Panicking about the impact of health care reform legislation? Chances are, your benefit consulting firm has already developed a proprietary tool for this very occasion.
Ken Sperling, global leader of Lincolnshire, Ill.-based Hewitt Associates’ health management consulting practice, envisions “a mammoth job” evaluating health care reform legislation “that is going to make complying with COBRA subsidies look easy.”
But don’t fret just yet. Steve Raetzman, an Arlington, Va.-based senior health care benefits consultant with Watson Wyatt Worldwide, notes that while complying with such legislation might appear overwhelming at first blush, it’s important to remember that key provisions aren’t likely to kick in until 2014 or 2015.
Mercer began tracking health care reform for about three years in anticipation of such legislation emerging sooner or later, according to Linda Havlin, a Chicago-based worldwide partner and national practice leader for the firm’s health and benefits consulting and intellectual capital areas.
The effort commenced with questions about the topic of reform appearing in its annual survey, as well as three ad hoc surveys issued in 2009 to gauge employer opinions about coverage mandates, benefit levels associated with a proposed excise tax and the individual insurance market. In addition, Webcasts were conducted to keep consultants and their clients abreast of key political developments alongside monthly Web briefings for clients in 2009. Financial modeling of how various scenarios would affect large firms also is now available to all customers.
Mercer’s pricing model is able to assess the actuarial impact of plan design criteria, contributions and overall valuations. Tools also can be used to examine larger implications, such as the financial stability of an employer’s risk pool.
Milliman’s comprehensive and customizable health care reform modeling is scaled to gauge the financial impact of a public plan, individual coverage mandate and tax on plans deemed over generous beyond benefit-design minimums relative to the status quo based on employee demographics. The internal tool for employers also examines the indirect effect of seemingly unrelated assumptions, such as expanding Medicaid coverage, which could trigger capacity problems for providers and influence pricing of their services.
“We spent a lot of time programming to develop this model with inputs and outputs,” reports Clark E. Slipher, a Milwaukee, Wis.-based consulting actuary for Milliman, noting that with all the moving parts to health care reform, a simple spreadsheet could not accommodate the multiple variables and complexity of these multiple calculations.
Meantime, Hewitt’s health care actuaries built a health reform impact model to determine the plan design and financial effect of landmark legislation based on extensive internal research and employer trend data, as well as the firm’s consulting and administrative expertise. Critical areas of exploration include whether current benefit offerings satisfy an individual health insurance mandate and the impact of excise taxes on high-cost plans as they relate to employees, union agreements, and administrative procedures and costs.
The solution uses salary as a proxy for family income to get a sense of what percentage of the workforce would fail the proposed affordability test under which employee contributions exceed 9.8% of adjusted gross income, and, therefore, be able to participate in a more affordable insurance exchange.
One major concern in the business community is that a looming change in the nation’s health care system that now appears larger than life could choke innovation. Given the prevailing attitude of employers, Slipher senses that many organizations are hesitant to pursue benefit design changes with reform legislation appearing to be more imminent than ever before.
“I think there’s a great deal of angst about the uncertainty of what is it going to be,” he observes.
Guest blogger Bruce Shutan is a former managing editor of Employee Benefit News and a freelance writer based in Los Angeles.
