Transcript Detailed summary of reform elements - HRA-NCA

Health Care Reform:
Getting Ready for the Next Phase
October 15, 2013
George Lane
[email protected]
202-331-5222
Mercer
The Problem: Health Benefit Cost Growth Dips to 4.1% After Employer
Actions, But Still Surpasses Wages and Inflation
Workers' earnings
Annual change in total health benefit cost per employee
Overall inflation
20.0%
18.0%
17.1%
16.0%
14.7%
14.0%
12.0%
12.1%
11.2%
10.0%
8.0%
10.1%
10.1%
8.1%
8.0%
7.3%
6.1%
6.0%
7.5%
6.9%
6.1% 6.1% 6.1% 6.3%
6.1%
5.5%
5.0%*
4.1%
4.0%
2.0%
2.1%
2.5%
0.2%
0.0%
-1.1%
-2.0%
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
*Projected
Source: Mercer’s National Survey of Employer-Sponsored Health Plans; Bureau of Labor Statistics, Consumer Price Index,
U.S. City Average of Annual Inflation (April to April) 1990-2012; Bureau of Labor Statistics, Seasonally Adjusted Data from the
Current Employment Statistics Survey (April to April) 1990-2012.
© 2013 Mercer
This is for informational purposes only, and is not intended to be used as legal advice.
July 7, 2015
1
Patient Protection and Affordable Care Act (PPACA)
Goals
• Enacted March 23, 2010, health reform’s goals
were:
– Provide access for 30+ million uninsured
– Cost control
– Quality
• Focusing on all three goals was a challenge
• Health reform is primarily health insurance reform
• It does not address major cost saving
opportunities
– Provider payment
– Harmonization across payer programs
– Tort reform
© 2013 Mercer
This is for informational purposes only, and is not intended to be used as legal advice.
July 7, 2015
2
Health Care Reform Update – Employer Mandate Delayed Until 2015
• Health insurance exchange coverage
• Wellness limit increase allowed2
• Individual coverage mandate6
• Health insurance industry fees
• Financial assistance for exchange coverage of lower-income
individuals
• Additional standards for non-grandfathered health plans, including
limits on out-of-pocket maximums, provider nondiscrimination, and
coverage of routine medical costs of clinical trial participants
• State Medicaid expansion (possibly only some states)
• Dependent coverage to age 26 for any covered employee’s
child2
• No annual dollar limits on essential health benefits2 (generally
banning standalone HRAs)
• No pre-existing condition
limits2
• No waiting period over 90 days2
2013
2014
• $2,500 per plan year health FSA contribution cap (plan years
on or after January 1, 2013)
• Comparative effectiveness group health plan fees first due
• Annual dollar limits on essential health benefits cannot be
lower than $2 million
• Employers notify employees about exchanges by Oct. 1,
2013
• Medical device manufacturers’ fees start
• Higher Medicare payroll tax on wages exceeding
$200,000/individual; $250,000/couples
• Change in Medicare retiree drug subsidy tax treatment takes
effect
• Health Insurance exchanges initial open enrollment period
© 2013 Mercer
This is for informational purposes only, and is not intended to be used as legal advice.
• Small market, non-grandfathered insured plans must cover
essential health benefits with limited deductibles (initially
$2,000/individual, $4,000/family), using a form of community rating
• Insurers must apply guaranteed issue and renewability to nongrandfathered plans of all sizes
• Auto enrollment some time after 2014
2015
• Temporary reinsurance fees first due in late
2014/early 2015
2018
• 40% excise tax on “high
cost” or Cadillac coverage
• Possible additional reporting and disclosure
• Employer shared responsibility
Footnotes
1. Applies to all plans, including grandfathered plans, effective for plan years beginning on or after Sept. 23, 2010
(Jan. 1, 2011, for calendar year plans).
2. Applies to all plans, including grandfathered plans, effective for plan years beginning on or after Jan. 1, 2014.
3. Applies to non-grandfathered plans, effective for plan years beginning on or after Sept. 23, 2010, except that
insured plan discrimination ban is delayed until regulations issued.
