Election Results Spell Change for Employer Sponsored Plans

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Election Results Spell Change for Employer Sponsored Plans
Calendar09 November 2016

Last night’s vote was about change, but what will Donald Trump’s presidency mean for healthcare benefits?  The ACA will almost certainly change, although it is unclear if we will see full repeal or a major overhaul.  With that said, Republicans won’t want to risk the backlash of kicking 25 million constituents off their plans. The task at hand is to “fix” the parts of the ACA that are ineffective.  At this point, here’s what we think we know:

  • The popular features of the ACA will likely remain, such as expanded eligibility for dependent children to age 26; the ban on pre-existing condition limits; and the closed gap in Medicare prescription coverage
  • Repeal of the excise tax could become a reality -- but would a cap on the employee tax exclusion take its place?
  • We’ll see a laser focus on how to create new, competitive markets for individuals who don’t get coverage through their employer or public programs, with Trump favoring individual tax preferences

Recent Mercer survey results found employers divided on repealing and replacing the ACA, with clear variation by employer size. While a majority of small employers favors repeal and replace (65% of those with 10-499 employees), that falls to just 36% of those with 20,000 or more employees. Our interpretation is that it is not the “repeal” as much as it is the “replace” that makes employer support uncertain.  Given a Trump presidency and a Republican-controlled Congress, here are key issues for employers as they consider the impact on their health program strategies:

  • Many employers welcome the promise of repeal of certain ACA requirements, especially the excise tax, the employer mandate, and reporting. But be prepared; it could take time -- a year or two -- for all the transitions to take place. These changes may need to be part of a larger plan for covering the 25 million uninsured who went to the public plans and Medicaid.
  • Enrollment in high-deductible health plans continues to grow and there is keen interest in expansion of HSAs. Legislation has been proposed to increase funding limits and allow funds to be used for OTC medications, telemedicine visits, and onsite clinic visits to support further growth.
  • While the rise of consumer-directed health plans has been an effective cost-management strategy, it has put financial pressure on employees and their families, so employers need to keep pushing for greater health care price transparency.
  • Employers will also need to double down on Rx strategies. Republicans are less likely to go after pharma to control drug prices, and projections are for an additional $25B annually in new drug spend.
  • More states passed time-off/sick leave laws. At the same time, employers are working on a proposal to get the federal government to pass ERISA-like safe harbor rules to ease the administrative burden of compliance with state and local laws.

Employers have done a great job of holding health benefit cost growth mostly below 4% in the years after the passage of the ACA, and 2016’s increase of just 2.4% was one of the lowest we’ve seen in decades. The threat of the excise tax was certainly a factor, and some employers made benefit cuts they didn’t want in order to hold down cost. To keep health care cost growth at sustainable levels in the years ahead will mean changing the health care system for the better, to ensure people get the right care, in the right place, at the right time -- and error-free. 

Employers provide health care coverage for more than half of the American people and are uniquely positioned to be a driving force for meaningful change in how care is accessed and delivered.  It is important that your voice is heard as the new policy debates begin. But don’t wait for the government. All of us must keep working to drive cost-effective care and better outcomes for our employees and their families.

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