Benefits May 18, 2016

Even If Repealed, Employers Would Keep Some ACA Provisions

"Employers have seen certain ACA provisions have a positive impact on their workforce," says Julie Stich, CEBS, research director at the International Foundation of Employee Benefit Plans.
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A new report from the International Foundation of Employee Benefit Plans (IFEBP) finds that if the Patient Protection and Affordable Care Act (ACA) is repealed, 78% of employers would keep in place at least some of the provisions they have already implemented in their health plans.

Employers also report a wide-range of provisions they would like to see reinstated in new legislation if the ACA is repealed, with the top being elimination of preexisting condition exclusions (38%), coverage of adult children to age 26 (31%) and increased wellness incentives (31%). A majority of employers predict a new health care reform bill being passed within the next four years if ACA is repealed.

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“Employers have seen certain ACA provisions have a positive impact on their workforce,” explains Julie Stich, CEBS, research director at IFEBP. “Mandates such as the elimination of preexisting condition exclusions and coverage of children until age 26 have allowed employees and their families to receive health care services that have made a positive impact on their physical, financial and emotional well-being.”

The report, “2016 Employer-Sponsored Health Care: ACA’s Impact,” found that employers have made a number of changes to curb rising costs due to ACA, including increasing out-of-pocket limits (37%), in-network deductibles (34%) or employees’ share of premium costs (31%). Employers have also increased copayments or coinsurance for primary care (28%), increased employees’ share of prescription drug costs (25%) and increased the employee’s share of dependent coverage cost (24%). One in ten employers has adopted a full-replacement high-deductible health plan (HDHP) because of ACA.

NEXT: Still preparing for the Cadillac tax

Looking ahead, 28% of employers are currently working on changes to avoid the ACA’s excise tax on high-cost plans (Cadillac tax), and an additional 38% plan to do so before the tax takes effect in 2020. Just 2% of employers report they plan to pay the tax.

The most common actions taken or planned to avoid the tax include moving to an HDHP (43%), shifting costs to employees (42%), dropping higher-cost plans (31%) or reducing benefits (30%). Of respondents taking these actions, 68% report they are somewhat or very unlikely to undo these plan changes if the Cadillac tax is repealed. 

Employers report their biggest ACA challenge and second biggest cost-driver for 2016 is reporting and disclosure. General ACA administrative costs are noted as the biggest cost-driver for 2016 and respondents expect that to continue in the future.

The report finds that employers remain committed to offering employer-sponsored health care coverage. Looking forward five years, only 3% of employers say it is unlikely they will be offering health care. Employers report they continue offering coverage to attract and retain employees and to increase employee satisfaction.

Survey responses were received from 446 human resources and benefits professionals. The surveyed organizations represent a wide base of U.S. employers from nearly 20 different industries and range in size from fewer than 50 to more than 10,000 employees.

The survey report may be downloaded at www.ifebp.org/ACA2016.
Data and Research May 18, 2016

Retirement Health Care Costs Could Top $375K

Even those who have met their 80% income replacement goal will need more to cover all health care expenses, a study finds.
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HealthView Services’ new 2016 Retirement Health Care Costs Data Report shows the average healthy 65-year-old couple retiring this year is projected to spend $288,400 in today’s dollars on lifetime Medicare Parts B, D and supplemental insurance (Plan F) premiums. 

When dental, hearing, vision and all other out-of-pocket expenses are included, the total retirement health care bill rises to $377,412.

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For retirees counting on Social Security income, HealthView Services’ Retirement Health Care Cost Index shows a 66-year-old couple retiring this year will need 57% of their Social Security to cover total health care costs. A 55-year-old couple retiring in 10 years will require 88%, and a 45-year-old couple, 116%.  These calculations are based on Social Security Trustees’ projections of a 3.1% cost-of-living adjustment (COLA) in 2017 and 2.7% thereafter.     

The paper addresses savings shortfalls for retirees who rely on income replacement ratios (IRR). The data indicates that using an IRR-based savings approach will only cover a portion of retirement medical expenses. A 55-year-old man who has met his 80% IRR goal will, for example, need an additional $25,679 investment growing at 6% annually to close this gap.

A key cost driver is health care inflation in retirement. Overall retirement health care costs are projected to have increased by 7.3% between 2015 and 2016, driven in part by a 16.1% increase in Medicare Part B premiums over the same period. Over the next 20 years, HealthView projects a more modest average annual inflation rate of 5.1% for retirement health care expenses. This is consistent with forecasts from the Centers for Medicare and Medicaid, which expects at least eight years of health care inflation between 5% and 7%.

Other findings include the cost disparity between genders, driven by a greater average life expectancy for women. A 30-year-old female retiring at 65 can expect to pay $548,098 (in today’s dollars) in total lifetime retirement health care expenses—$118,632 more than a male of the same age (based on life expectancies of 91 and 87, respectively).

Similarly, healthy Americans can expect to pay significantly more for retirement medical services than those suffering from a chronic disease that may impact their lifespans. A healthy male or female can expect to pay almost twice as much for lifetime health care in retirement than someone who is diabetic.

“Few Americans have taken steps toward addressing medical expenses in retirement, and most do not understand Medicare costs,” says Ron Mastrogiovanni, founder and CEO of HealthView Services. “Our data shows the significant impact of rising health care costs and the importance of planning for them.”

The report is here.

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