reduces coverage to minimum reducing cost of coverage for employer and employees
■ However, high contributions + low salaries still make coverage unaffordable for many
Estimated Cost in 2014 $
(Millions)
Current coverage, projected $35.6
Cost of employer coverage under HCR $32.7
Shared Responsibility Surcharge $4.7
Free Choice Vouchers $14.2
Excise Tax $0
Total cost with HCR $51.6
Change in total cost +45%
Impact of HCR on Enrollment Impact of HCR on Cost
32Mercer
Potential solutions: Hospitality industry employer
■ Avoid Shared Responsibility Surcharge/Free Choice Voucher– For one plan, reduce contribution to make coverage affordable for
low income employees ($96/month for single, $129/month family) to avoid cost and administrative expense for both
■ Avoid Excise Tax– More aggressively manage cost of medical plan– Reduce or drop FSA– Reduce or drop dental/vision, or move to voluntary individual
coverage– Reduce or drop medical plan
33Mercer
Case Study 2: Financial services employer
Aggregate Annual Health Care Cost for Richest Plans
Coverage Single Family
Highest Value Medical Plan $5,112 $19,440
Dental + Vision $400 $1,300
Sub-total without FSA $5,512 $20,740
Medical plan with $2,500 FSA $8,012 $23,240
Observations
■ Actuarial value range from 60% to 80%; all plans qualify
■ Single contribution is low– No risk of Shared Responsibility/Free Choice Voucher
■ Family contribution could produce Shared Responsibility/ Free Choice Voucher expense but it should be minimal due to high salaries
■ Large percentage of employees electing high cost plan and FSA
Red Flags
■ Newly eligible employees– Increased cost for coverage or penalties
■ High enrollment and FSA election– Excise Tax risk
Lowest Value Medical Plan: Actuarial Value 60%
Contributions Single Family
Employer $294 $912
Employee $43 $164
Total $337 $1,076
■ Employer Characteristics– 25,254 full time employees– 21,415 covered (85%)– Average salary: $64,700
34Mercer
Case Study 2: Impact of HCR on Employer Cost for Full Time Coverage
■ Scenario 1: Maintain current program; minimal change
■ Because of high income, no employees eligible for Medicaid
■ Because of low premium compared to income, no employees eligible for Exchange with Shared Responsibility Surcharge or Free Choice Voucher
■ Individual Mandate causes more employees to enroll
Coverage CurrentAfter HCR
Employer Plan 21,415 23,335
Exchange with Subsidy - -
Exchange with Voucher - -
Opt-outs 3,839 1,919
Estimated Cost in 2014$
(Millions)
Current coverage, projected $214.1
Cost of employer coverage under HCR $227.8
Shared Responsibility Surcharge $0
Free Choice Vouchers $0
Excise tax $5.0
Total cost with HCR $232.8
Change in total cost +9%
Impact of HCR on Enrollment Impact of HCR on Cost
35Mercer
Case Study 2: Impact of HCR on employer cost for full-time coverage
■ Scenario 2: Offer minimum qualifying coverage
■ As with Scenario 1, no employees were eligible for Medicaid, Shared Responsibility Surcharge or Free Choice Voucher
■ Additional enrollees assumed due to individual Mandate
Coverage CurrentAfter HCR
Employer Plan 21,415 23,335
Exchange with Subsidy - -
Exchange with Voucher - -
Opt-outs 3,839 1,919
Estimated Cost in 2014$
(Millions)
Current coverage, projected $214.1
Cost of employer cover under HCR $175.5
Shared Responsibility Surcharge $0
Free Choice Vouchers $0
Excise tax $0
Total cost with HCR $175.5
Change in total cost -18%
Impact of HCR on Enrollment
Note: Cost in penalties for dropping coverage is $18.9 million (91% reduction)
Impact of HCR on Cost
36Mercer
Potential solutions: Financial services employer
■ Excise tax– More aggressively manage cost of medical plan– Reduce or drop FSA– Reduce or drop dental/vision, or move to voluntary individual
coverage – Reduce or drop medical plan
37Mercer
Impact of Senate tax credit on individual premium
■ Medicaid and Government subsidy in Exchange reduces premium if income is 400% of Federal Poverty Level ($43,344 for single) or less
■ Government subsidy– Tax credits which produce premium cost ranging from 2.8% of income at
Federal Poverty Level (FPL) to 9.8% of income from 300% to 400% FPL
Individual Premium as Percentage of Income after Tax Credit
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
$0 $10 $20 $30 $40 $50 $60 $70
