The American Health Care Act: Economic and Employment Consequences for States
Could health insurance reductions under the American Health Care Act (AHCA) cause problems for employment in the future? Check out this article from The Commonwealth Fund to learn more.
Abstract
Issue: The American Health Care Act (AHCA), passed by the U.S. House of Representatives, would repeal and replace the Affordable Care Act. The Congressional Budget Office indicates that the AHCA could increase the number of uninsured by 23 million by 2026.
Goal: To determine the consequences of the AHCA on employment and economic activity in every state.
Methods: We compute changes in federal spending and revenue from 2018 to 2026 for each state and use the PI+ model to project the effects on states’ employment and economies.
Findings and Conclusions: The AHCA would raise employment and economic activity at first, but lower them in the long run. It initially raises the federal deficit when taxes are repealed, leading to 864,000 more jobs in 2018. In later years, reductions in support for health insurance cause negative economic effects. By 2026, 924,000 jobs would be lost, gross state products would be $93 billion lower, and business output would be $148 billion less. About three-quarters of jobs lost (725,000) would be in the health care sector. States which expanded Medicaid would experience faster and deeper economic losses.
Background
On May 24, 2017, the U.S. House of Representatives passed the American Health Care Act (AHCA, H.R. 1628) to partially repeal and replace the Affordable Care Act (ACA), also known as Obamacare. The U.S. Senate is currently developing its own version of the legislation.
A January 2017 analysis found that repealing certain elements of the ACA—the Medicaid expansion and premium tax credits—could lead to 2.6 million jobs lost and lower gross state products of $1.5 trillion over five years.1,2 That brief focused only on specific repeal elements because other details were not available. This brief examines all aspects of the AHCA, including restructuring Medicaid and health tax credits and repealing ACA taxes (Exhibit 1).
Key Provisions of the American Health Care Act as Passed by the U.S. House of Representatives
| Eliminates individual penalties for not having health insurance and penalties for employers that do not offer adequate coverage to employees. Raises premiums for people who do not maintain continuous insurance coverage. |
| Replaces the current income-related premium tax credits to subsidize nongroup health insurance with age-based tax credits. Allows premiums to be five times higher for the oldest individuals, compared to the current threefold maximum. |
| Restricts state Medicaid eligibility expansions for adults, primarily by reducing federal matching rates from 90 percent beginning in 2020 to rates ranging between 50 percent and 75 percent. |
| Creates temporary funding for safety-net health services in states that did not expand Medicaid. |
| Restructures Medicaid funding based on per capita allotments rather than the current entitlement. States may adopt fixed block grants instead. |
| Creates a Patient and State Stability Fund and Invisible Risk-Sharing Program. |
| Terminates the Prevention and Public Health Fund. |
| Repeals numerous taxes included in the ACA, including Medicare taxes on investment income and on high-income earnings, taxes on health insurance and medical devices, and a tax on high-cost insurance (i.e., the “Cadillac tax”); raises limits for health savings accounts and lowers the threshold for medical care deductions. |
| Allows states to waive key insurance rules, like community rating of health insurance and essential health benefits. Creates a fund that states could use to lower costs for those adversely affected by the waiver. |
The Congressional Budget Office (CBO) reported the AHCA would increase the number of uninsured Americans under age 65 by 14 million in fiscal year 2018, eventually reaching 23 million more by 2026.3 A RAND analysis of an earlier version of the bill was similar: 14 million more uninsured in 2020 and 20 million in 2026.4
This report examines the potential economic effects of the AHCA from calendar years 2018 to 2026, including:
-
- employment levels, measured as changes in the number of jobs created or lost due to policy changes
- state economic growth, as measured by changes in gross state products in current dollars, adjusted for inflation; an aggregate measure of state economies, analogous to the gross domestic product at the national level
state business output,
- as measured by changes in business receipts in current dollars at production, wholesale, and retail levels, encompassing multiple levels of business activity.
Our estimates are based on changes in federal funding gained or lost to states, consumers, and businesses. The AHCA significantly reduces federal funding for Medicaid. It lowers federal match funding for the 31 states and District of Columbia that expanded Medicaid, encouraging them to discontinue their expansions. It gives states an option to either adopt per capita allotments for Medicaid or fixed block grants; either option lowers federal Medicaid expenditures. Eliminating the tax penalty for individuals without health insurance reduces incentives to purchase insurance, raising the number of uninsured people. Restructuring premium tax credits and widening age-related differences in premiums are expected to shrink nongroup insurance coverage and reduce federal spending for health insurance subsidies. The AHCA is designed so that tax cuts take effect sooner than reductions in health insurance subsidies. Thus, state employment and economies could grow at first but shrink in later years as the coverage reductions deepen.
How Federal Health Funding Stimulates Job Creation and State Economies
Federal health funds are used to purchase health care. Then, fiscal effects ripple out through the rest of the economy, creating employment and other economic growth. This phenomenon is called the multiplier effect. Health funds directly pay hospitals, doctors’ offices, and other providers; this is the direct effect of federal funding. These facilities use revenue to pay their employees and buy goods and services, such as rent or equipment; this is the indirect effect of the initial spending. In addition, there are induced effects that occur as health care employees or other businesses (and eventually their workers) use their income to purchase consumer goods like housing, transportation, or food, producing sales for a diverse range of businesses. Similarly, when federal taxes are reduced, consumers or businesses retain income and can purchase goods and services, invest, or save. Due to interstate commerce, each type of effect can flow across state lines.
Both government spending increases and tax reductions can stimulate job creation and economic growth. The relative effects depend on how the funds are used. Government spending or transfers, like health insurance subsidies, typically have stronger multiplier effects in stimulating consumption and economic growth than do tax cuts. Tax cuts usually aid people with high incomes who shift much of their gains into savings, stimulating less economic activity.5,6,7 A recent analysis found that 90 percent of the AHCA’s tax cuts go to the top one-fifth of the population by income.8
This report estimates how the AHCA will change federal funds gained or lost for all 50 states and the District of Columbia from 2018 to 2026. We allocate federal funding changes, based on CBO estimates, for each state. We then analyze how federal funding changes ripple through state economies, using the PI+ economic model, developed by Regional Economic Models, Inc. (REMI).9 (See Appendix B. Study Methods.)
Findings
Overall Effects
As illustrated in Exhibit 2, most of the AHCA’s tax repeals begin almost at once, while coverage-related spending reductions phase in. The net effect initially raises the federal deficit. In 2018, the number of jobs would rise by 864,000 and state economies would grow. Health sector employment begins to fall immediately in 2018, with a loss of 24,000 jobs, and continues dropping to 725,000 health jobs lost by 2026 (Exhibit 3). Most other employment sectors gain initially, but then drop off and experience losses.
By 2020, the reduction in federal funding for coverage would roughly equal the total level of tax cuts. By the following year, 2021, coverage reductions outpace tax cuts. As a result, there are 205,000 fewer jobs than without the AHCA and state economies begin to shrink.
By 2026, 924,000 fewer people would have jobs. Gross state products would drop by $93 billion and business output would be $148 billion lower. These downward trends would continue after 2026.
Looking at Coverage-Related and Tax Repeal Policies
To better understand how the AHCA affects state economies and employment, Exhibit 4 looks at the two major components of the AHCA separately. The coverage-related policies (Title I of the AHCA and sections related to premium tax credits and individual and employer mandates) generally lower federal spending, particularly due to cuts to Medicaid and premium tax credits. Some policies partially offset those large cuts, such as the Patient and State Stability Fund. The tax repeal policies (Title II, except for sections about premium tax credits and individual and employer mandates), such as repeal of Medicare-related taxes, Cadillac tax, or medical device tax, predominantly help people with high incomes or selected businesses.
Implemented alone, the coverage-related policies would lead to steep job losses over time, reaching 1.9 million by 2026, driven by deep Medicaid cuts (Exhibit 4). Job losses begin to mount in 2019.