4. A temporary exemption applies to certain categories of employers.
5. Applies to non-grandfathered plans, effective for plan years on or after August 1, 2012.
6. A temporary exemption applies to employees of employers with non-calendar-year plans.
July 7, 2015
3
Key Areas of Impact
2014, 2015 and 2018
• In 2014 and 2015, the majority of the key provisions will be effective, such as:
–
–
–
–
Launch of public exchanges (2014)
Individual mandate (2014)
Medicaid expansion, where applicable (2014)
Shared responsibility penalties (2015)
• For employer-sponsored plans, the key areas for potential cost increases
include:
– Current waivers joining the plan
– Cost shifting from public plans (Medicare and Medicaid) to private insurance
– Shared responsibility penalties
• One area for potential savings for employers is migration of current plan
enrollees from the employer plan to Medicaid
– This is complicated by the Supreme Court decision as states can independently
decide whether or not to expand Medicaid eligibility
• In 2018, an excise tax of 40% applies for employer plan costs that exceed
certain dollar thresholds
© 2013 Mercer
This is for informational purposes only, and is not intended to be used as legal advice.
July 7, 2015
4
Two Public Programs
2014: Medicaid and Public Exchanges
• Medicaid: States will determine whether to expand Medicaid to anyone below
138% of federal poverty level (FPL)
– In these states, subsidies may be available for certain people to buy coverage
– Those ineligible for Medicaid or federal subsidies may have no option for
coverage other than employer plan
• Public Exchanges: Insurance plan options available on exchanges that are
operated by states or the Federal government (or a State/Federal partnership)
– Exchanges will conduct open enrollment from October 1, 2013 – February 28,
2014 (expect a communication blitz early to mid summer)
– If household income is between 138%-400% of the FPL, and individual does
not have access to affordable employer coverage, the Federal government
will provide subsidies to buy insurance on exchanges
© 2013 Mercer
This is for informational purposes only, and is not intended to be used as legal advice.
July 7, 2015
5
Who is Eligible for Subsidized Government Insurance?
Assumes States Expand Medicaid to 138% FPL
Household income < 138% FPL
Eligible for Medicaid*
Household income < 400% FPL
Could be eligible for
subsidized exchange coverage
Federal Poverty Level (FPL)
2014 eligibility threshold estimates**
Family size of
2013
2014**
Medicaid
138% FPL
Exchange
400% FPL
1 (single)
$11,490
$11,835
$16,332
$47,339
2
$15,510
$15,975
$22,046
$63,901
3
$19,530
$20,116
$27,760
$80,464
4
$23,550
$24,257
$33,474
$97,026
5
$27,570
$28,397
$39,188
$113,588
6
$31,590
$32,538
$44,902
$130,151
7
$35,610
$36,678
$50,616
$146,713
8
$39,630
$40,819
$56,330
$163,276
* Health reform legislation specifies income threshold of 133% FPL but also requires states to apply an “income disregard” of 5% of FPL in meeting income test;
effective income threshold for eligibility is 138%
** Federal Poverty Level (FPL) assumed to increase 3% per year
© 2013 Mercer
This is for informational purposes only, and is not intended to be used as legal advice.
July 7, 2015
6
Individual Mandate
2014
• All individuals must have health
coverage*
OR • Pay a penalty
– 2014: Greater of $95(single)/$285
cap (family) or 1% of household
income
– By 2016: Greater of
$695(single)/$2,085 cap (family)
or 2.5% of household income
* Employers will be required to automatically enroll new and currently enrolled full-time employees in medical coverage sometime after 2014 (awaiting
regulations). Estimated financial impact is not reflected below.
© 2013 Mercer
This is for informational purposes only, and is not intended to be used as legal advice.
July 7, 2015
7
Employer Shared Responsibility
2015
Pay or Play?
