KFF: Employer-Sponsored rates up only 4% this year, but deductibles & the Cadillac Tax causing heartburn
2019 OPEN ENROLLMENT ENDS (most states)
Time: D H M S
Although nearly half of the country is covered by it, and the Affordable Care Act does impact it, I don't write much about Employer-Sponsored Insurance (ESI); there's a lot of facets to the ACA, and my main focus has obviously been primarily on the Individual Market (both on and off-exchange) as well as Medicaid (both expansion and "woodworkers").
Today, however, there are two big developments which relate directly to ESI:
- First, Hillary Clinton is supposed to make a big speech about her proposals for improvements to the ACA...which is expected to include opposition to the so-called "Cadillac Tax" on high-end employer-sponsored healthcare policies.
- The second is the Kaiser Family Foundation's 2015 Employer Health Benefits Survey, released just moments ago.
When it comes to the Cadillac Tax, I know that it's supposed to help curb overall healthcare costs. I know that it's extremely unpopular with unions (which are obviously one of Clinton's core target constituencies). I know that it's supposed to be one of the main revenue sources for funding the rest of the ACA. Beyond that, I don't know much about it.
Fortunately, over at Vox, Sarah Kliff has written this handy explainer to cover the major key points about the "Cadillac Tax":
Economists love the idea of limiting the tax exclusion for employer-sponsored coverage. For one thing, subsidizing employer-based care is regressive — it's a tax subsidy paid, in effect, by people who don't have good jobs that give them health care. But perhaps more important, it encourages employers to spend more and more money on lavish health insurance, which in turn pushes up health-care costs across the system.
...But voters? They hate it. And employers really hate it. Coalitions have sprung up in Washington, DC, for the sole purpose of killing it. Hundreds of legislators on both sides of the aisle have backed a bill to repeal it. It's become one of Obamacare's central weaknesses — and thus one of the GOP's main targets.
That, however, is not the main point of this entry. This is:
The key findings from the survey, conducted from January through June 2015, include a modest increase (4%) in the average premiums for both single and family coverage in the past year.
Key point #1: ESI premiums only went up 4% overall in 2015 (and only 3% overall in 2014). The ACA has not (as of yet, at least) led to sky-high rate increases in the ESI market.
The average annual single coverage premium is $6,251 and the average family coverage premium is $17,545. The percentage of firms that offer health benefits to at least some of their employees (57%) and the percentage of workers covered at those firms (63%) are statistically unchanged from 2014.
Key Point #2: Virtually no employers are dropping employee coverage due to the ACA.
Relatively small percentages of employers with 50 or more full-time equivalent employees reported switching full-time employees to part time status (4%), changing part-time workers to full-time workers (10%), reducing the number of full-time employees they intended to hire (5%) or increasing waiting periods (2%) in response to the employer shared responsibility provision which took effect for some firms this year.
Key Point #3: Remember all the hoopla about Papa Johns and other employers cutting employee hours down below the 30-hour/week threshold or firing people in order to avoid having to cover them? Turns out this was greatly exaggerated.
In fact, if you read it again, note that 2.5x as many employers (10%) are moving part-timers to full time than are doing the opposite (4%). It doesn't specify the total number of employees impacted in either group, but this kind of yanks the rug out from under the "millions of people cut back to 29.5 hours" claims.
Employers continue to be interested in programs addressing the health and behaviors of their employees, such as health risk assessments, biometric screenings, and health promotion and wellness programs. Meaningful numbers of employers which offer one of these screening programs now offer incentives to employees who complete them; 31% of large firms offering health benefits provide an incentive to complete a health risk assessment and 28% provide an incentive to complete a biometric screening. A majority of large employers (200 or more workers) (53%) have analyzed their health benefits to see if they would be subject to the high-cost plan tax when it takes effect in 2018, with some already making changes to their benefit plans in response to the tax.
Key Point #4: Ah, there it is. That's the "Cadillac Tax" everyone's wringing their hands over.
That's not the only "stormy weather ahead" part of the KFF report; there's also one other issue which is concerning in the ESI world, just as it is in the individual market:
Among covered workers with a general annual deductible, the average deductible amount for single coverage is $1,318. The average annual deductible is similar to last year ($1,217), but has increased from $917 in 2010. Deductibles differ by firm size; for workers in plans with a deductible, the average deductible for single coverage is $1,836 in small firms, compared to $1,105 for workers in large firms. Sixty-three percent of covered workers in small firms are in a plan with a deductible of at least $1,000 for single coverage compared to 39% in large firms; a similar pattern exists for those in plans with a deductible of at least $2,000 (36% for small firms vs. 12% for large firms) (Exhibit G).
As noted in this NY Times story, while the actual dollar amount increase isn't bad ($101 higher than last year), on a percentage scale, that's a 44% hike over the past 5 years. In fact, the "average deductible" has actually gone up 67% when you include the increase in those enrollees who have one at all.
Anyway, Kaiser's conclusion?
The continuing implementation of the ACA has brought about a number of changes for employer-based coverage...Even with these new requirements, most market fundamentals have stayed consistent with prior trends, suggesting that the implementation has not caused significant disruption for most market participants.
That's up until now. Going forward, things are obviously a bit murkier...although it's not all bad news:
The stability we have seen over the last several years does not mean that no changes are occurring.
...Employers, particularly large employers, continue to show interest in private exchanges, although enrollment to date is not very large. If these exchanges succeed, they have the potential to move some of the decision-making about benefits away from employers, which could transform how employees and employers interact over benefits.
While the ACA has not transformed the market, changes are occurring and more are likely to come. Some employers report that they have modified job classifications in reaction to the employer requirement to offer benefits, with more reporting that they increased the number of jobs with full-time status than decreasing it.
Here's the line which I expect to attract the most attention from anti-ACA forces (but they'll probably leave out the "5%" caveat when doing so):
Additionally, five percent of large employers (200 or more workers) reported that they intend to reduce the number of full-time employees that they intend to hire because of the cost of providing health care benefits.
The Cadillac Tax, however, is definitely causing heartburn for a lot of people:
Employers also are considering the potential impacts that the high-cost plan tax may have on their health benefits, with small percentages already taking action to lower plan costs. Over a longer period, the high-cost plan tax has the potential to cause significant changes in employer-sponsored coverage as employers and workers look for ways to keep cost increases to inflation far below the even moderate premium increases we have seen in recent years.
...At the same time, concerns about the high-cost plan tax will have employers and insurers looking for savings. These competing pressures may well lead to plan changes such as tighter networks, stricter management and higher cost sharing as employers and insurers struggle to contain these higher costs.
All in all, kind of a mixed bag. This Cadillac Tax thing seems to be the next Big Fight when it comes to the ACA, and I honestly can't decide whether it's an inherently Good or Bad thing. As best as I can figure it, the solution is to modify the Cadillac tax with some sort of tiered tax as opposed to killing it outright...but with the 2016 election around the corner...