Alternatively, the tax repeal policies on their own would be associated with higher employment and state economic growth. Gains begin with 837,000 more jobs in 2018; this rises through 2024, and leads to 1 million additional jobs in 2026. Combined, tax repeal and coverage-related changes lead to initial economic and employment growth but eventual losses.
The detailed employment results show how these two components of the AHCA affect different economic sectors. Coverage and spending-related policies are directly related to funding for health services (e.g., Medicaid, premium tax credits, high-risk pools). The reductions directly affect the health sector—hospitals, doctors’ offices, or pharmacies—but then flow out to other sectors. Thus, about two-fifths of jobs lost due to coverage policies are in the health sector while three-fifths are in other sectors. Tax changes affect consumption broadly, spreading effects over most job sectors.
Within the health sector, job losses due to coverage-related cuts are much greater than gains due to tax repeal; losses in health care jobs begin immediately. In other sectors, employment grows at the beginning but later declines.
State-Level Effects
Consequences differ from state to state. We summarize data for nine states: Alaska, Florida, Kentucky, Maine, Michigan, New York, Ohio, Pennsylvania, and West Virginia. Exhibit 5 shows the effects of the AHCA in 2018 and in 2026. Complete results for all 50 states and the District of Columbia are available in Appendices A1–A4. In this analysis, states that expanded Medicaid tend to experience deeper and faster economic declines, although substantial losses occur even among nonexpansion states:
- Eight of the nine states (Alaska, Florida, Kentucky, Maine, New York, Ohio, Pennsylvania, and West Virginia) begin with positive economic and employment effects in 2018, but are worse off by 2026, with outcomes typically turning negative well before 2026.
- Michigan is worse off in 2018 and continues to decline through 2026. We assume Michigan will terminate its Medicaid expansion immediately because of a state law that automatically cancels the expansion if the federal matching rate changes.10 Six other states (Arkansas, Illinois, Indiana, New Hampshire, New Mexico, and Washington) have similar legislation and experience losses sooner than other states.
- Most job losses are in health care. In six states (Florida, Kentucky, Maine, Michigan, Ohio, and West Virginia) health care job losses begin in 2018, but all nine states have significant reductions in health employment by 2026. Looking at the U.S. overall, in most states, losses in health care jobs begin by 2020 (Appendix A2).
- States that expanded Medicaid have deeper and faster losses. Having earned more federal funds, they lose more when Medicaid matching rates fall. While cutting funds to states that expanded health insurance for low-income Medicaid populations, the bill temporarily increases funding to states that did not expand Medicaid. Nonetheless, states that did not expand Medicaid, like Florida and Maine, experience job and economic losses after a few years. In fact, Florida has the third-highest level of job loss in the nation by 2026.
- Other factors that can affect the size of economic and employment effects include:
- the extent to which states gained coverage in the ACA health insurance marketplaces; states with higher marketplace enrollment tend to lose more
- the cost of health insurance in the state; the new tax credits are the same regardless of location, making insurance less affordable in high-cost states and reducing participation
- age structure; older people will find insurance less affordable
- state population size; the population size of states magnifies their losses or gains
- other factors that affect tax distribution, like number of residents with investment income or high incomes or whether medical device or pharmaceutical manufacturers are located in the state.
Overall, the 10 states with the largest job losses by 2026 are: New York (86,000), Pennsylvania (85,000), Florida (83,000), Michigan (51,000), Illinois (46,000), New Jersey (42,000), Ohio (42,000), North Carolina (41,000), California (32,000), and Tennessee (28,000). Forty-seven states have job losses by 2026; four states (Colorado, Hawaii, Utah, and Washington) have small job gains in 2026, but would likely incur losses in another year or two (Appendix A1).
Conclusions
The House bill to repeal and replace the Affordable Care Act would greatly reduce the number of people with insurance coverage, effectively reversing gains made since the law’s enactment. The AHCA would initially create more employment and economic growth, driven by a federal deficit increase in 2018 and 2019, but the effects turn negative as coverage reductions deepen, with job losses and lower economic growth beginning in 2021. By 2026, 924,000 jobs would be lost, gross state products would be $93 billion lower, and business output could fall by $148 billion.
Health care has been one of the main areas of job growth in recent years.11 Under the AHCA, the sector would lose jobs immediately, with a loss of 24,000 jobs in 2018. By 2026, 725,000 fewer health sector jobs would exist. This would be a major reversal from current trends. While our analysis shows other employment sectors grow initially, most other sectors would experience losses within a decade.
It may be useful to look at these findings in a macroeconomic context. The U.S. unemployment rate for May 2017 was 4.3 percent, the lowest in 16 years and about half as high as during the recent recession. When unemployment is low, additional job growth creates a tighter labor market, so that businesses often have greater difficulties filling job vacancies. In turn, this can accelerate inflation.
It is likely that the business cycle will eventually slow down again. In that event, the AHCA could accentuate job loss and economic contraction. Combined with major increases in the number of uninsured, this could contribute to a period of economic and medical hardship in the U.S. The AHCA could exaggerate both the highs and lows of the business cycle. From a national policy perspective, it may be more useful to develop countercyclical policies that strengthen employment and the economy during times of contraction.
This analysis finds that the net effect of the AHCA would be a loss of almost 1 million jobs by 2026, combined with 23 million more Americans without health insurance, according to the CBO. In late May, the Trump administration released its budget proposal, which appears to propose an additional $610 billion in Medicaid cuts, beyond those included in the AHCA.12 Such deep cuts would further deepen the employment and economic losses discussed in this study.
This analysis has many limitations. We do not know whether or when the AHCA or an alternative will be enacted into law. Alternative policies could yield different effects. We focus only on the consequences of the AHCA. Other legislation, such as infrastructure, trade, national security, or tax policies, may be considered by Congress and might also affect economic growth and employment.
These projections, like others, are fraught with uncertainty. Economic, technical, or policy changes could alter results. In particular, the AHCA grants substantial discretion to states, such as in Medicaid expansions, waivers of federal regulations, and use of new funds like the Patient and State Stability Fund. While this analysis is aligned with CBO’s national estimates, we developed state-level projections, introducing further uncertainty. Our approach conservatively spreads changes across states and may underestimate the highs and lows for individual states.
See original article Here.
Source:
Ku, L., Steinmetz, E., Brantley, E., Holla, N., Bruen, B. (14 June 2017). The American Health Care Act: Economic and Employment Consequences for States. [Web Blog Post]. Retrieved from address https://www.commonwealthfund.org/publications/issue-briefs/2017/jun/ahca-economic-and-employment-consequences
Senate Health Bill Would Revamp Medicaid, Alter ACA Guarantees, Cut Premium Support
The Senate has just released their version of the American Health Care Act (AHCA). Here is a great article by Julie Rovner from Kaiser Health News detailing what the Senate's version of the AHCA legislation means for Americans.
Republicans in the U.S. Senate on Thursday unveiled a bill that would dramatically transform the nation’s Medicaid program, make significant changes to the federal health law’s tax credits that help lower-income people buy insurance and allow states to water down changes to some of the law’s coverage guarantees.
The bill also repeals the tax mechanism that funded the Affordable Care Act’s benefits, resulting in hundreds of billions of dollars in tax cuts for the wealthy and health care industry.
Most senators got their first look at the bill as it was released Thursday morning. It had been crafted in secret over the past several weeks. Senate Majority Leader Mitch McConnell (R-Ky.) is seeking a vote on the bill before Congress leaves next week for its Fourth of July recess.
Senators had promised that their ACA replacement would be very different than the version that passed the House in May, but the bill instead follows the House’s lead in many ways.
At lightning speed and with a little over a week for wider review, the Republicans’ bill could influence health care and health insurance of every American. Reversing course on some of the more popular provisions of the Affordable Care Act, it threatens to leave tens of millions of lower-income Americans without insurance and those with chronic or expensive medical conditions once again financially vulnerable.