Minimum
Value
Coverage
Affordability
Employer
Shared
Responsibility
Full-time
Employees
(and
dependents)
• Employers not offering coverage to fulltime employees* (and their dependents)
– Subject to penalty of up to $2,000 for
each full-time employee if at least one
full-time employee receives incomebased assistance to buy coverage on
insurance exchange**
• Employers offering coverage to full-time
employees* (and their dependents)
– Lesser of: (1) up to $3,000 for each
full-time employee eligible for incomebased assistance**, or (2) up to $2,000
for every full-time employee
* Full time is defined as someone averaging 30 or more hours per week
** No penalties for FT employees enrolled in Medicaid
Note: Penalty not applied to first 30 employees
© 2013 Mercer
This is for informational purposes only, and is not intended to be used as legal advice.
July 7, 2015
8
Employer Shared Responsibility
Minimum Plan Value
What is the “minimum value” test?
• The plan must be designed to pay at least 60% of covered
benefit.
• Approach for determining minimum value:
Minimum Plan Value
Illustration
Claim $
– HHS minimum value calculator.
– Proposed safe harbor plans (not final).
– Actuarial certification for non-standard plan designs.
Proposed design-based safe harbors for minimum value
• $3,500 integrated medical and drug deductible, 80% plan costsharing, $6,000 maximum out-of-pocket limit.
<40 ¢
>60 ¢
• $4,500 integrated medical and drug deductible, 70% plan costsharing, $6,400 maximum out-of-pocket limit*, $500 employer
contribution to an HSA.
• $3,500 medical deductible, $0 drug deductible,
60% plan medical expense cost-sharing, 75% plan drug
cost-sharing, $6,400 maximum out-of-pocket limit*, and
drug co-pays of $10/$20/$50 for the first, second and
third prescription drug tiers, 75% coinsurance for specialty
drugs.
•
Plan
Employee
Notes: Based on 2014 guidance; subject to change in 2015. Assumes
coverage of all EHB categories; *Still have to comply with OPM max limit rules.
© 2013 Mercer
This is for informational purposes only, and is not intended to be used as legal advice.
July 7, 2015
9
Employer Shared Responsibility
2015: Affordable Contributions
What is the “affordability” test?
• An employee’s required contribution for selfonly coverage cannot exceed 9.5% of the
employee’s household income
• OK to use employee’s W-2 wages as proxy for
household income
Projected 2014 Employer safe harbor contributions
With Medicaid expansion
Without Medicaid expansion
138% of Federal
Employee
100% of Federal
Employee
Poverty Level
contribution for
Poverty Level
contribution for
(projected to
employer to avoid
(projected to
employer to avoid
2014)
penalty
2014)
penalty
Individual coverage
$16,353
per year
$129
per month
$11,850
per year
$94
per month
** Health reform legislation specifies income threshold of 133% FPL but also requires states to apply an “income disregard” of 5% of FPL in meeting
income test; effective income threshold for eligibility is 138%
© 2013 Mercer
This is for informational purposes only, and is not intended to be used as legal advice.
July 7, 2015
10
Current Lowest-Cost Medical Plan Would Likely be Considered
‘Unaffordable’ for at Least Some Employees in 2014
26%
22%
14%
12%
13%
10%
5%
Health care
services
Retail and
hospitality
Transportation/ Other services Manufacturing
Communication/
Utility
Financial
services
All respondents
Source: Mercer’s Survey on Health Care Reform: The Road to Implementation – June 2013
© 2013 Mercer
This is for informational purposes only, and is not intended to be used as legal advice.
July 7, 2015
11
Likely to Take Action to Ensure Coverage is Affordable for all Eligible
Employees
Based on respondents that have employees for whom
coverage would be considered unaffordable
Add a less expensive Lower employee Raise employee
cost-sharing
plan with lower
contributions in a
(deductibles,
employee
current medical
etc.) to
contributions than
plan
compensate
for
the current plan
lower
contributions
Raise dependent
Make no (or
minimal) changes contributions to
compensate for
and pay shared
lower employeeresponsibility
only contributions
penalty as
necessary
Introduce
salary-based
contributions
Source: Mercer’s Survey on Health Care Reform: The Road to Implementation – June 2013
© 2013 Mercer
This is for informational purposes only, and is not intended to be used as legal advice.
