Health Care Reform: Getting Ready for the Next Phase October 15, 2013 rge Lane [email protected] 31-5222 cer
Jan 13, 2016
Health Care Reform:Getting Ready for the Next Phase October 15, 2013
George Lane [email protected] 202-331-5222
Mercer
© 2013 MercerThis is for informational purposes only, and is not intended to be used as legal advice.
2April 21, 2023
*ProjectedSource: 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.
The Problem: Health Benefit Cost Growth Dips to 4.1% After Employer Actions, But Still Surpasses Wages and Inflation
17.1%
12.1%
10.1%
8.0%
-1.1%
2.5%
0.2%
6.1%
8.1%
11.2%
14.7%
10.1%
7.5%
5.5%5.0%*
4.1%
6.1%6.9%
6.3%6.1%6.1%6.1%7.3%
2.1%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
20.0%
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Workers' earningsAnnual change in total health benefit cost per employee
Overall inflation
2
© 2013 MercerThis is for informational purposes only, and is not intended to be used as legal advice.
3April 21, 2023
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 MercerThis is for informational purposes only, and is not intended to be used as legal advice.
4April 21, 2023
• Temporary reinsurance fees first due in late 2014/early 2015
• Possible additional reporting and disclosure
• Employer shared responsibility
• Health insurance exchange coverage
• Individual coverage mandate6
• Financial assistance for exchange coverage of lower-income individuals
• 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
• Wellness limit increase allowed2
• Health insurance industry fees
• 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
• 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 non-grandfathered plans of all sizes
• Auto enrollment some time after 2014
• 40% excise tax on “high cost” or Cadillac coverage
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.
• $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 20182014 2015
Health Care Reform Update – Employer Mandate Delayed Until 2015
© 2013 MercerThis is for informational purposes only, and is not intended to be used as legal advice.
5April 21, 2023 5
Key Areas of Impact2014, 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 MercerThis is for informational purposes only, and is not intended to be used as legal advice.
6April 21, 2023 6
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 MercerThis is for informational purposes only, and is not intended to be used as legal advice.
7April 21, 2023 7
Who is Eligible for Subsidized Government Insurance?Assumes States Expand Medicaid to 138% FPL
Household income < 138% FPLEligible for Medicaid*
Federal Poverty Level (FPL) 2014 eligibility threshold estimates**
Family size of 2013 2014**Medicaid138% FPL
Exchange400% 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
Household income < 400% FPLCould be eligible for
subsidized exchange coverage
* 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
7
© 2013 MercerThis is for informational purposes only, and is not intended to be used as legal advice.
8April 21, 2023 8
Individual Mandate2014
• All individuals must have health coverage*
• 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
OR
* 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 MercerThis is for informational purposes only, and is not intended to be used as legal advice.
9April 21, 2023 9
Employer Shared Responsibility2015
Affordability Affordability
Minimum Value
Coverage
Minimum Value
Coverage
Full-time Employees
(and dependents)
Full-time Employees
(and dependents)
Employer Shared
Responsibility
• Employers not offering coverage to full-time 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 income-based 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 income-based assistance**, or (2) up to $2,000 for every full-time employee
Pay or Play?
* Full time is defined as someone averaging 30 or more hours per week** No penalties for FT employees enrolled in MedicaidNote: Penalty not applied to first 30 employees
© 2013 MercerThis is for informational purposes only, and is not intended to be used as legal advice.
10April 21, 2023
What is the “minimum value” test?
• The plan must be designed to pay at least 60% of covered benefit.
• Approach for determining minimum value:– 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 cost-sharing, $6,000 maximum out-of-pocket limit.
• $4,500 integrated medical and drug deductible, 70% plan cost-sharing, $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 drugcost-sharing, $6,400 maximum out-of-pocket limit*, anddrug co-pays of $10/$20/$50 for the first, second andthird prescription drug tiers, 75% coinsurance for specialtydrugs.
• 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.