Income Level (in thousands)
Per
cen
tag
e o
f In
com
e
Individual Premium
FPL$10.8
3 FPL$32.5
4 FPL$43.3
2 FPL$21.7
38Mercer
Impact of Senate tax credit on individual premium
■ Tax credits for individuals with income <400% FPL ($43,344 for a single) will reduce premiums to specified percent of income
– Subsidized premiums range from $25/month (at FPL) to $354/month (at 400% FPL)
– For individuals >400% FPL, there are no tax credits; individual seeking coverage in exchange pay full premium
Individual Premium after Tax Credit
$0
$100
$200
$300
$400
$500
$600
$700
$0 $10 $20 $30 $40 $50 $60 $70
Income Level (in thousands)
Ind
ivid
ua
l P
rem
ium
Exchange Plan Financial Services ER Hospitality ER
FPL$10.8
2 FPL$21.7
3 FPL$32.5
4 FPL$43.3
39Mercer
Impact of tax credit on premium for family of four
■ The level of subsidized premium in an Exchange varies based on income and the number of members in the family (which affects the FPL)
■ Subsidized premium for family of four ranges from $51/month (FPL) to $720 (400% FPL)
Level of affordability and Medicaid eligibility cutoff
Example for Family of Four
Family SizeFederal
Poverty Level
Senate Medicaid Threshold (1.33 FPL)
4x FPL (eligible for Exchange)
Single $10,836 $14,412 43,344$ Family of 2 $14,580 $19,391 58,320$ Family of 3 $18,312 $24,355 73,248$ Family of 4 $22,056 $29,334 88,224$ Family of 5 $25,800 $34,314 103,200$ Family of 6 $29,532 $39,278 118,128$ Family of 7 $33,276 $44,257 133,104$ Family of 8 $37,020 $49,237 148,080$
Family Premium as Percentage of Income after Tax Credit
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
$0 $10 $20 $30 $40 $50 $60 $70 $80 $90 $100 $110 $120 $130 $140
Income Level (in thousands)
Per
cen
tag
e o
f In
com
e
Family Premium
FPL$22.1
3 FPL$66.2
4 FPL$88.2
2 FPL$44.1
Family Premium after Tax Credit
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$0 $20 $40 $60 $80 $100 $120 $140Income Level (in thousands)
Ind
ivid
ua
l P
rem
ium
Family Premium Exchange Plan
Financial Services ER Hospitality ER
FPL$22.1
2 FPL$44.1
3 FPL$66.2
4 FPL$88.2
Looking ahead
41Mercer
16%17%3%3%51-53% 7-10%
Medicaid / CHIPMedicare Other
GovtEmployer
PlansIndividual / Non Group
Exchange2019
Uninsured
Potential redistribution of lives
Medicaid / CHIP 43
million
Medicare Other Govt 54 million
Employer Plans 176
million
Individual / Non-Group 27 million
Uninsured 46 million
16%12%13%8%51%Cu
rren
t
Source: Mercer estimates; CBO estimate of Medicaid growth
Re-distribution of health plan lives and uninsured
42Mercer
Impact on employers
■ Employers will continue to feel cost pressures constraining how much they can contribute to all benefit plans– 2010 renewal rates were high for insured plans– New industry fees are likely to be passed on as cost to employers– Increased enrollment in government plans will add new cost
pressure on provider payment Although uncompensated care is likely to be reduced
– Mandates and excise tax concerns
■ Total benefit cost will reinforce employers shifting to voluntary benefits
■ Benchmarking prospective changes will have increased value
■ Employees will have heightened awareness of the new minimum for benefit value and contributions; and cost for Exchange coverage– May create new sources of employee relations concerns for
employers who are not providing the minimum
43Mercer
Taking action
February MarchJanuary Ongoing
Bill passes & is signed
■ Evaluate impact – immediate changes, cost to bring plans into compliance or penalties for non-compliance, cost savings opportunities
■ Evaluate impact on employee relations, attraction and retention
■ Monitor what direction that competitors and industries are taking for future plans
■ Determine services that will be provided by health plans
■ Maintain ongoing education – webcasts, GRIST, Alerts, Updates, Perspectives
■ Sequence of communication as reform is being finalized
■ High level webcast followed by a more detailed webcast upon passage
■ Local market meetings
Now When reform passes Ongoing actions
44Mercer
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Linda HavlinChicago+1 312 917 [email protected]
Geoff ManvilleWashington+1 202 263 [email protected]
Kelly TrawWashington+1 202 263 [email protected]
George WagonerRichmond+1 804 344 3740 [email protected]
www.mercer.com