-
Policy Theory vs. Reality
March 2017 • Lockton Companies
Lockton Health Reform Advisory Practice
WHY TAXING HEALTH INSURANCE IS
BAD POLICY
Taxing Employees on Health Insurance Threatens the Group
Market
Reducing the income tax exclusion for employer-provided
insurance increases taxes on employees or forces employers to
increase employee out-of-pocket costs, or both.
Employees most likely to opt out of coverage are the healthiest
and youngest employees. Those remaining will be the heaviest users,
skewing the group plan’s risk profile.
Threats to the Group Market Could Shift Enormous Costs to the
Government
Over 177 million Americans receive health insurance through an
employer.1
Employers pay more than $668 billion annually2 to insure their
employees, more than the federal government spends on Medicare.
This amounts to, on average, $5,306 toward the premium for
employee-only coverage and $12,865 for family coverage.3 Of those
enrolled in group plans today, 43 percent would qualify for
Medicaid or ACA-like tax credits, if not for their group plan.4
Average Amount Employers Pay in Premium Costs
100%
0%Employee
OnlyFamily
$5,306
$12,86582.5%
71%
43+57y43%Percent of Current Group Plan Enrollees Who
Would Qualify for Medicaid or ACA Subsidies
L O C K T O N C O M P A N I E S
-
Other Revenue Streams Are Already in Place
According to the Congressional Budget Office (CBO), taxing
health insurance on premiums above the 75th percentile of average
group premium costs would generate $174 billion from 2020 to 2026.5
A tax on premiums above the 90th percentile yields considerably
less.6 Other larger revenue streams, unrelated to health insurance,
already exist under the ACA.
Taxing Employees Won’t Lead to Higher Wages or Reduce Healthcare
Consumption
Imposing taxes on insurance premiums merely forces employers to
reduce premium costs by imposing higher deductibles and slashing
benefits. Despite rosy policy arguments, employers won’t increase
wages to compensate for benefit cuts. Of Lockton survey
respondents,
67 percent said they definitely would not or probably would not increase wages
to offset health insurance cuts; 27 percent were unsure what they’d
do. Fewer than 6 percent would definitely or probably increase
wages.7
Nor will taxing health insurance reduce healthcare consumption.
More than 80 percent of medical claim costs are incurred by only 13
percent of plan enrollees. These, the sickest of the sick, will
consume the care they need no matter what their deductible or other
out-of-pocket cost.8
Where Costs Are Generated
13+87y 13% of Group Plan Enrollees
18+82yGenerateof Claim Costs82%The problem isn’t how employers
provide insurance; the problem is with the general
health of Americans. And employers are far more engaged in
combating health risks
than the individual health insurance market.
POLICY THEORY VS. REALITY
Lockton Health Reform Advisory Practice
How likely is your company to give additional wages to make up
for the
reduction in benefits?7
1+6+51+16+26+A
We probably would increase wages.
5.7%
We would definitely increase wages. .25%
I am not sure. 27%
We probably would NOT increase wages.
51%
We definitely would NOT increase wages.
16%
807 respondents
-
Promoting Health
Eighty-three percent of employers offer on-site biometric
screenings, weight loss programs, hypertension management programs,
or other workplace wellness programs.
Wellness programs achieve demonstrable results. For example,
prenatal care programs alone save, on average, $1,200 per
enrollee.9
Promoting Appropriate Utilization
Employers drive appropriate care through plan design,
transparency tools, nurse helplines, telemedicine, preventive care
promotion, and on-site clinics.
Promoting Efficient Healthcare Delivery
Employers work to ensure they have the most cost-effective
program, continuously evaluating vendor partners, healthcare
funding methods, pharmacy management, and reference-based
pricing.
Employers With a Culture of Health Report
Employees are satisfied with their job experience
Employees take responsibility for their health
Employees know how to navigate the healthcare system
64%with a culture
of health
17%without a culture
of health
53%with a culture
of health
10%without a culture
of health
39%with a culture
of health
9%without a culture
of health
Source: Optum 2016: The five keys to building a culture of
health
83+17y83%Employers That Offer Some Form
of Wellness Program9
86+35 Employers not implementing cost-savings programs
3.5% Employers implementing cost-savings programs10
Increase in Healthcare Costs
8.6%
Employer-Provided vs. Individual Market
Healthcare Cost Increases
Lockton Employers
Individual Market
4.63%
15.53%
POLICY THEORY VS. REALITY
EMPLOYERS MANAGE HEALTHCARE COSTS
BETTER THAN THE INDIVIDUAL MARKETEmployers provide health
insurance to 177 million Americans and manage costs better than the
individual market by promoting:
Appropriate
Utilization
Efficient
Healthcare
Delivery
Health
-
© 2017 Lockton, Inc. All rights reserved.
Our Mission
To be the worldwide value and service leader in insurance
brokerage, risk management, employee benefi ts, and retirement
services
Our Goal
To be the best place to do business and to work
RISK MANAGEMENT | EMPLOYEE BENEFITS | RETIREMENT SERVICES
lockton.com
kc:28224
1See
https://www.census.gov/content/dam/Census/library/publications/2016/demo/p60-257.pdf
2US Bureau of Economic Analysis, Table 6.11D
https://www.bea.gov/iTable/iTable.cfm?ReqID=9&step=1#reqid=9&step=3&isuri=1&903=219
3http://files.kff.org/attachment/Report-Employer-Health-Benefits-2016-Annual-Survey,
p. 1
4U.S. census 2016 Annual Social and Economic Supplement to the
Current Population Survey
4S&P Health Care Cost Index
5Options for Reducing the Deficit: 2017-26 (Dec. 2016), p.
274
6A “straightline” reduction in lieu of interpolation yields an
estimate of $70 billion in net revenue
7Lockton survey of its insured and self-insured businesses
8Analysis of Lockton’s Infolock data on its self-insured
clients
9SCIO Health Analytics Case Study.
1032014–2015 Lockton Infolock® data.