Like the House measure, the Senate bill, which is being called a “discussion draft,” would not completely repeal the ACA but would roll back many of the law’s key provisions. Both bills would also — for the first time — cap federal funding for the Medicaid program, which covers more than 70 million low-income Americans. Since its inception in 1965, the federal government has matched state spending for Medicaid. The new bill would shift much of that burden back to states.
The bill would also reconfigure how Americans with slightly higher incomes who don’t qualify for Medicaid would get tax credits to help pay insurance premiums, eliminate penalties for those who fail to obtain insurance and employers who fail to provide it, and make it easier for states to waive consumer protections in the ACA that require insurance companies to charge the same premiums to sick and healthy people and to provide a specific set of benefits.
“We agreed on the need to free Americans from Obamacare’s mandates, and policies contained in the discussion draft will repeal the individual mandate so Americans are no longer forced to buy insurance they don’t need or can’t afford; will repeal the employer mandate so Americans no longer see their hours and take-home pay cut by employers because of it,” McConnell said on the floor of the Senate after releasing the bill. He also noted that the bill would help “stabilize the insurance markets that are collapsing under Obamacare as well.”
It is not clear that the bill will make it through the Senate, however, or that all of it will even make it to the Senate floor. The Senate (like the House) is operating under a special set of budget rules that allow it to pass this measure with only a simple majority vote and block Democrats from dragging out the debate by using a filibuster. But the “budget reconciliation” process comes with strict rules, including the requirement that every provision of the bill primarily impact the federal budget, either adding to or subtracting from federal spending.
For example, the legislation as released includes a one-year ban on Medicaid funding for Planned Parenthood. That is a key demand of anti-abortion groups and some congressional conservatives, because Planned Parenthood performs abortions with non-federal funding. But it is not yet clear that the Senate parliamentarian will allow that provision to be included in the bill.
Also still in question is a provision of the Senate bill that would allow states to waive insurance regulations in the Affordable Care Act. Many budget experts say that runs afoul of Senate budget rules because the federal funding impact is “merely incidental” to the policy.
Drafting the Senate bill has been a delicate dance for McConnell. With only 52 Republicans in the chamber and Democrats united in opposition to the unraveling of the health law, McConnell can afford to lose only two votes and still pass the bill with a tie-breaking vote from Vice President Mike Pence. McConnell has been leading a small working group of senators — all men — but even some of those have complained they were not able to take part in much of the shaping of the measure, which seems to have been largely written by McConnell’s own staff.
So far, McConnell has been fielding complaints from the more moderate and more conservative wings of his party. And the draft that has emerged appears to try to placate both.
For example, as sought by moderates, the bill would phase down the Medicaid expansion from 2020 to 2024, somewhat more slowly than the House bill does. But it would still end eventually. The Senate bill also departs from the House bill’s flat tax credits to help pay for insurance, which would have added thousands of dollars to the premiums of poorer and older people not yet eligible for Medicare.
A Congressional Budget Office report estimating the Senate bill’s impact on individuals and the federal budget is expected early next week. The House bill, according to the CBO, would result in 23 million fewer Americans having health insurance over 10 years.
For conservatives, however, the Senate bill would clamp down even harder on Medicaid in later years. The cap imposed by the House would grow more slowly than Medicaid spending has, but the Senate’s cap would grow even more slowly than the House’s. That would leave states with few options, other than raising taxes, cutting eligibility, or cutting benefits in order to maintain their programs.
Defenders of the health law were quick to react.
Sen. Ron Wyden (D-Ore.) complained about changes to coverage guarantees in the ACA.
“I also want to make special note of the state waiver provision. Republicans have twisted and abused a part of the Affordable Care Act I wrote to promote state innovation, and they’re using it to give insurance companies the power to run roughshod over individuals,” he said in a statement issued shortly after the bill was released. “This amounts to hiding an attack on basic health care guarantees behind state waivers, and I will fight it at every turn.”
“The heartless Senate health care repeal bill makes health care worse for everyone — it raises costs, cuts coverage, weakens protections and cuts even more from Medicaid than the mean House bill,” said a statement from Protect Our Care, an umbrella advocacy group opposing GOP changes to the health law. “They wrote their plan in secret and are rushing forward with a vote next week because they know how much harm their bill does to millions of people.”
See the original article Here.
Source:
Rovner J. (2017 June 22). Senate health bill would revamp medicaid, alter ACA guarantees, cut premium support [Web blog post]. Retrieved from address https://khn.org/news/senate-health-bill-would-revamp-medicaid-alter-aca-guarantees-cut-premium-support/
The Employer Mandate: Essential or Dispensable?
Have you wondered how the passing of the AHCA will impact employers? Check out this article by David Blumenthal, M.D and David Squires from Commonwealth Fund and see how employers will affect by the passing of the most recent healthcare legislation.
The Commonwealth Fund’s Sara Collins has blogged that, “Employers are at the heart of the U.S. health insurance system and their ongoing commitment to it will be critical to its success and viability over time.” The point is undeniable. More than 150 million Americans under the age of 65 get their coverage through the workplace, and employer-sponsored insurance remains critical to the success of the Affordable Care Act’s (ACA) coverage plans.
Some may therefore be surprised by the growing talk of repealing the ACA’s requirement that employers cover their employees. To unpack this issue, let’s take a look at the ACA provision itself, why it was enacted, and the potential upside and downside of repeal.
The Employer Mandate
The ACA section under discussion is often called an employer mandate, but that’s an oversimplification. The law says that employers with 50 or more employees have a choice. They can offer health insurance that meets minimum standards for affordability and coverage to employees working 30 or more hours a week. Or they can pay the federal government a penalty if at least one of their employees receives a federal subsidy for a private insurance plan sold through one of the new ACA insurance marketplaces.
You can call this a mandate. Or you can call it a requirement that businesses share responsibility for the costs of covering all Americans, either by helping to buy insurance directly for their own employees, or helping the federal government do so.
The language here matters. The concept of shared responsibility reflects a political calculation and a statement of values. It asserts that for the ACA to be fair and politically viable, all Americans have to do their part. All U.S. citizens are required to have health insurance, and many will have to pay a penalty if they go without it (the individual mandate). Employers must cover workers or help the government financially to do so. Taxpayers have to support the expansion in Medicaid eligibility and marketplace subsidies. Hospitals have to take cuts in Medicare payments, medical device makers need to accept additional taxes, and so on. The most successful American social programs—such as Social Security and Medicare—rely on this concept of shared responsibility.
The Rationale
Whatever you label it, the employer coverage requirement has several rationales beyond the concept of shared sacrifice. Policymakers want to deter employers who now provide coverage to their employees from dumping workers into the marketplaces, either by dropping coverage completely or limiting benefits to the point where workers will chose to buy insurance elsewhere. The requirement also attempts to nudge employers who don’t cover employees into offering health insurance. And on the assumption that some businesses will chose to pay rather than offer coverage, the employer provision provides an important source of revenue to cover the ACA’s expenses: an estimated $139 billion over 10 years.
The Rationale for Repeal
Several arguments are fueling the repeal push. First, implementation will be administratively complex and burdensome. For example, employers will have to report many new details about their workers, including what coverage they have been offered and whether they have received coverage elsewhere.
Second, some economists are concerned that the employer requirements will distort hiring decisions, leading companies to bring on fewer low-income employees who might be eligible for subsidized coverage in the marketplaces. Firms with payrolls near 50 workers might hire fewer workers altogether. Economists also believe that if employers incur penalties for not offering coverage, workers might contribute to the costs of insurance through reduced wages. Other economists, however, believe these effects will be modest.
