EUCLID MANAGERS®
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We proudly represent many
fine carriers including
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Delta Dental of Illinois
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Individual Products:
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…and many more!
Contact Information
Health Reform – Surveys and Analyses
Provide Mixed Outlook
Surveys and analyses regarding the impact of health reform on employers
and individuals are sprouting up like weeds. And, depending on the results,
administration officials or other interest groups have responded in kind –
hacking away at the results! This issue of Reflections provides an overview of
the results of some of these surveys.
The Lockton Benefit Group Survey
The survey conducted by the Lockton Benefit Group, a Kansas City based
brokerage and consulting firm, provides interesting results and observations.
continued on page 2
A letter from Karen Knippen
When it comes to understanding and addressing federal health reform,
former Defense Secretary, Donald Rumsfeld, said it best:
“… as we know there are known knowns; there are things we know we
know. We also know there are known unknowns; that is to say we know
there are some things we do not know. But there are also unknown
unknowns – the ones we don’t know we don’t know."
But, we do know that Euclid Managers is committed to providing you and
your clients the best service and products!
Sincerely yours,
234 Spring Lake Drive
Itasca, Illinois 60143
Phone: (630) 238-1900
Outside Chicagoland:
(800) 345-7868
Fax: (630) 773-8790
Visit us at:
www.euclidmanagers.com
Karen Knippen, RHU, REBC, CLTC
EUCLID MANAGERS® has been serving the independent agent since 1976 with a portfolio of group health, professional
liability and individual life and health, annuity and long-term care products. We proudly represent UnitedHealthcare,
Delta Dental of Illinois, MetLife and HumanaOne. We encourage your feedback and suggestions. Please call your
EUCLID MANAGERS® Marketing Representative or Marcy Graefen at (630) 238-2915 for more information. Outside
Chicagoland, call (800) 345-7868. Website: www.euclidmanagers.com
This study provides insights regarding employer
opinions on health reform to date as well as how
employers may respond as health reform continues to
roll out.
Employers responding to their survey decried the
increased administrative burdens already resulting
from health reform. Eighty percent of employers
expressed concern about increased administrative
burdens. Among the current and future administrative
requirements worrying employers are:
• “Grandfathered plan" and other enrollment notices
• W-2 reporting of health coverage costs
• New four-page plan summaries
• Notices to employees regarding insurance exchanges
• Reports to federal agencies regarding coverage,
wellness programs and more.
Notices are seen as costly and burdensome. Employers
note that hard copy notifications cost between $1 and
$3 per employee.
Other provisions of PPACA are also causing concern
among employers. These include:
• The impact of the employer “pay or play" mandate identified by 71 percent of respondents
• The cost impact of benefit mandates and
expansions such as the elimination of dollar
maximums and coverage of adult children –
identified by 63 percent of respondents
• Cost of the automatic enrollment requirement that
is effective in 2014 – identified by 60 percent of
respondents
• The “Cadillac Tax" effective in 2018 – a concern of
58 percent of respondents
• The FSA cap of $2,500 in 2013 – cited by 54 percent
• Non-discrimination rules becoming applicable to
insured plans – cited by 32 percent of respondents.
Issues raised by various employers also included the
difficulty of maintaining grandfathered status and the
ultimate definition of full-time employee and how it
will be calculated for penalty purposes.
-2-
Reflections
Employers did find some benefits in health reform.
Most notable was the change in the maximum
permissible health condition-related wellness incentives
or penalties. Beginning with plan years in 2014,
wellness incentives can be increased from 20% of the
COBRA cost of coverage to 30%. Federal authorities
have discretion to allow incentives of up to 50%.
Some employers see the new health insurance
exchanges as an attractive option for part-time
employees or early retirees since coverage will be
available to all. In some cases, these individuals may
also qualify for subsidies in the exchange making
coverage more affordable.
Employers were asked whether they would continue to
offer a health plan once the “pay or play" provision
was effective. Most employers expect to continue to
do so with the most common reason to do so the
desire to retain and attract employees cited by 86
percent of respondents. But, notably, 20 percent will
consider dropping coverage.
One employer comment serves as a capstone for the
overall employer outlook, “We currently provide
healthcare coverage to our employees. The current
healthcare reform act will do nothing but add cost
and add administrative requirements."