Employer Shared ResponsibilityMinimum Plan Value
Minimum Plan Value Illustration
Claim $
<40 ¢
>60 ¢
10
© 2013 MercerThis is for informational purposes only, and is not intended to be used as legal advice.
11April 21, 2023 11
Employer Shared Responsibility 2015: Affordable Contributions
Projected 2014 Employer safe harbor contributions
With Medicaid expansion Without Medicaid expansion
138% of Federal Poverty Level (projected to
2014)
Employee contribution for
employer to avoid penalty
100% of Federal Poverty Level (projected to
2014)
Employee contribution for
employer to avoid penalty
Individual coverage $16,353per 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%
What is the “affordability” test?
• An employee’s required contribution for self-only coverage cannot exceed 9.5% of the employee’s household income
• OK to use employee’s W-2 wages as proxy for household income
© 2013 MercerThis is for informational purposes only, and is not intended to be used as legal advice.
12April 21, 2023 12April 21, 2023
Current Lowest-Cost Medical Plan Would Likely be Considered ‘Unaffordable’ for at Least Some Employees in 2014
12April 21, 2023
26%22%
14%12%
10%
5%
13%
Health careservices
Retail andhospitality
Transportation/Communication/
Utility
Other services Manufacturing Financialservices
All respondents
Source: Mercer’s Survey on Health Care Reform: The Road to Implementation – June 2013
© 2013 MercerThis is for informational purposes only, and is not intended to be used as legal advice.
13April 21, 2023 13April 21, 202304/21/23
Likely to Take Action to Ensure Coverage is Affordable for all Eligible Employees
Lower employee contributions in a current medical
plan
Add a less expensive plan with lower
employee contributions than
the current plan
Introduce salary-based contributions
Raise dependent contributions to compensate for lower employee-
only contributions
Raise employee cost-sharing (deductibles,
etc.) to compensate for
lower contributions
13
Source: Mercer’s Survey on Health Care Reform: The Road to Implementation – June 2013
Based on respondents that have employees for whom coverage would be considered unaffordable
Make no (or minimal) changes and pay shared responsibility
penalty as necessary
© 2013 MercerThis is for informational purposes only, and is not intended to be used as legal advice.
14April 21, 202304/21/23
The Most Disruptive Requirement for the Most Employers: Extending Coverage to all Employees Working 30 or More Hours per Week
Retail and hospitality
Financial services
Health care services
Government Other servicesTransportation/Communication/
Utility
Manufacturing
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
14
46% 46%42%
39%
34%
25%22%
Source: Mercer’s Survey on Health Care Reform: The Road to Implementation – June 2013
© 2013 MercerThis is for informational purposes only, and is not intended to be used as legal advice.
15April 21, 2023 15
New Concept of Full-time Employee2015
• 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 MercerThis is for informational purposes only, and is not intended to be used as legal advice.
16April 21, 2023 16
Lookback and Stability Examples
Stability Period #1
Oct. 15
Standard Measurement Period #1 Administration Period #1
Employee B• Worked an average of
27 hours per week
Employee A• Worked an average of
35 hours per week
Oct. 15 Jan. 1 Jan. 1
Employee B• Not treated as a full-
time employee
Employee A• Treated as a full-time
employee
Example 1: Ongoing Employees
© 2013 MercerThis is for informational purposes only, and is not intended to be used as legal advice.
17April 21, 202304/21/23
Likely Response to ACA’s Requirement That all Employees Working 30 or More Hours per Week be Eligible for Coverage
10%
10%
30%
59%
<1%
Pay shared responsibility penalty as necessary
Make all employees eligible for the full-time employee plan(s)
Terminate medical coverage for all employees after the insurance exchanges become available
Add a new lower-cost plan option for all employees
Use segmentation strategy: Offer a lower-cost plan to newly eligible employees
Based on employers that do not currently offer coverage to all employees working 30 or more hours per week
17Source: Mercer’s Survey on Health Care Reform: The Road to Implementation – June 2013
© 2013 MercerThis is for informational purposes only, and is not intended to be used as legal advice.