July
7/7/2015
7, 2015
12
The Most Disruptive Requirement for the Most Employers:
Extending Coverage to all Employees Working 30 or More Hours per Week
One-third of all survey respondents currently
do not offer coverage to all employees
working 30+ hours per week
Percent of employers that currently do not offer coverage in a qualified plan
to all employees working an average of 30 or more hours per week
46%
46%
42%
39%
34%
25%
22%
Retail and
hospitality
Health care
services
Government
Transportation/ Other services
Communication/
Utility
Manufacturing
Financial
services
Source: Mercer’s Survey on Health Care Reform: The Road to Implementation – June 2013
© 2013 Mercer
This is for informational purposes only, and is not intended to be used as legal advice.
July
7/7/2015
7, 2015
13
New Concept of Full-time Employee
2015
• Employer’s own definition of full-time (and linked benefit eligibility) does not matter
for employer shared responsibility
– 30 or more hours per week on average/130 hours per calendar month
• IRS set out optional approaches for variable hour and seasonal employees
– Allows a “lookback” measurement period of 3 to 12 months to determine average
hours
– Requires a “stability” period of at least 6 months (and no shorter than the
measurement period) when employees determined to work 30+ hours must be
offered coverage
– Allows an administrative period up to 90 days
– Potentially means that employers should already be monitoring hours
• Employers meeting safe harbor won’t be subject to shared responsibility penalties
• Gives certainty at least through end of 2015
© 2013 Mercer
This is for informational purposes only, and is not intended to be used as legal advice.
July 7, 2015
14
Lookback and Stability Examples
Example 1: Ongoing Employees
Employee A
• Worked an average of
35 hours per week
Oct. 15
Employee A
• Treated as a full-time
employee
Oct. 15
Standard Measurement Period #1
Jan. 1
Administration
Period #1
Employee B
• Worked an average of
27 hours per week
© 2013 Mercer
This is for informational purposes only, and is not intended to be used as legal advice.
Jan. 1
Stability Period #1
Employee B
• Not treated as a fulltime employee
July 7, 2015
15
Likely Response to ACA’s Requirement That all Employees Working 30
or More Hours per Week be Eligible for Coverage
Based on employers that do not currently offer coverage
to all employees working 30 or more hours per week
Make all employees eligible for the full-time employee plan(s)
59%
Add a new lower-cost plan option for all employees
30%
Use segmentation strategy: Offer a lower-cost plan to newly eligible employees
10%
Pay shared responsibility penalty as necessary
10%
Terminate medical coverage for all employees after the insurance exchanges become available
<1%
Source: Mercer’s Survey on Health Care Reform: The Road to Implementation – June 2013
© 2013 Mercer
This is for informational purposes only, and is not intended to be used as legal advice.
July
7/7/2015
7, 2015
16
Over One in 10 of all Surveyed Employers Will Reduce Some Workers’
Hours to Limit the Number of Newly Eligible Employees
All respondents
Retail/hospitality employers
66%
54%
21% 21%
20%
12%
2%
Will reduce hours to
limit the number of
eligible employees
7%
Will ask
employees already
eligible for
coverage to work
more hours
Will not change
workforce strategy to
limit the number of
newly eligible
employees
Already provide
coverage to
employees working
30+ hours
Source: Mercer’s Survey on Health Care Reform: The Road to Implementation – June 2013
© 2013 Mercer
This is for informational purposes only, and is not intended to be used as legal advice.