Avalere Health Comparison
of Studies and Analyses
The consulting firm Avalere Health LLC conducted a
review of the various analyses and surveys to compare
and contrast the findings regarding health reform and
the impact on employer sponsored insurance. They also
conducted interviews with various experts. They
reviewed the results of studies conducted by RAND,
the Urban Institute, the Lewin Group and the
Congressional Budget Office (CBO) among others.
Most of these studies showed similar results, i.e., that
employer-sponsored insurance will continue to be
robust after 2014.
Notably, the experts’ models were less certain about
the stability of employer-sponsored coverage when it
came to smaller employers and firms with low-wage
workers. These firms may find it more beneficial to
pay penalties, if applicable, and encourage employees
to enroll in health insurance exchanges or Medicaid.
Early retiree coverage is also expected to decline
significantly since these plans were already declining
before health reform. Post- 2014, early retirees will
have more options available to them through the
exchanges and individuals may also qualify for subsidies.
The Avalere analysis notes that employers offer
benefits for a variety of reasons, the principle one
being to attract and retain employees. Federal health
reform does not affect this goal to any great degree.
The study notes that the state of the economy and the
job market are more likely to impact this goal – if
employers have a large pool of willing workers,
offering health coverage may not be required.
With the insurance market reforms and health insurance
exchanges, some of the advantages of employersponsored coverage will be removed.A reason that
will change is that historically employers have offered
coverage that employees could not readily purchase
on their own. Employer-sponsored coverage provides
easier underwriting, greater coverage and tax
advantages not otherwise available.
Employers also provide coverage because it is seen
as improving worker productivity. In many cases,
employers also noted that offering health coverage
is the “right thing to do."
Employers are expected to weigh the options of
continuing coverage as health reform is more fully
realized in 2014. One employer noted that "no one
wants to be the first to drop coverage, but everyone
wants to be the second." Chief concerns that employers
will consider include:
• The amount necessary or available to “gross up"
worker pay to offset an employer dropping health
coverage
• The value of the tax deductibility for both the
employer and the employee contribution to
employer-sponsored coverage
• The size of the penalty since it is not tax deductible.
Estimated Shifts in ESI (Employer Sponsored Insurance)
Change
in ESI
Newly
Offer
ESI
CBO
Lewin Group
Urban Institute
(-3 million)
(-3 million)
(-.5 million)
6-7 million
14.4 million
Drivers
• Increased participation due to
individual mandate
• Premiums decline for small firms (<100)
• Offer rates increase most for small
firms; smallest firms (<10) have biggest
increase in offer rates because of
premium tax credit and savings available
through small business exchanges
Drivers
• Increased demand
from individual
mandate
Drivers
• Avoid penalty
• Lower premiums because of
elimination of health status rating or
new small employer credit
(-8 to -9 million)
Drop
ESI
Drivers
• Lower-wage
workers and small
businesses may
drop coverage due
to subsidies
(-17 million)
Drivers
• Employers will drop coverage
primarily if many employees are
subsidy or Medicaid eligible
• 8.6M receive subsidy
• 3.7M enroll in Medicaid
• 3.9M move to individual exchange
w/out subsidy
• 1M will go uninsured
RAND
+13.6 million
29
Drivers
• Increased demand from individual
mandate and lower cost options through
exchanges for small businesses
• ESI offer rates increase for small
firms (<50). The majority of this increase
is driven by firms with ten or fewer
employees
Drivers
• 13% of firms drop ESI because
employees are eligible for Medicaid and
subsidized coverage in the individual
exchanges
• 93 percent of firms that drop coverage
have <10 workers; less than 3 percent
of people are affected
•Increased offerings among small
businesses
Avalere Health; June 17, 2011 p10.
29
Eibner, C. Hussey, P. et al. (2010) The effects of the Affordable Care Act on Workers’ Health Insurance Coverage.
New England Journal of Medicine, 363, 15, 1393-1395.
Reflections
-3-
A service publication for brokers from
Euclid Managers®, proudly representing
UnitedHealthcare of Illinois, Delta Dental of Illinois,
MetLife and HumanaOne.
Visit us online www.euclidmanagers.com.
Legislative Review is published by Euclid Managers®, 234 Spring Lake Drive., Itasca, IL 60143. For more information, contact your Marketing Representative or Marcy Graefen
at (630) 238-2915 or fax your request to (630) 773-8790. Outside Chicagoland: (800) 345-7868, Fax (877) 444-2250. © Permission to quote with credit to source.
Health Reform – Surveys and Analyses
Provide Mixed Outlook
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