Third, modeling from RAND and the Urban Institute suggests that when fully implemented in 2016, the employer provisions will increase the number of insured Americans by only a few hundred thousand. The overwhelming proportion of U.S. employers already provides insurance to their employees, and would continue to do so without the penalties in the ACA, the analysts contend.
Concerns About Repeal
Supporters of the employer requirement posit that projections that employers would stay in the health insurance business without the ACA requirements are just that—projections. Balanced against employers’ past record of providing coverage is an increasing tendency for businesses to reduce the generosity of coverage. In fact, the law’s requirements that workplace coverage be affordable and meaningful may be as important as the requirement that employers offer coverage at all.
Eliminating the employer provisions would also leave a big hole in funding for the ACA. The likelihood that supporters and opponents could reach agreement on how to raise the missing cash seems low, especially given the recent history of the congressional effort to replace the Medicare physician payment formula known as the SGR. This year, a bipartisan consensus on policy crashed and burned when Republicans and Democrats could not agree on new sources of revenue to pay for the legislation.
Finally, and perhaps most importantly, repealing the employer mandate would undermine the concept of shared responsibility and potentially add momentum—which could grow in a new Congress or under a new president—to the idea of eliminating the individual mandate as well. After all, why should individuals have to buy insurance when businesses don’t? Virtually all disinterested analysts agree that the individual mandate is critical to the stability of the new insurance marketplaces created under the ACA, and to reducing the number of uninsured Americans.
Proceed with Caution
The full effects of repealing the employer provisions of the ACA remain speculative. A repeal seems unlikely in the short term, in part, because a repeal effort would open the floodgates to partisan warfare over undoing the ACA in its entirety, or to changing other elements of the law that could have more far-ranging consequences.
However, if serious bipartisan discussion of ACA improvement becomes possible, expect to see a repeal of employer coverage provisions front and center on the legislative agenda. Under these circumstances, lawmakers should still proceed with caution. It may be wise to experiment with implementing the employer provisions and to reassess their comparative benefits and costs at a later date. The philosophy of shared responsibility is foundational to the law’s political viability, and should not be discarded without compelling evidence that the employer requirements are not essential to the ACA’s success.
See the original article Here.
Source:
Blumenthal D., Squires D. (2017 June 4). The employer mandate: essential or dispensable [Web blog post]. Retrieved from address https://www.commonwealthfund.org/publications/blog/2014/jun/the-employer-mandate
3 HSA Facts Employers Need to Know
Take a look at this informative article from Benefits Pro about what changes to HSAs means for employers by Whitney Richard Johnson.
Health Savings Accounts offer employers a way to help employees with health care costs without being as involved as they might be with, say, a Flexible Saving Account. But what are some other advantages?
And what are employers' responsibilities? Although employers will want to research more indepth about HSAs, here is a quick look at some basic HSA questions and answers:
#1: What are the advantages to an employer of offering an HDHP and HSA combination?
The benefits of offering employees an HDHP and HSA vary dramatically depending upon the circumstances. A major strength of offering an HSA program is flexibility.
Employers can be very generous and fully fund an HSA and also pay for the HDHP coverage. Alternatively, employers can also use the flexibility of the HSA to allow for the employer to reduce its involvement in benefits and put more responsibility onto the employee.
Generally, employers switch to HDHPs and HSAs to save money on the health insurance premiums (or to reduce the rate of increase) and to embrace the concept of consumer driven healthcare. The list below elaborates on strengths of HDHPs and HSAs.
Lower Premiums. HDHPs, with their high deductibles, are usually less expensive than traditional insurance.
Consumer-driven health care. Many employers believe in the concept of consumer-driven healthcare. If an employer makes employees responsible for the relatively high deductible, the employees may be more careful and inquisitive into their health care purchases. Combining this with an HSA where employees can keep unused money increases employees’ desire to use health care dollars as if they were their own money – because it is their own money.
Lower administration burden. Given the individual account nature of HSAs, much of the administrative burden for HSAs is switched from the employer (or paid third-party administrator) to the employee and the HSA custodian as compared to health FSAs and HRAs. This increased burden on the employee comes with significant perks: more control over how and when the money is spent, increased privacy, and better ability to add money to the HSA outside of the employer.
Tax deductibility at employee level. The ability of employees to make their own HSA contributions directly and still get a tax deduction is advantageous. Although it is better for employees to contribute through an employer, an employee can make contributions directly. An employer may not offer pretax payroll deferral or it may be too late for an employee to defer. For example, an employee that decides to maximize his prior year HSA contribution in April as he is filing his taxes can still do so by making an HSA contribution directly with the HSA custodian.
HSA eligibility. Becoming eligible for an HSA is a benefit that also stands on its own. Although not all employees will embrace HSAs, savvy employees that understand the benefits of HSAs will value a program that enables them to have an HSA.
#2: What are the employer responsibilities regarding employee HSAs?
If an employer offers pretax employer contributions, then the employer has the following responsibilities:
Make comparable contributions. If the employer is making a pretax employer contribution (nonpayroll deferral), it must do so on a comparable basis.
Maintain Section 125 plan for payroll deferral. If the employer allows pretax payroll deferral, then the employer must adopt and maintain a Section 125 plan that provides for HSA deferrals. This includes collecting employee deferral elections, sending the deferred amount directly to the HSA custodian, and accounting for the money for tax-reporting purposes.
HSA eligibility and contribution limits. Employers should work with employees to determine eligibility for an HSA and the employee’s HSA contribution limit. Although it is legally the employee’s responsibility to determine his or her eligibility and contribution limit, a mistake in these areas generally involves work by both the employer and the employee to correct. Mistakes are best avoided by upfront communication. Also, the employer does have some responsibility not to exceed the known federal limits. An employer may not know if a particular employee is ineligible for an HSA due to other health coverage but an employer is expected to know the current HSA limits for the year and not exceed those limits.
Tax reporting. The employer needs to properly complete employees’ W-2 forms and its own tax-filing regarding HSAs (HSA employer contributions are generally deductible as a benefit under IRC Section 106).
Business owner rules. Business owners generally are not treated as employees and employers need to review HSA contributions for business owners for proper tax reporting.
Detailed rules. There are various detailed rules that fall within the responsibility of the employer that are too numerous to list here but include items such as: (1) holding employer contributions for an employee that fails to open an HSA, (2) not being able to “recoup” money mistakenly made to an employee’s HSA, (3) actually making employer HSA contributions into employees HSAs on a timely basis, and (4) other detailed rules.
#3: How do employers switching from traditional insurance to HDHPs explain the change to employees?
Although there is no certain answer to this question, a straight-forward and honest approach to the change will likely work best.
Changing from traditional insurance to a high deductible plan with an HSA can be significant because employees likely face a higher deductible (although traditional health plan deductibles have been increasing to the point they are close to HDHPs).
Often the largest obstacle to the change is that employees feel something is being taken away from them. An employer that can show that the actual dollars contributed by the employer are level, or increased, versus the previous year helps a lot – especially if the employer makes a substantial HSA contribution for employees.
If the employer is making the change to reduce its health care expenses, then the employer will have to explain and justify that change to employees to get employees’ support for the change (e.g., the business is in a tough spot due to a difficult economy, etc.).
Depending on the facts, the change will likely be an improvement for some employees and HSA eligibility provides benefits to all employees. Some specific benefits include the following:
Saving money. The HDHP is generally significantly less expensive. Depending upon the circumstances, this fact often saves not only the employer money but also the employee. Highlighting the savings will help convince employees the change is positive. Although an actual reduction of the employee’s portion of the premium expense may be unlikely given increasing health insurance premiums, explaining that without the change the employee’s portion of the premium would have increased by more will help reduce tension.
Tax savings. The HSA enables tax savings. For some employees these tax savings are significant.
Control. HSAs give individuals control over their money and accordingly their doctor and treatment choices.
