In preparation for the January 1, 2011 expansion of health care coverage to children up to age 26, Mercer is urging plan sponsors to review their current health plan for cost-saving opportunities. The influx of newly eligible dependents will on average increase total health care costs from 0.25% to 2%, Mercer estimates.
Because of this anticipated increase in the cost of providing coverage, Mercer believes it is important for plan sponsors to begin 2011 from the lowest cost base possible. By conducting a dependent eligibility audit before the end of the year, for example, plan sponsors may not only reduce their costs in the short term, but also identify data trends and issues for coming plan years that can be better managed and communicated to all plan stakeholders.
“We believe that, even without dependent eligibility expansion, dependent audits just make good business sense,” explained Rich VanThournout, Health and Benefits Business Leader for Mercer’s U.S. Outsourcing business. “Not only do they almost always lower total plan costs, they also give plan sponsors some much needed clarity as to the demographics of their participant community, which empowers both sound cost forecasts and strategic plan design.”
Prior to the passage of health care reform, Mercer conservatively estimated that 3% to 8% of covered family members (spouses and dependents) could not produce valid verification of eligibility during an audit. Although this figure may decrease slightly with expanded dependent eligibility, ineligibles can still translate into a significant unnecessary expense to employers, who pay an average of $2,100* annually to cover a single dependent, according to an estimate based on data from Mercer’s National Survey of Employer-Sponsored Health Plans.
“With the recent economic volatility and difficult business environment, we have already seen a marked increase in clients conducting dependent eligibility audits,” said Dan Priga, National Business Leader of Mercer's Performance Audit Group. “If costs do in fact increase in the ranges we estimate, this will further stress the budgets of plan sponsors. Our message to plan sponsors is this—find every dollar you can now to help minimize the likely cost spike that is just around the corner.”
* Employers should consider their own cost per dependent when calculating their potential savings.
For a comprehensive analysis of the Patient Protection and Affordable Care Act, and additional information on health reform and other developments in employee benefits, just click here.
Under the Patient Protection and Affordable Care Act, in 2014, certain employers will be assessed a fee for not offering health care coverage to employees. Employers with more than 50 employees that do not offer coverage and have at least one full-time employee who receives a premium tax credit will be taxed $2,000 per full-time employee (excluding the first 30 employees from the assessment). Employers with more than 50 employees that offer coverage but have at least one full-time employee receiving a premium tax credit, will pay the lesser of $3,000 for each employee receiving a premium credit or $750 for each full time employee. Employers with 50 or fewer employees are exempt from penalties.
If the experience of San Francisco is any guide, this employer mandate will increase the number of individuals with access to health care and receive support for a public health care option, according to the National Bureau of Economic Research (NBER).
In 2006, San Francisco became the first city to enact a pay-or-play employer minimum health spending mandate. The city also created Healthy San Francisco, a “public option” to allow affordable, universal access to care. The San Francisco Health Care Security Ordinance (HCSO) went into effect on Jan. 9, 2008, for employers with at least 50 employees, and on April 1, 2008, for employers with 20 to 49 employees. For-profit employers with fewer than 20 employees and non-profit employers with fewer than 50 employees were exempt from the minimum funding requirement. Employers can meet the HCSO requirement several ways, including providing insurance, reimbursing individuals directly for their health care expenses, paying into employees’ health savings accounts (HSAs) or health reimbursement arrangements (HRAs), or paying into the Healthy San Francisco program.
Unlike the Massachusetts health reform law, the San Francisco HCSO does not include an individual mandate to buy health insurance. Healthy San Francisco is a restricted medical provider network (not insurance) within the city of San Francisco. The mandate applies to all employees working at least ten hours per week, and to temporary and contract workers.
Using the 2008 Bay Area Employer Health Benefits Survey, the NBER found that most employers (75%) increased health spending to comply with the law, yet the majority (64%) supported the law. In the first year after implementation, 21% of firms used Healthy San Francisco for at least some employees. It appeared that few, if any, firms dropped existing insurance offerings. However, 28% added new insurance options, including an HRA (14%), a new high deductible health plan (HDHP, 10%), and a mini-medical plan (9%).
