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Towers watson-health-care-reform-what-ahead-presentation-feb2012-120223082549-phpapp01
- 1. Health Care Reform — What’s Ahead
A Spectrum of Opportunity
February 22, 2012
© 2012 Towers Watson. All rights reserved.
- 2. Today’s speakers
Randy Abbott is a senior consulting leader at Towers Watson, based in
Boston. He has over 35 years’ experience in HR, benefits, health care and
workforce health improvement. The author of over 165 articles and
monographs on health care issues, Randy has emerged as a leading
strategist on Health Reform, advising some of the nation’s largest and most
complex employers on its implications.
Jane Jensen is a senior health care consultant in Towers Watson’s Health and
Group Benefits practice and is based in Denver. She has over 25 years of
experience in health and welfare employee benefits design and financing and is
the lead actuary on health reform issues.
Mike Langan is an attorney with over 30 years’ experience in health benefits
and public policy. He supports Towers Watson’s consulting staff on regulatory
issues affecting employer health and group benefit plans. Mike has written and
spoken extensively on the Patient Protection and Affordable Care Act.
© 2012 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 2
- 3. Discussion topics
A convergence of challenges and opportunities
The health care reform outlook
Spectrum of opportunity
Optimizing the play
Embracing the opportunities
© 2012 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 3
- 4. Health care reform is one of many converging factors affecting
employers
Health Care
Reform
Escalating New Entrants
Costs and Technology
Employer
Health
Plans
Lack of Employee Delivery
Engagement System Shifts
Workforce Productivity
Challenges
© 2012 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 4
- 5. Total rewards builds from strategic objectives and takes a portfolio
approach to deliver desired results
© 2012 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 5
- 6. Most employers expect to “play” by retaining a medical program for
actives after 2014
“Play” Provide employer-sponsored health 26%
options coverage for the long term 38%
Provide employer-sponsored health coverage, but structure 20%
contributions and communication to encourage low-wage… 8%
Provide employer-sponsored health coverage until the 15%
excise tax is triggered 10% Finance: 67%
Provide employer-sponsored health coverage until an 6% HR: 67%
inflection point other than the excise tax 11%
Adopt a defined contribution (DC) approach by providing
“Pay” monetized value to employees, pay penalties, and direct
9%
11% Finance: 15%
options employees to Exchanges
Exit employer-sponsored health coverage, pay penalties, 6%
and direct employees to Exchanges 2%
HR: 13%
0%
Other action
2%
18%
Don't know
18%
HR n=104 Finance n=201
Source: 2011 Towers Watson-Forbes Survey: Opportunity to Align Cost and Talent Objectives?
.
© 2012 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 6
- 7. Political and legal challenges create uncertainty for employers
Potential “game-changers” loom in the near term
Supreme Court decision expected by late June 2012
November 2012 general election will affect strategy in White House and
Congress
Repeal is more complex than it appears — likely requiring GOP “sweep” and
a super-majority in the Senate
The combination of near-term uncertainty and long-term strategic
significance makes health reform a crucial business planning
contingency
© 2012 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 7
- 8. Meanwhile, health reform implementation is moving forward
New implementation guidance is arriving frequently
Uniform four-page summary of benefits and coverage
Employer Pay-or-Play mandate
Auto-enrollment mandate
90-day limitation on waiting periods
W-2 reporting beginning with 2012
Women’s contraceptive services
Comparative effectiveness tax on employer plans begins with 2012
Mandatory employee communication on Exchanges and federal subsidies is
just 12 months away
© 2012 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 8
- 9. Reform may influence your broader workforce strategies
Total Rewards Strategy
Health Care Reform Financial Impact
Who can enroll? What is the cost per enrollee? How do we control the costs?
Workforce Structure Contribution Strategy Trend Mitigation
Design,
Part-time Employed Differ by age, Engagement,
delivery,
vs. low wage/ Affordable? number of behavioral
health
full-time higher wage dependents? changes
management
Play or Pay Excise Tax
Health care reform, and the changes scheduled to take effect in 2014 in particular,
have implications far beyond the benefit program — creating business risks that will
affect workforce planning, total rewards strategies and costs
© 2012 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 9
- 10. The decision will vary based on employer profile
Play Spectrum of Opportunity Pay
Compete heavily to Diverse margins Low margins
attract/retain talent Mix of low/high-wage Majority of employees are
Health care benefits are earners low-wage earners
a core part of Employee Health benefits are a Many employees may be
Value Proposition material consideration Medicaid-eligible
Healthy workforce is viewed Workforce requires a Higher turnover
as a key productivity driver diverse range of Health care benefits are not
Employee Value Proposition occasional and core to Employee Value
requires health commitment part-time workers Proposition
Awaiting an inflection point High number of part-time or
seasonal workers
Examples Examples Examples
Technology Financial Services Retail
Health Care Low-end Manufacturing Hospitality
*Estimated; Source: 2011 Towers Watson Health Care Trend Survey, August 2011.
© 2012 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 10
- 11. Will you play or pay…the spectrum of opportunity offers many
options
Play
Play Spectrum of Opportunity Pay
Play and Pay and
Optimal play redirect Selective play redeploy Pay and exit
Continue as a plan Restructure Limit eligibility to Discontinue plan Discontinue
sponsor for all contributions to employer-sponsored sponsorship and plan
employees qualify low-paid plan and direct provide some sponsorship
employees for ineligibles to Exchanges financial top-up with no financial
federal subsidies for employees accommodation
for employees
© 2012 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 11
- 12. Do the math: Decisions along the spectrum will have significant
workforce and cost management implications
Optimal play Play and redirect Selective play Pay and redeploy Pay and exit
$3,650
$3,650
$2,034
$463 $1,536
$3,103 $2,636
$2,730 $3,218
$12,092
$9,792 $10,172
$7,832 $7,931
$2,887
Employer pays Employee pays Estimated Federal Subsidy
© 2012 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 12
- 13. What are the implications of exchanges and emerging market
dynamics for the Pay or Play decision?