Flexibility. An HSA is very flexible and allows for some employees to put aside a large amount and get a large tax benefit. For those that prefer not to do so, the HSA allows that as well. Plus, even better, the HSA allows employees to change their mind mid-year. If an employee believes they are not going to need any medical services, the employee needs to contribute only a minimum deposit to an HSA. If it turns out that the employee does incur some medical treatment, the employee can contribute at that time and still get the tax benefits. Employees are often frustrated by HSA rules because of some confusion, but when explained that the rules are very flexible they appreciate HSAs more.
Distribution reasons. HSAs allow for more distribution reasons than FSAs: namely to pay for health insurance premiums if unemployed and receiving COBRA, to pay for some health insurance premiums after age sixty-five, to use for any purpose penalty-free after age sixty-five, to carry forward a large balance, and more.
See the original article Here.
Source:
Johnson W. (2017 May 11). 3 HSA facts employers need to know [Web blog post]. Retrieved from address https://www.benefitspro.com/2017/05/11/3-hsa-facts-employers-need-to-know?kw=3+HSA+facts+employers+need+to+know&et=editorial&bu=BenefitsPRO&cn=20170514&src=EMC-Email_editorial&pt=Benefits+Weekend+PRO&page_all=1
The Facts on the GOP Health Care Bill
Do you know all the facts behind the American Health Care Act (AHCA)? Check out this article by Fact Check and find out about all the details behind the GOP new health care legislation.
House Republicans released their replacement plan for the Affordable Care Act on March 6. How does the GOP’s American Health Care Act differ from the ACA? We look at the major provisions of the amended version of the bill, as of May 4. (The legislation passed the House on May 4 and now goes to the Senate for consideration.)
Is there a requirement to have insurance or pay a tax?
No. For all months after Dec. 31, 2015, the bill eliminates the tax penalties that the ACA imposes on nonexempt individuals for not having health insurance, as well as employers with 50 or more full-time workers who do not offer health insurance to their employees. (To be clear, unless this bill becomes law quickly, those filing their 2016 tax returns will still be subject to the penalty.)
Are insurance companies required to offer coverage regardless of preexisting conditions?
Yes, but there’s a penalty for not having continuous coverage. Under both the ACA and the GOP bill, insurers can’t deny coverage to anyone based on health status. Under the GOP bill, they are required, however, to charge 30 percent higher premiums for one year, regardless of health status, to those entering the individual market who didn’t have continuous coverage, which is defined as a lapse of coverage of 63 days or more over the previous 12 months.
However, an amendment proposed in late April allows states to obtain a waiver that would enable insurers to charge more to people with preexisting conditions who do not maintain continuous coverage. Such policyholders could be charged higher premiums based on health status for one year. After that, provided there wasn’t another 63-day gap, the policyholder would get a new, less expensive premium that was not based on health status. This change would begin in 2019, or 2018 for those enrolling during special enrollment periods.
States with such a waiver would also have to have either a “risk mitigation program,” such as a high-risk pool, or participate in a new Federal Invisible Risk Sharing Program, as a House summary of the amendment says. Beyond those programs, another amendment to the bill would provide $8 billion in federal money over five years to financially aid those with preexisting conditions who find themselves facing higher premiums in waiver states.
For more on this waiver program, see our May 4 article, “The Preexisting Conditions Debate.”
What happens to the expansion of Medicaid?
It will be phased out.
Prior to the ACA, Medicaid was available to groups including qualified low-income families, pregnant women, children and the disabled. The ACA expanded eligibility to all individuals under age 65 who earn up to 138 percent of the federal poverty level (about $16,643 a year for an individual), but only in states that opted for the expansion. Thirty-one states and the District of Columbia have opted in to the expansion, which includes enhanced federal funding, so far. More than 11 million newly eligible adults had enrolled in Medicaid through March 2016, according to an analysis by the Kaiser Family Foundation of data from the Centers for Medicare & Medicaid Services.
Under the Republican health care plan, no new enrollment can occur under this Medicaid expansion, with enhanced federal funds, after Dec. 31, 2019. States that haven’t already opted in to the expansion by March 1, 2017, can’t get the ACA’s enhanced federal funding for the expansion-eligible population.
To be clear, the bill doesn’t eliminate the Medicaid expansion coverage for those who are enrolled prior to 2020 in the current expansion states. But if those enrollees have a break in coverage for more than one month after Dec. 31, 2019, they won’t be able to re-enroll (unless a state wanted to cover the additional cost itself).
The Republican plan includes another notable change to Medicaid. It would cap the amount of federal funding that states can receive per Medicaid enrollee, with varying amounts for each category of enrollee, such as children, and the blind and disabled. Currently, the federal government guarantees matching funds to states for qualifying Medicaid expenses, regardless of cost. Under the GOP bill, states have the option of receiving a block grant, rather than the per-capita amounts, for traditional adult enrollees and children – not the elderly or disabled. States also have the option of instituting work requirements for able-bodied adults, but not pregnant women.
Are insurers required to cover certain benefits?
The latest version of the bill requires insurers to provide 10 essential health benefits mandated by the ACA, unless a state obtains a waiver to set its own benefit requirements. The ACA’s essential health benefits required insurance companies to cover 10 health services: ambulatory, emergency, hospitalization, maternity and newborn care, mental health and substance use disorder services, prescription drugs, rehabilitative services and devices, laboratory services, preventive care and chronic disease management, and pediatric services including dental and vision.
Beginning in 2020, states could set their own essential health benefits by obtaining a waiver.
At that point, state requirements could vary, as they did before the ACA was enacted. For instance, a 2009 report from the Council for Affordable Health Insurance, a group representing insurance companies, said 47 states had a mandate for emergency service benefits, while 23 mandated maternity care and only three mandated prescription drug coverage.
State Medicaid plans would not have to meet the essential health benefits requirement after Dec. 31, 2019.
Are there subsidies to help individuals buy insurance? How do they differ from the Affordable Care Act?
There are two forms of financial assistance under the ACA: premium tax credits (which would change under the GOP plan) and cost-sharing to lower out-of-pocket costs (which would be eliminated).
Let’s look at the premium tax credits first. They would be available to individuals who buy their own coverage on the individual, or nongroup, market. But instead of a sliding scale based on income, as under the ACA, the Republican plan’s tax credits are based on age, with older Americans getting more. (The plan, however, allows insurers to charge older Americans up to five times more than younger people, as we will explain later.)
The ACA tax credits also take into account the local cost of insurance, varying the amount of the credit in order to put a cap on the amount an individual or family would have to spend for their premiums. The Republican plan doesn’t do that. (See this explanation from the nonpartisan Kaiser Family Foundation for more on how the ACA tax credits are currently calculated.)
There are income limits under the GOP bill. Those earning under $75,000, or $150,000 for a married couple, in modified adjusted gross income, get the same, fixed amounts for their age groups — starting at $2,000 a year for those under age 30, increasing in $500 increments per decade in age, up to $4,000 a year for those 60 and older. The tax credits are capped at $14,000 per family, using the five oldest family members to calculate the amount. This new structure would begin in 2020, with modifications in 2018 and 2019 to give more to younger people and less to older people.
For those earning above those income thresholds, the tax credit is reduced by 10 percent of the amount earned above the threshold. For instance, an individual age 60 or older earning $100,000 a year would get a tax credit of $1,500 ($4,000 minus 10 percent of $25,000).
That hypothetical 60-year-old gets $0 in tax credits under the ACA. But if our 60-year-old earns $30,000 a year, she would likely get more under the ACA than the GOP plan: In Franklin County, Ohio, for instance, the tax credit would be $6,550 under the ACA in 2020 and $4,000 under the Republican plan. (This interactive map from the KFF shows the difference in tax credits under the health care plans.)