July 7, 2015
17
After Taking These Steps, About Half of Respondents Affected by the
Rule Still Expect a Significant Increase in Eligible Employees in 2014
Based on respondents that currently do not cover all employees working 30+ hours
Among those expecting
an increase in number
of eligible employees,
average increase:
All respondents: 11%
Retail/Hospitality: 19%
All respondents
Retail/hospitality employers
68%
43%
43%
25%
12%
3%
Number of eligible
employees will
increase
Number of eligible
employees will stay
about the same
Number of eligible
employees will
decrease
Source: Mercer’s Survey on Health Care Reform: The Road to Implementation – June 2013
© 2013 Mercer
This is for informational purposes only, and is not intended to be used as legal advice.
5%
July 7, 2015
3%
Don’t know
18
How the Individual Mandate and Expanded Eligibility Will Affect
Enrollment – and Budgeting – Remains a Tough Question for Many
Employers
Those budgeting for an
increase assumed
enrollment would rise
by 10% on average
(16% for retail &
hospitality)
All respondents
Retail & hospitality
respondents
42%
41%
43%
35%
22%
17%
Have budgeted for an increase
in enrollment in 2014
Will not budget for an
increase in enrollment in 2014
Source: Mercer’s Survey on Health Care Reform: The Road to Implementation – June 2013
© 2013 Mercer
This is for informational purposes only, and is not intended to be used as legal advice.
July 7, 2015
Don’t know yet
whether or not to
budget for an increase
19
Summary and Cost Implications
Key Drivers of Potential Costs Under Employer Mandate Provisions
Low Scenario
Best Estimate Scenario
High Scenario
• 0% of current waivers w/ affordable
coverage elect CLIENT’s plan
• 25% of current waivers w/ affordable coverage
elect CLIENT’s plan
• 50% of current waivers w/ affordable
coverage elect CLIENT’s plan
•50% of current waivers w/ unaffordable
coverage elect exchange
•50% of current waivers w/ unaffordable
coverage elect exchange
•50% of current waivers w/ unaffordable
coverage elect exchange
Total Net Cost
After Reform
$5.57M
$5.72M
$5.88M
$ Change
+ $90K
+ $247K
+ $403K
% Change
+ 1.6%
+ 4.5%
+ 7.4%
Note: Compares CLIENT’s 2014 net cost after HCR against status quo plans with 8% medical trend applied.
Before-Tax Net Cost Impacts
Low Scenario
Best Estimate
Scenario
High Scenario
Migration into plans by Waivers
$0
$154K
$308K
Migration from plans to Medicaid
$0
$0
$0
Migration from plans to Exchange
$0
$0
$0
Shared Responsibility Penalty
$0
$0
$0
HCR Fees
$90K
$93K
$95K
TOTAL
$90K
$247K
$403K
- Does not include ACA premium tax, estimated to be $160K for CLIENT
rounding July 7, 2015
- Assumes 67 US opt-outs based on census provided
© 2013 Mercer- Totals do not add up to sum of components due to
This is for informational purposes only, and is not intended to be used as legal advice.
20
Health Care Reform Fees
Summary
Fee
Effective Year
Who Pays
Estimated Cost to CLIENT
Manufacturers of
Branded Prescription
Drugs
2011 and continues
thereafter
Companies who manufacture or
sell branded prescription drugs to
certain government programs
Fees likely to be passed
through indirectly to
employers (impact unclear)
Patient-Centered
Outcomes Research
Institute (PCORI) Fee
Policy or plan year
that ends on or after
Oct. 1, 2012, and
before Oct. 1, 2019
Insurer for fully insured plans;
group health plan sponsor for self
insured plans (e.g., employer
maintaining a single-employer
plan)
$1.00 PMPY for policy or
plan years ending on or after
Oct. 1, 2012 but before Oct.
1, 2013, increasing in
subsequent years
Manufacturers of
Medical Devices
2013 and continues
thereafter
Companies who manufacture or
sell medical devices
2.3% of every sale; Pass
through cost paid by vendor;
minimal impact
Fee on Health Insurance Begins in 2014 and
Providers
continues thereafter
Health insurance companies
offering fully insured coverage
Estimated 1.9% - 2.3% in
2014
Transitional
Reinsurance Fee
Insurance providers; self-insured
Estimated $63 PMPY for
plan is liable (but TPA or ASO may 2014, decreasing in
transfer fee at plan’s discretion)
subsequent years
2014 and sunsets in
2016
© 2013 Mercer
This is for informational purposes only, and is not intended to be used as legal advice.