18April 21, 2023 18April 21, 2023
12%
2%
21%
66%
20%
7%
21%
54%
All respondents
Retail/hospitality employers
Over One in 10 of all Surveyed Employers Will Reduce Some Workers’ Hours to Limit the Number of Newly Eligible Employees
Will reduce hours to limit the number of eligible employees
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 MercerThis is for informational purposes only, and is not intended to be used as legal advice.
19April 21, 2023 19April 21, 2023
After Taking These Steps, About Half of Respondents Affected by the Rule Still Expect a Significant Increase in Eligible Employees in 2014
43% 43%
3%
12%
68%
25%
5% 3%
All respondents
Retail/hospitality employers
Number of eligible employees will
increase
Number of eligible employees will stay
about the same
Number of eligible employees will
decrease
Don’t know
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%
Source: Mercer’s Survey on Health Care Reform: The Road to Implementation – June 2013
© 2013 MercerThis is for informational purposes only, and is not intended to be used as legal advice.
20April 21, 2023 20April 21, 2023
How the Individual Mandate and Expanded Eligibility Will Affect Enrollment – and Budgeting – Remains a Tough Question for Many Employers
17%
42% 41%
35%
22%
43%
All respondents
Retail & hospitalityrespondents
Have budgeted for an increase in enrollment in 2014
Will not budget for an increase in enrollment in 2014
Don’t know yet whether or not to
budget for an increase
Those budgeting for an increase assumed
enrollment would rise by 10% on average
(16% for retail & hospitality)
Source: Mercer’s Survey on Health Care Reform: The Road to Implementation – June 2013
© 2013 MercerThis is for informational purposes only, and is not intended to be used as legal advice.
21April 21, 2023
+ $90K
+ 1.6%
Summary and Cost ImplicationsKey Drivers of Potential Costs Under Employer Mandate Provisions
Best Estimate Scenario• 25% of current waivers w/ affordable coverage
elect CLIENT’s plan
•50% of current waivers w/ unaffordable coverage elect exchange
High Scenario• 50% of current waivers w/ affordable
coverage elect CLIENT’s plan
•50% of current waivers w/ unaffordable coverage elect exchange
Total Net Cost After Reform
$ Change
% Change
$5.57M $5.72M $5.88M
+ $247K
+ 4.5%
+ $403K
+ 7.4%
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
Low Scenario• 0% of current waivers w/ affordable
coverage elect CLIENT’s plan
•50% of current waivers w/ unaffordable coverage elect exchange
- Does not include ACA premium tax, estimated to be $160K for CLIENT- Totals do not add up to sum of components due to rounding- Assumes 67 US opt-outs based on census provided
21
Note: Compares CLIENT’s 2014 net cost after HCR against status quo plans with 8% medical trend applied.
© 2013 MercerThis is for informational purposes only, and is not intended to be used as legal advice.
22April 21, 2023 22April 21, 2023 22
Health Care Reform FeesSummaryFee 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 Providers
Begins in 2014 and continues thereafter
Health insurance companies offering fully insured coverage
Estimated 1.9% - 2.3% in 2014
Transitional Reinsurance Fee
2014 and sunsets in 2016
Insurance providers; self-insured plan is liable (but TPA or ASO may transfer fee at plan’s discretion)
Estimated $63 PMPY for 2014, decreasing in subsequent years
© 2013 MercerThis is for informational purposes only, and is not intended to be used as legal advice.
23April 21, 2023 23
Excise Tax2018
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 self-
insured coverage– Employers responsible for tax for HSA
contributions
Based on current enrollment
Employer Tax (in $ '000s) - Status Quo Tax
Affected Employees
Employees 6252013 -$ - 2014 -$ - 2015 -$ - 2016 -$ - 2017 -$ - 2018 (first year of tax) 109$ 191 2019 157$ 191 2020 233$ 217 2021 316$ 222 2022 409$ 232 2023 509$ 232 2024 632$ 418 2025 779$ 418 2026 937$ 418 2027 1,108$ 418 2028 1,295$ 426 2029 1,501$ 426 2030 1,725$ 452
First Year Excise Tax Applies (2018-2030)Employee Only 2018Two Party 2028Employee + Family 2018
© 2013 MercerThis is for informational purposes only, and is not intended to be used as legal advice.