As for the cost-sharing subsidies available now under the ACA — which can lower out-of-pocket costs for copays and other expenses for those earning between 100 percent and 250 percent of the federal poverty level — those would be eliminated in 2020. However, the GOP bill sets up a Patient and State Stability Fund, with $100 billion in funding over nine years with state matching requirements, that can be used for various purposes, including lowering out-of-pocket costs of a state’s residents. An additional $30 billion was added to this fund for other programs: $15 billion would be used to set up the Federal Invisible Risk Sharing Program, another reinsurance program, and $15 billion is set aside specifically for maternity and mental health coverage.
Small-business tax credits would end in 2020. The health insurance marketplaces stay, but the tax credits can be used for plans sold outside of those marketplaces. And the different levels of plans (bronze, silver, etc.) based on actuarial value (the percentage of costs covered) are eliminated; anyone can buy a catastrophic plan, not just those under 30 as is the case with the ACA.
What does the bill do regarding health savings accounts?
It increases the contribution limits for tax-exempt HSAs, from $3,400 for individuals and $6,750 for families now to $6,550 and $13,100, respectively. It allows individuals to use HSA money for over-the-counter drugs, something the ACA had limited to only over-the-counter drugs for which individuals had obtained a prescription.
There were so-called winners and losers in the individual market under the ACA. How would that change under this bill?
Both the current law and the Republican proposal primarily impact the individual market, where 7 percent of the U.S. population buys its own health insurance. As we’ve written many times, how the ACA affected someone in this market depended on their individual circumstances — and the same goes for the House Republicans’ plan. In general, because the ACA said that insurers could no longer vary premiums based on health status and limited the variation based on age, older and sicker individuals could have paid less than they had before, while younger and healthier individuals could have paid more.
The GOP plan allows a wider variation in pricing based on age: Insurers can charge older individuals up to five times as much as younger people, and states can change that ratio. Under the ACA, the ratio was 3:1. So, younger individuals may see lower premiums under this bill, while older individuals could see higher premiums.
Older Americans do get higher tax credits than younger Americans under the Republican plan, but whether that amounts to more or less generous tax credits than under the ACA depends on other individual circumstances, including income and local insurance pricing. Those with low incomes could do worse under the GOP plan, while those who earned too much to qualify for tax credits under the ACA (an individual making more than $48,240) would get tax credits.
We would encourage readers to use the Kaiser Family Foundation’s interactive map to see how tax credits may change, depending on various circumstances. “Generally, people who are older, lower-income, or live in high-premium areas (like Alaska and Arizona) receive larger tax credits under the ACA than they would under the American Health Care Act replacement,” KFF says. “Conversely, some people who are younger, higher-income, or live in low-premium areas (like Massachusetts, New Hampshire, and Washington) may receive larger assistance under the replacement plan.”
A few weeks after the bill was introduced, House Republicans, through an amendment, made a change to a tax provision to create placeholder funding that the Senate could use to boost tax credits for older Americans, as we explain in the next answer.
Also, some individuals with preexisting conditions could see higher premiums under the legislation, if they don’t maintain continuous coverage and live in states that received waivers for pricing some plans based on health status.
Which ACA taxes go away under the GOP plan?
Many of the ACA taxes would be eliminated.
As we said, the bill eliminates all fines on individuals for not having insurance and large employers for not offering insurance. Also, beginning in 2017, for high-income taxpayers, the bill eliminates the 3.8 percent tax on certain net investment income. The 0.9 percent additional Medicare tax on earnings above a threshold stays in place until 2023. The bill repeals the 2.3 percent tax on the sale price of certain medical devices in 2017 and the 10 percent tax on indoor tanning services (effective June 30, 2017). It also gets rid of the annual fees on entities, according to the IRS, “in the business of providing health insurance for United States health risks,” as well as fees on “each covered entity engaged in the business of manufacturing or importing branded prescription drugs.”
It reduces the tax on distributions from health savings accounts (HSAs) not used for qualified medical expenses from 20 percent to 10 percent and the tax on such distributions from Archer medical savings accounts (MSAs) from 20 percent to 15 percent. It lowers the threshold for receiving a tax deduction for medical expenses from 10 percent to 5.8 percent of adjusted gross income. (Originally, the bill lowered the threshold to 7.5 percent, but House Republicans changed that to create some flexibility for potential funding changes the Senate could make. A congressional aide told us that the change is expected to provide $85 billion in spending over 10 years that the Senate could use to boost the tax credit or provide other support for Americans in the 50-64 age bracket.)
And from 2020 through 2025, the bill suspends the so-called “Cadillac tax,” a 40 percent excise tax on high-cost insurance plans offered by employers.
Will young adults under the age of 26 still be able to remain on their parents’ plans?
Yes. The bill does not affect this provision of the ACA.
How does the bill treat abortion?
It puts a one-year freeze on funding to states for payments to a “prohibited entity,” defined as one that, among other criteria, provides abortions other than those due to rape, incest or danger to the life of the mother. This would include funding to Planned Parenthood under Medicaid, which is most of the organization’s government funding. Under current law, Planned Parenthood can’t use federal money for abortions, except those in cases of rape, incest or risk to the mother’s life.
Also under the GOP plan, tax credits can’t be used to purchase insurance that covers abortion beyond those three exceptions. Health insurance companies would still be able to offer “separate coverage” for expanded coverage of abortions, which individuals could then purchase on their own.
How many people will have insurance under the plan, as compared with the ACA?
The nonpartisan Congressional Budget Office estimated that the legislation, as passed by the House, would lead to 14 million fewer people having insurance in 2018 and 23 million fewer insured in 2026, compared with current law under the ACA.
How much will the bill cost, as compared with the ACA?
CBO estimated that the legislation passed by the House would reduce federal deficits by $119 billion over the next decade, 2017-2026. It would reduce revenues by $992 billion, mostly by repealing the ACA’s taxes and fees, and reduce spending by $1.11 trillion for a net savings of $119 billion, according to CBO.
See the original article Here.
Source:
Robertson L., Gore D., Schipani V. (2017 May 24). The facts on the GOP health care bill [Web blog post]. Retrieved from address https://www.factcheck.org/2017/03/the-facts-on-the-gop-health-care-bill/
The Effects of Ending the Affordable Care Act’s Cost-Sharing Reduction Payments
Take a look at this interesting article by Kaiser Family Foundation and see how the cost-sharing mandate under the ACA will be affected in the AHCA.
Controversy has emerged recently over federal payments to insurers under the Affordable Care Act (ACA) related to cost-sharing reductions for low-income enrollees in the ACA’s marketplaces.
The ACA requires insurers to offer plans with reduced patient cost-sharing (e.g., deductibles and copays) to marketplace enrollees with incomes 100-250% of the poverty level. The reduced cost-sharing is only available in silver-level plans, and the premiums are the same as standard silver plans.
To compensate for the added cost to insurers of the reduced cost-sharing, the federal governments makes payments directly to insurance companies. The Congressional Budget Office (CBO) estimates the cost of these payments at $7 billion in fiscal year 2017, rising to $10 billion in 2018 and $16 billion by 2027.
The U.S. House of Representatives sued the Secretary of the U.S. Department of Health and Human Services under the Obama Administration, challenging the legality of making the cost-sharing reduction (CSR) payments without an explicit appropriation. A district court judge has ruled in favor of the House, but the ruling was appealed by the Secretary and the payments were permitted to continue pending the appeal. The case is currently in abeyance, with status reports required every three months, starting May 22, 2017.
If the CSR payments end – either through a court order or through a unilateral decision by the Trump Administration, assuming the payments are not explicitly authorized in an appropriation by Congress – insurers would face significant revenue shortfalls this year and next.
Many insurers might react to the end of subsidy payments by exiting the ACA marketplaces. If insurers choose to remain in the marketplaces, they would need to raise premiums to offset the loss of the payments.