July 7, 2015
21
Excise Tax
2018
What is the Excise Tax?
• 40% excise tax on “high cost” coverage, including
medical, health FSA contributions, onsite medical
clinics, and employer contributions to HSAs
– Does not include stand-alone insured dental and
vision coverage or certain other coverage types
• Initial cap set at $10,200/single and $27,500 family
– Higher thresholds ($11,850/$30,950) for retirees
and workers in high-risk professions
– Higher threshold ($27,500) for single
multiemployer plan coverage
– Other adjustments possible for older groups and
“higher than expected” health care trends between
2010 and 2018
– Indexed to CPI (for 2019 only, CPI+1%)
• Aggregate cost determined using a methodology
similar to that used for determining applicable COBRA
premiums
• Employers must determine aggregate cost
– Insurers responsible for tax for insured coverage
– Benefit administrators responsible for tax for selfinsured coverage
– Employers responsible for tax for HSA
contributions
© 2013 Mercer
This is for informational purposes only, and is not intended to be used as legal advice.
July 7, 2015
Employer Tax (in $ '000s) Status Quo
Employees
2013
2014
2015
2016
2017
2018 (first year of tax)
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
Affected
Employees
Tax
625
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
First Year Excise Tax Applies (2018-2030)
Employee Only
Two Party
Employee + Family
109
157
233
316
409
509
632
779
937
1,108
1,295
1,501
1,725
191
191
217
222
232
232
418
418
418
418
426
426
452
2018
2028
2018
Based on current enrollment
22
Excise Tax Calculation
Scenario 1 – Bundled Plans (Medical/Dental/Vision/FSA)
CLIENT
- Estimated Excise Tax (in $000's)
$1,400
$1,264
$1,200
$1,110
$966
$1,000
$835
$800
$714
$603
$600
$497
$400
$400
$200
$312
$108
$137
$182
$234
$0
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
• Based on current plan costs and FSA elections, CLIENT’s plans are expected to
trigger an Excise Tax in the first year: 2018
• Since the Excise Tax thresholds are indexed by CPI (~3%) and historical trends are
higher, the Excise Tax is expected to grow exponentially in future years
© 2013 Mercer
This is for informational purposes only, and is not intended to be used as legal advice.
July 7, 2015
23
Excise Tax Calculation
Scenario 2 – Unbundled Plans (Medical & FSA Only)
Client
- Estimated Excise Tax (in $000's)
$1,200
$989
$1,000
$854
$800
$725
$608
$600
$500
$400
$400
$306
$200
$24
$47
2018
2019
$85
$126
$172
$222
$0
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
• If CLIENT decides to “un-bundle” the dental and vision benefits and leave them on a
fully-insured basis, then the Excise tax is estimated to be lower
• Despite this change, the tax will continue to grow in a similar exponential manner in
future years
© 2013 Mercer
This is for informational purposes only, and is not intended to be used as legal advice.
July 7, 2015
24
Excise Tax Calculation
Considerations
• The estimates provided were performed under the current interpretation of
the law. Final regulations have not been written.
• Potential changes to help mitigate Excise Tax implications include:
– “Unbundling” of benefits
– Eliminating FSA (affecting approximately 13% of enrolled population)
– Medical plan design changes
– Move towards CDHPs
© 2013 Mercer
This is for informational purposes only, and is not intended to be used as legal advice.
July 7, 2015
25
Other Strategic Considerations
OPTION: Self-insurance vs. Fully-insured
Potential Impact of Health Trend Reduction (2014 – 2017)
Remaining fully-insured may create a significant barrier to
achieving lower trend.