24April 21, 2023
Excise Tax CalculationScenario 1 – Bundled Plans (Medical/Dental/Vision/FSA)
• 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
24
$108 $137 $182
$234 $312
$400
$497
$603
$714
$835
$966
$1,110
$1,264
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
CLIENT - Estimated Excise Tax (in $000's)
© 2013 MercerThis is for informational purposes only, and is not intended to be used as legal advice.
25April 21, 2023
Excise Tax CalculationScenario 2 – Unbundled Plans (Medical & FSA Only)
• 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
25
$24 $47$85
$126$172
$222
$306
$400
$500
$608
$725
$854
$989
$0
$200
$400
$600
$800
$1,000
$1,200
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Client - Estimated Excise Tax (in $000's)
© 2013 MercerThis is for informational purposes only, and is not intended to be used as legal advice.
26April 21, 2023 26
Excise Tax CalculationConsiderations
• 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
Other Strategic Considerations
© 2013 MercerThis is for informational purposes only, and is not intended to be used as legal advice.
28April 21, 2023 28April 21, 2023
OPTION: Self-insurance vs. Fully-insuredPotential Impact of Health Trend Reduction (2014 – 2017)
Cumulative four-year
difference: $1.9M$380K annual average savings
Cumulative four-year
difference: $3.0M$600K annual average savings
• Rx Carve-Out
• Funding
• Wellness
• Focus on High Cost Population
• Plan Design with Incentives
• No ACA Premium Tax
TREND
Ann
ual C
ost (
in m
illio
ns)
Remaining fully-insured may create a significant barrier to achieving lower trend.
© 2013 MercerThis is for informational purposes only, and is not intended to be used as legal advice.
29April 21, 2023 29
OPTION: Private Health Care Exchanges
Percent of employers that would consider offering a private
exchange
Employer advantages
Cost control.
Choice for employees.
Streamlined management and administration.
Employee advantages
Cost-efficient, convenient buying.
Comprehensive coverage.
Personalized portfolios.
Advantages for Employers and Employees
© 2013 MercerThis is for informational purposes only, and is not intended to be used as legal advice.
30April 21, 2023 30
How Does Defined Contribution Relate To Exchanges?
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.
Defined contribution = Funding arrangement where employers manage their year-over-year increase in health and welfare benefits spend to a pre-defined amount
© 2013 MercerThis is for informational purposes only, and is not intended to be used as legal advice.
31April 21, 2023
How Do Private Exchanges Work?
Funding: DB or DC
Employer defined contribution
Employee contribution or combination
Administration
Eligibility determination
Data-driven events
Election management
Contribution calculation
HR profes-sionals
Reporting & premium data
Employee support
Online
Call center
Print & e-mail
Integrated benefit processes
PayrollDeductions
CarriersElection data
31
© 2013 MercerThis is for informational purposes only, and is not intended to be used as legal advice.
32April 21, 2023 32April 21, 2023
How Cost Would Affect the Decision to Switch to a Private Exchange Model
32April 21, 2023
28%
19%14%
34%
5%
Doesn’t matter what the cost savings,
would not consider switching
Might be willing to pay more than currently
for easier administration, more
attractive benefit
Might be willing to switch if change was
cost neutral
Would need immediate savings over current health
insurance
Would not need immediate savings,
but would need greater control over
future cost
Source: Mercer’s Survey on Health Care Reform: The Road to Implementation – June 2013
© 2013 MercerThis is for informational purposes only, and is not intended to be used as legal advice.
33April 21, 2023 33April 21, 2023
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
• 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 subsidy-eligible)
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
© 2013 MercerThis is for informational purposes only, and is not intended to be used as legal advice.
34April 21, 2023
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 Plans34