We have previously estimated that insurers would need to raise silver premiums by about 19% on average to compensate for the loss of CSR payments. Our assumption is that insurers would only increase silver premiums (if allowed to do so by regulators), since those are the only plans where cost-sharing reductions are available. The premium increases would be higher in states that have not expanded Medicaid (and lower in states that have), since there are a large number of marketplace enrollees in those states with incomes 100-138% of poverty who qualify for the largest cost-sharing reductions.
There would be a significant amount of uncertainty for insurers in setting premiums to offset the cost of cost-sharing reductions. For example, they would need to anticipate what share of enrollees in silver plans would be receiving reduced cost-sharing and at what level. Under a worst case scenario – where only people eligible for sharing reductions enrolled in silver plans – the required premium increase would be higher than 19%, and many insurers might request bigger rate hikes.
While the federal government would save money by not making CSR payments, it would face increased costs for tax credits that subsidize premiums for marketplace enrollees with incomes 100-400% of the poverty level.
The ACA’s premium tax credits are based on the premium for a benchmark plan in each area: the second-lowest-cost silver plan in the marketplace. The tax credit is calculated as the difference between the premium for that benchmark plan and a premium cap calculated as a percent of the enrollee’s household income (ranging from 2.04% at 100% of the poverty level to 9.69% at 400% of the poverty in 2017).
Any systematic increase in premiums for silver marketplace plans (including the benchmark plan) would increase the size of premium tax credits. The increased tax credits would completely cover the increased premium for subsidized enrollees covered through the benchmark plan and cushion the effect for enrollees signed up for more expensive silver plans. Enrollees who apply their tax credits to other tiers of plans (i.e., bronze, gold, and platinum) would also receive increased premium tax credits even though they do not qualify for reduced cost-sharing and the underlying premiums in their plans might not increase at all.
We estimate that the increased cost to the federal government of higher premium tax credits would actually be 23% more than the savings from eliminating cost-sharing reduction payments. For fiscal year 2018, that would result in a net increase in federal costs of $2.3 billion. Extrapolating to the 10-year budget window (2018-2027) using CBO’s projection of CSR payments, the federal government would end up spending $31 billion more if the payments end.
This assumes that insurers would be willing to stay in the market if CSR payments are eliminated.
Methods
We previously estimated that the increase in silver premiums necessary to offset the elimination of CSR payments would be 19%.
To estimate the average increase in premium tax credits per enrollee, we applied that premium increase to the average premium for the second-lowest-cost silver plan in 2017. The Department of Health and Human Services reports that the average monthly premium for the lowest-cost silver plan in 2017 is $433. Our analysis of premium data shows that the second-lowest-cost silver plan has a premium 4% higher than average than the lowest-cost silver plan.
We applied our estimate of the average premium tax credit increase to the estimated total number of people receiving tax credits in 2017. This is based on the 10.1 million people who selected a plan during open enrollment and qualified for a tax credit, reduced by about 17% to reflect the difference between reported plan selections in 2016 and effectuated enrollment in June of 2016.
We believe the resulting 23% increase in federal costs is an underestimate. To the extent some people not receiving cost-sharing reductions migrate out of silver plans, the required premium increase to offset the loss of CSR payments would be higher. Selective exits by insurers (e.g., among those offering lower cost plans) could also drive benchmark premiums higher. In addition, higher silver premiums would somewhat increase the number of people receiving tax credits because currently some younger/higher-income people with incomes under 400% of the poverty level receive a tax credit of zero because their premium cap is lower than the premium for the second-lowest-cost silver plan. We have not accounted for any of these factors.
Our analysis produces results similar to recent estimates for California by Covered California and a January 2016 analysis from the Urban Institute.
See the original article Here.
Source:
Levitt L., Cox C., Claxton G., (2017 April 25). The effects of ending the affordable care act's cost-sharing reduction payments[Web blog post]. Retrieved from address https://www.kff.org/health-reform/issue-brief/the-effects-of-ending-the-affordable-care-acts-cost-sharing-reduction-payments/
3 Aspects of the GOP Healthcare Plan that Demand Employers’ Attention
The House of Representatives last week passed the American Health Care Act (AHCA) bill to begin the process of repealing the ACA. Find out what this new legislation means for employers in the great article from Employee Benefits Adviser by Daniel N. Kuperstein.
The extremely emotional journey to repeal (more appropriately, to “change”) the Affordable Care Act reached a significant milestone this week: The Republican-led House of Representatives passed an updated version of the American Health Care Act. While more than 75% of the provisions of the ACA remain intact, the AHCA gutted or delayed several of the ACA’s taxes on employers, insurers and individuals.
So what does this mean for employers?
First off, it’s important to remember that this new bill is not law just yet. The House version of the bill now heads to the Senate, where there’s no guarantee that it will pass in its current form; the margin for victory is much slimmer there. Only three “no” votes by Senate Republicans could defeat the bill, and both moderate and conservative Republican lawmakers in the Senate have expressed concerns about the bill. In other words, employers don’t have to do anything just yet, but it’s still beneficial to understand the major changes that could be coming down the pike.
As employers know from working over the last seven years to implement provisions of the ACA, there will be a million tiny details to work through if the AHCA becomes law.
But for now, we see three major aspects that demand employers’ attention.
There will be more emphasis on health savings accounts
Under the AHCA, health savings accounts will likely become far more popular — and more useful. The HSA contribution limits for employers and individuals are essentially doubled. Additionally, HSAs will be able to reimburse over-the-counter medications and allow spouses to make catch-up contributions to the same HSA. Of course, with this added flexibility comes increased responsibility — there will be a greater need for employees to understand their insurance.
There will be more flexibility in choosing a benchmark plan
For larger employers not in the small group market, the AHCA creates an opportunity to choose a benchmark plan that offers a significantly lower level of benefits to employees.
Currently, the ACA provides that employer-sponsored self-insured health plans, fully-insured large group health plans, and grandfathered health plans are not required to offer EHBs. However, these plans are prohibited from imposing annual and lifetime dollar limits on any EHBs they do offer. For purposes of determining which benefits are EHBs subject to the annual and lifetime dollar limits, the ACA currently permits employers sponsoring these types of plans to define their EHBs using any state benchmark plan. In other words, employers are not bound by the essential health benefits mandated by their state and can pick from another state’s list of required benefits.
Under the AHCA, we may see a big change to how the rules on annual and lifetime limits work. Notably, nothing in the AHCA would prohibit employers from choosing a state benchmark plan from a state that had obtained an AHCA waiver, which would allow the state to put annual and lifetime limits on its EHBs. This means that, if one state decides to waive these EHB requirements, many employers could decide to use that lower-standard plan as their benchmark plan. Of course, while choosing such a benchmark plan may benefit an organization by lowering its costs, such a move may have a negative impact on its ability to recruit and retain the best talent.
There will be a greater need to help employees make smart benefits decisions
The most important aspect of this for employers is to understand the trend in health insurance, which is undeniably moving in the direction of consumerism.
The driving philosophy behind this new Republican plan is to place more responsibility on individuals. However, this doesn’t mean employers can throw a party and simply wish their workers “good luck” — employers need to think at a macro level about what’s good for business. In a tightening labor market in which so many talented people consider themselves free agents, smart employers will focus on helping employees to make smart decisions about their health insurance.
See the original article Here.
Source:
Kuperstein D. (2017 May 5). 3 aspects of the GOP healthcare plan that demand employers attention [Web blog post]. Retrieved from address https://www.employeebenefitadviser.com/opinion/3-aspects-of-the-gop-healthcare-plan-that-demand-employers-attention
HSAs to see explosive growth
Are you using HSAs to help save money on your healthcare cost? Find out from this article by Employee Benefit News on how the market for HSAs is set to grow exponentially over the next few years by Kathryn Mayer.
It’s about time for health savings accounts to take the spotlight. And that’s going to be a good thing for employees, industry experts say: Not only will HSAs help workers with their healthcare expenses, but the savings vehicles also will put them on a better track for retirement planning.