$10
$9.3
Cumulative four-year
difference: $1.9M
$380K annual average
savings
Annual Cost (in millions)
$9
$8.5
$8.4
$8
$7.7
$7.9
$7.4
$7.6
TREND
$7.1
$7
$7.2
$6.9
$6.4
$6.8
9.5%
$6
2013
2014
7.0%
$600K annual average
savings
• Rx Carve-Out
• Funding
• Wellness
• Focus on High Cost Population
• Plan Design with Incentives
• No ACA Premium Tax
5.5%
2015
© 2013 Mercer
This is for informational purposes only, and is not intended to be used as legal advice.
$8.0
Cumulative four-year
difference: $3.0M
2016
July 7, 2015
2017
27
OPTION: Private Health Care Exchanges
Percent of employers that would
consider offering a private
exchange
Advantages for Employers and
Employees
56%
Employer advantages
 Cost control.
 Choice for employees.
 Streamlined management
and administration.
18%
Employee advantages
 Cost-efficient, convenient
buying.
2011
 Comprehensive coverage.
2012
© 2013 Mercer
This is for informational purposes only, and is not intended to be used as legal advice.
 Personalized portfolios.
July 7, 2015
28
How Does Defined Contribution Relate To Exchanges?
Defined contribution = Funding arrangement where employers manage their yearover-year increase in health and welfare benefits spend to a pre-defined amount
With private exchanges, employers can successfully
implement defined contribution.
• Offer employees an array of choices.
• Encourage employees to “buy down” to lower-cost medical
coverage and use remaining dollars for other purchases.
Best achieved when employees can purchase other
attractive products (life, accident, disability, critical illness, auto, etc.).
• Better meets employees’ personal needs.
• Helps manage their benefit spend.
© 2013 Mercer
This is for informational purposes only, and is not intended to be used as legal advice.
July 7, 2015
29
How Do Private Exchanges Work?
Funding:
DB or DC
Employee
support
Employer defined
contribution
Online
Employee
contribution or
combination
Administration
Eligibility
determination
Call center
Election
data
Carriers
Deductions
Payroll
Reporting &
premium data
HR
professionals
Data-driven
events
Print & e-mail
Election
management
Contribution
calculation
Integrated benefit processes
© 2013 Mercer
This is for informational purposes only, and is not intended to be used as legal advice.
July 7, 2015
30
How Cost Would Affect the Decision to Switch to a Private Exchange
Model
Might be willing to pay
more than currently
for easier
administration, more
attractive benefit
Doesn’t matter what
the cost savings,
would not consider
switching
5%
Might be willing to
switch if change was
cost neutral
28%
34%
Would not need
immediate savings,
19%
but would need
greater control over
future cost
14%
Source: Mercer’s Survey on Health Care Reform: The Road to Implementation – June 2013
© 2013 Mercer
This is for informational purposes only, and is not intended to be used as legal advice.
July 7, 2015
Would need
immediate savings
over current health
insurance
31
OPTION: Limit Eligibility/Exclude Spouses
• What does it mean to “offer coverage”?
– Must offer to dependents under age 26 but not spouses
– Do not have to subsidize or make dependent coverage “affordable”
• Medical claim cost for spouse vs. child
Average annual claims paid by medical plan (after deductible, coinsurance, etc.)
• Employee/Self
$4,088.72
• Spouse/Partner
$5,540.64
• Child/Other Dependent
$1,999.34
• Options: spousal surcharge; exclude spouse with access to other
coverage; totally exclude spouses
• If spouse is excluded from employer coverage, might qualify for subsidized
coverage in the public exchange (whereas if employer 60% value
affordable coverage is offered to spouse, spouse not considered subsidyeligible)
© 2013 Mercer
This is for informational purposes only, and is not intended to be used as legal advice.
July 7, 2015
32
Survey Data on Spouse Coverage
Larger Employers More Likely to Require a Surcharge
Than to Exclude Spouses With Other Coverage Available
Source: 2012 National Survey of Employer Sponsored Health Plans
© 2013 Mercer
This is for informational purposes only, and is not intended to be used as legal advice.
July 7, 2015
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