Group Plan Sponsorship Individual Plan Enrollment
Individual Plan Enrollment
Current Evolving market for members under age 65 Medicare
State via Private Exchange or “Public” Exchange Market
Plan Sponsor Employer Pooled group plan; Expanded access to Individual market and
Role makes all employer may be able to Medicaid and “Public “Private Exchanges” well
decisions shift some administrative Exchanges” scheduled to established; individual
functions to group be available in 2014 plans may offer higher
“Private Exchange” regardless of health status; value vs. group plans
employer reporting to (especially as the donut
Exchange hole narrows)
Employee Limited choice; Broad choice; select a Broad choice; directed to Broad choice; use
Experience select an Private Exchange plan Medicaid or select a Public Medicare coordinator to
employer- Exchange plan access individual health
sponsored plan plans
Employer Full plan cost Premium payment based Penalties for active FT Financial subsidies (DC
Cost less employee on employee elections, employees; Financial contributions) may be
contributions less employee subsidies (DC provided
contributions contributions) may be
provided
Employee Average rates Generally average rates; Rates vary based on plan Rates vary based on plan
Cost vary by plan based on plan and family and family tier selected and family tier selected and
and family tier tier selected plus age, location, tobacco may also vary by age;
selected use; federal subsidy may Medicare premiums also
be available apply
© 2012 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 13
- 14. Consider options that are in between Pay or Play: Exchanges
In certain situations, the opportunity of participating in new federally subsidized programs
in 2014 may result in lower cost than the current situation
Given this reality, some employers may wish to consider options that allow access to
subsidized coverage for a portion of their population
ILLUSTRATIVE
Single Family of 4
$10,000
Exchange $30,000
Exchange
$9,000
$25,000
$8,000
$7,000
$20,000
$6,000
$5,000 $15,000
$4,000
$10,000
$3,000
$2,000 $5,000
$1,000
$0 $0
Employer Plan Low Income; Moderate Income; High Income; Employer Plan Low Income; Moderate Income; High Income;
Exchange Plan Exchange Plan Exchange Plan Exchange Plan Exchange Plan Exchange Plan
EE Premium EE Out-of-Pocket Employer Plan Spend Federal Subsidy
Note: Chart scales differ for Single vs. Family Coverage.
© 2012 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 14
- 15. Excise tax implications ILLUSTRATIVE
$14,000
$12,000
$10,000
$8,000
$6,000
$4,000
$2,000
$0
2018 2019 2020 2021 2022 2023 2024 2025
Non Deductible Excise Tax $638 $1,348 $2,440 $3,819 $5,446 $7,490 $9,795 $12,365
Absent modification, plan costs will exceed thresholds
© 2012 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 15
- 16. Organizational health strategy
Organizational Health Care Strategy
Health Benefits Workforce Health and Productivity
Design, financing, risk management and Optimization of workforce productivity
administration within total rewards and/or via external exchange and engagement through good health
Operational Framework
Health Engagement Accountability Linking Provider Technology Healthy
Improvement Strategies Environment
Measurement and Improvement
Data management
Reporting and benchmarking
Integrated health and productivity assessment
© 2012 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 16
- 17. Optimize the play — and opportunities
Program Design
Account-based
Narrow
Behavior-based
Consumer Engagement
Incentives
Financial Subsidy Behavioral economics
Part-time Social media
Dependents Game mechanics
Surcharges
Optimizing
Employer Provider
Health Integration/
Plans Payment Reform
Care Delivery Bundled payments
Integrated care
Primary care alternatives Shared savings
ACOs/PCMH
Workforce Health
and Productivity
Wellness
Condition management
Onsite health
© 2012 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 17
- 18. Optimizing the play: Why does it matter?
Performance varies widely Annual Cost Per Employee Efficiency
among employers Percentile Percentile
Significant opportunity for 25th 50th 75th 25th 50th 75th
cost avoidance today and $8,487 $9,752 $11,166 9.7% 1.4% -8.0%
future years
Database Actual Adjustment Factors Custom ABC
Benchmark Company
Explore dependent $15,132
subsidies 29% $13,693
Employers likely to focus $10,637 11% 9%
3% 3%
more on employee coverage
after reform Age/ Family Geography Plan Composite
Gender Size Value
Lower dependent size
impacts potential excise tax
for dependent coverage
Key
Dependent participation drives an additional 11% annual health care cost
Message
© 2012 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 18
- 19. Embrace change and opportunities
New
Network
Structures
Innovative Primary
Engagement Care
Strategies Alternatives
Integrated
Value-based
Care
Reimbursement
Delivery
© 2012 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 19
- 20. Beyond the technical analysis, consider the higher-order questions
What are the implications of change — for our operations,
1 our workforce, our brands, our competitive environment?
What are the implications for attraction, retention and
2 engagement? And for retirement and retirees?
Key Questions Beyond benefits, what is our commitment to workforce
3 health? Is there a necessary connection between health
for Employers and benefits?
What new tactics and/or partners should we consider in
4 optimizing our program today?
If we can free up dollars spent on active and
5 retiree health benefits, what opportunities do we have
to reallocate investments?
© 2012 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 20
- 21. © 2012 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 21