“The market is going to blow up,” American Retirement Association CEO Brian Graff said this week during the NAPA 401k Summit in Las Vegas, citing new healthcare reform proposals — including the GOP’s American Health Care Act — as well as a better understand of HSAs as reasons for the predicted growth.
The ACHA, which doubles HSA contributions, “dramatically increases the incentive for employers to offer high-deductible health plans,” he said. The GOP plan expands the allowable size of healthcare savings accounts that can be coupled with high-deductible insurance plans, up to $6,550 for an individual or $13,100 for a family. It also expands qualifying expenses to include health insurance premiums, over-the-counter medications and preventive health costs.
By 2018, there will be 27 million HSA accounts and more than $50 billion in HSA assets, according to estimates from the Kaiser Family Foundation cited by Graff. Currently, there are 18 million accounts and $34.7 billion in assets.
Those statistics — and proposed healthcare reforms — are catching the eye of the retirement industry: The accounts have the potential to become “more compelling than a 401(k),” due to tax-deductible and tax-deferred incentives, Graff said.
“We have to think about what this means for our industry,” he said.
In a live poll during a conference keynote, three-quarters of retirement advisers noted they do not offer HSA advisory services. That number, Graff predicts, will change radically over the next two years.
Current proposals are positioning HSAs a hybrid of medical and retirement savings, Graff said. “It’s not just a health account, it’s a savings account.” Healthcare expenses are a major concern for retirees and often cause employees to push back plans for retirement. If HSA funds are not needed for medical expenses, the money can be withdrawn after age 65 and taxed as ordinary income.
Graff says plan sponsors and retirement advisers should encourage employees to first max out their HSAs and then match their 401(k)s.
The HSA is “the nexus between healthcare and retirement,” Daniel Bryant, an advisor with Sheridan Road, said during a standing-room only panel on HSAs Monday.
Meanwhile, added panelist Ryan Tiernan, a national accounts manager with American Funds, “it’s the biggest jump ball no one has cared to jump to. HSAs are probably the most efficient way to save and invest for your biggest expense in retirement.”
See the original article Here.
Employers embrace new strategies to cut healthcare costs
Are you looking for a new solution for cutting your healthcare cost? Take a look at the great article from Employee Benefits Advisor about what other employers are doing to cut their cost healthcare cost by Phil Albinus
As employers await a new health plan to replace the Affordable Care Act and consensus grows that high deductible health plans (HDHPs) are not the perfect vehicle for cutting healthcare costs, employers are incorporating innovative strategies to achieve greater savings.
Employers are offering HSAs, wellness incentives and price transparency tools at higher rates in an effort to cut the costs of their employee health plans. And when savings appear to plateau, they are implementing innovative reward plans to those who adopt these benefits, according to the 2017 Medical Plan Trends and Observation Report conducted by employee-engagement firm DirectPath and research firm CEB. They examined 975 employee benefit plans to analyze how they functioned in terms of plan design, cost savings measures and options for care.
The report found that 67% of firms offer HSAs while only 15% offer employee-funded Health Reimbursement Arrangements. As “use of high deductible plans seem to have (at least temporarily) plateaued under the current uncertainty around the future of the ACA, employer contributions to HSAs increased almost 10%,” according to the report.
Wellness programs continue to gain traction. Fifty-eight percent of 2017 plans offer some type of wellness incentive, which is up from 50% in 2016. When it comes to price transparency tools, 51% of employers offer them to help employees choose the best service, and 18% plan to add similar tools in the next three years. When these tools are used, price comparison requests saw an average employee savings of $173 per procedure and average employer savings of $409 per procedure, according to CEB research.
“What was interesting was the level of creativity within these incentives and surcharges. There were paycheck credits, gift cards, points that could be redeemed for rewards,” says Kim Buckey, vice president of client services at DirectPath. “One employer reduced the co-pays for office visits to $20 if you participated in the wellness program. We are seeing a level of creativity that we haven’t seen before.”
Surcharges on tobacco use has gone down while surcharges for non-employees such as spouses has risen. “While the percentage of organizations with spousal surcharges remained static (26% in 2017, as compared to 27% in 2016), average surcharge amounts increased dramatically to $152 per month, a more than 40% increase from 2016,” according to the report.
Tobacco surcharges going down “is reflective of employers putting incentives in, so they are taking a carrot approach instead of the stick,” says Buckey.
Telemedicine adoption appears to be mired in confusion among employees. More than 55% of employees with access to these programs were not aware of their availability, and almost 60% of employees who have telemedicine programs don’t feel they are easy to access, according to a separate CEB survey.
Employers seem to be introducing transparency and wellness programs because the savings from HDHPs appear to have plateaued, says Buckey. She also noted recent research that HSAs only deliver initial savings at the expense of the employee’s health.
“With high deductible plans and HSAs, there has been a lot of noise how they aren’t the silver bullet in controlling costs. Some researchers find that it has a three-year effect on costs because employees delay getting care and by the time they get it, it’s now an acute or chronic condition instead of something that could have been headed off early,” she says.
“And there is a tremendous lack of understanding on how these plans work for lower income employees, [it’s] hard to set aside money for those plans,” she says.
Educating employees to be smarter healthcare consumers is key. “What is becoming really obvious is that there is room to play in all these areas of cost shifting and high deductible plans and wellness but we can no longer put them in place and hope for the best,” she says. We have to focus on educating employees and their families,” she says. “If we are expecting them to act like consumers, we have to arm them with the tools. Most people don’t know where to start.”
She adds, “we know how to shop for a TV or car insurance but 99% of people don’t know where to start to figure out where to shop for prescription drugs or for the hospital where to have your knee surgery. Or if you get different prices from different hospitals, how do you even make the choice?”
When asked if the results of this year’s report surprised her – Buckey has worked on the past five – she said yes and no.
Given that the data is based on information from last summer for plans that would be in effect by 2017, she concedes that given the current political climate “a lot is up in the air.” Most employers were hesitant to make substantive changes to their plans due to the election, she says. We may see the same thing this year as changes are made to the ACA and the Cadillac Tax, she adds.
“What I was interested in were the incremental changes and some of the creativity being applied to longstanding issues of getting costs under control,” she says.
See the original article Here.
Source:
Albinus P. (2017 March 05). Employers embrace new strategies to cut healthcare costs [Web blog post]. Retrieved from address https://www.employeebenefitadviser.com/news/employers-embrace-new-strategies-to-cut-healthcare-costs?brief=00000152-1443-d1cc-a5fa-7cfba3c60000
2017 HSA Limits Released
Original post benefitspro.com
Change is not the order of the day for health savings account (HSA) limits in 2017.
The Internal Revenue Service (IRS) issued its new guidelines for contributions and out-of-pocket expenses for HSAs that are tied to a high-deductible plan this week.
Maximum OOPs for individual and family accounts won’t budge next year, and contributions will remain intact for family plans. Individual contributions increased slightly.
Here’s the run-down of the details:
- Out-of-pocket maximums are unchanged at $6,550 for individuals and $13,100 for families;
- Maximum contributions for family plans remain the same at $6,750;
- Individual contributions can increase from $3,350 to $3,400.
High deductible plans in 2017 will be those that have an annual deductible of least $1,300 for self-only coverage and $2,600 for family coverage.
HSAs are open to all men and women enrolled in a high-deductible health insurance program (exceeding $1,300 for individuals and $2,600 for family) aside from those policyholders currently covered by Medicare or listed as a dependent.
For both 2015 and 2016, IRS regulations mandating the potential contributions on plans covering families (a minimum of two people) held successive increases of $100. Individual restrictions, meanwhile, were bumped up by $50 in 2015, but remained stable the following year.
The annual fluctuations of HSA contribution levels are based directly upon federal cost of living adjustments. They will be applied for the calendar year of 2017.
A full account of the new guidelines may be read under Revenue Procedure 2016-28.