As of April 2009, more than 902 employers (out of a total 5,000 covered employers) elected to pay into Healthy San Francisco. According the San Francisco Department of Public Health, among the employees being paid for, approximately half live within San Francisco and are eligible for health care access through the Healthy San Francisco program, and half live outside San Francisco and receive their payments through a city-run HRA. As of June 4, 2010, Healthy San Francisco enrolled 53,058. There had been 60,000 uninsured adults at the time the program was implemented.
“Lessons from the San Francisco mandates can help policymakers determine what to expect with implementation of a national-level benefit mandate,” the NBER concluded. “First, pay-or-play mandates of this size are feasible; employers in San Francisco have been able to absorb the extra cost of providing health benefits without significant negative effects on employment or earnings. Some firms in industries where most competitors are also subject to the mandate, such as restaurants, have been able to pass the costs of the mandate directly along to consumers.
“Second, employers are likely to choose the lowest-cost option available. In the San Francisco case, this has largely played out through use of HRAs, Healthy San Francisco, and mini-medical plans, which are designed to just meet the health spending requirement. Finally, despite most employers having to make changes in their benefit policies to comply with the mandate, most employers are supportive of the HCSO. This bodes well for implementation of the national employer mandate in 2014.”
The working paper No. 16179, How Do Employers React to A Pay-or-Play Mandate? Early Evidence from San Francisco, was published in July 2010. For more information, visit http://www.nber.org.
For a comprehensive analysis of the Patient Protection and Affordable Care Act, and additional information on health reform and other developments in employee benefits, just click here.
Have you ever heard of the U.S. Preventive Services Task Force? If you’re like most people, you probably haven’t, though some of you might recall the brouhaha over the Task Force’s mammography recommendations last fall. However, members of this once obscure agency founded in 1984 are likely to find themselves the target of some serious lobbying as advocates push to have their top priorities considered covered services under Task Force guidelines. In fact, one commentator suggests that the Task Force “could become a political lightning rod” as insurers might not pay for a service that don't receive the backing of the Task Force.
So what? Why does this Task Force matter? You see, under health reform, health plans and issuers will be required to provide coverage, without cost-sharing, for certain preventive services. This provision applies to, among other things, evidence-based items or services that are currently recommended by the U.S. Preventive Services Task Force. Now, a trio of government agencies has issued regulations (to be published on July 19th) that clarify what this provision means.
Under these new rules, evidence-based items or services that have in effect a rating of A or B in the current recommendations of the U.S. Preventive Services Task Force with regard to the individual involved would have to be covered without cost-sharing requirements. Currently, the list of services with a rating of A or B is long but includes such things as:
screening and counseling to reduce alcohol misuse;
aspirin therapy for certain men age 45-79 years and women age 55 to 79 years;
assorted pregnancy-care screenings; and
screenings for depression, cholesterol abnormalities, anemia, hypothyroidism, obesity, colorectal cancer, tobacco use, and visual acuity in children.
The new rules also indicate that Task Force recommendations for mammography screening that were issued in 2009 which recommended routine screening for women age 50 and older, will not be considered current. Instead, those issued in 2002, which recommended earlier screening starting at age 40, will be used.
Beyond that, the new regulations clarify the cost-sharing requirements for recommended preventive services provided during office visits. For example, if a recommended preventive service (RPS) is billed separately from an office visit, then cost-sharing requirements for the office visit may be imposed. If an RPS is not billed separately and the primary purpose of the visit is the delivery of a preventive item or service, then cost-sharing requirements may not be imposed. If an RPS is not billed separately but the primary purpose of the office visit is not the delivery of a preventive item or service, then cost-sharing requirements may be imposed.
As with other issues arising out of health reform, stay tuned for developments. This is an area that is sure to be ever-evolving.
For more information. For a comprehensive analysis of the Patient Protection and Affordable Care Act, and additional information on health reform and other developments in employee benefits, just click here.
