Pre-Existing Conditions?

Nevin AdamsBy Nevin Adams, EBRI

Much has been made of the so-called employer mandate of the Affordable Care Act, and its postponements. Of course, as a recent EBRI publication points out, the mandate (currently slated to be enforced effective in 2015) applies only to employers with 50 or more full-time workers – and most of these employers already offer health coverage to their workers. Last year, 91 percent of employers with 50–199 workers offered coverage, as did 99 percent of employers with 200 or more workers, according to the EBRI analysis.

However, the Patient Protection and Affordable Care Act (PPACA) defines a full-time employee as one who works 30 or more hours per week, on average – well below the 40-hour-week threshold typically associated with full-time employment. As a result, there is concern that employers may respond by cutting back on health coverage for part-time workers or by decreasing part-timer hours to keep them below the 30-hour-week threshold.

The EBRI report notes that, overall, there were 20 million workers employed under 30 hours per week and 18.8 million employed 30–39 hours per week in 2012. Among those employed between 30 and 39 hours per week, 6.3 million (33.6 percent) had employment-based coverage from their own job. In contrast, 60.5 percent of workers employed at least 40 hours per week had employment-based coverage from their own job.

Has the PPACA led to a reduction in hours? The EBRI analysis finds that between 2006 and 2010 (the year that PPACA was signed into law), the percentage of workers employed fewer than 30 hours per week increased from 11.9 percent to 14.1 percent, while the percentage of workers employed 30–39 hours per week also increased, from 11.4 percent to 13.2 percent over the period. Since passage of PPACA, there has actually been a slight drop in the use of part-time workers, though this may be attributable to the drop in the unemployment rate.

Indeed, the percentage of workers with coverage through their own job has been trending downward since 2007 regardless of hours worked per week. However, in relative terms, the EBRI report notes that part-time workers have experienced a much larger decline in coverage than full-time workers. Between 2007 and 2012, workers employed 40 or more hours per week experienced a 3 percent reduction in the likelihood of having coverage from their own job, while those employed 30–39 hours per week experienced a 12 percent decline (those employed fewer than 30 hours per week experienced a 20 percent decline).

Among workers employed 30–39 hours per week, both those who worked for a large employer and those who worked for a small employer experienced a 9 percent decline in coverage between 2008 and 2012.

The data confirm that the recent recession resulted in an increased use of part-time workers, but since 2010 the percentage of workers employed less than 40 hours per week has declined slightly. The data also indicate that while both full-time and part-time workers have experienced drops in health coverage, part-time workers have been affected disproportionately.

The question, of course, is whether PPACA’s full-time worker definition will accelerate – or ameliorate – those trends.

  • Notes

“Trends in Health Coverage for Part-Time Workers, 1999–2012” is published in the May EBRI Notes at http://www.ebri.org/pdf/notespdf/EBRI_Notes_05_May-14_PrtTime-Rollovers.pdf

 

Motion “Sensers”

By Nevin Adams, EBRI

Nevin Adams

I’m not sure exactly when I was introduced to the concepts behind Sir Isaac Newton’s laws of motion.  While behavioral finance has laid claim to the concept of (and means of combatting) inertia in benefit plan design, Newton’s first law of motion (sometimes called “the law of inertia”)—first published in the late 1600s—reminds us that (in layman’s terms), an object at rest remains at rest; or perhaps more precisely, an object continues to do whatever it happens to be doing unless a force is exerted upon it.

However, the one I remember most from earlier days is the third law of motion—the notion that for every action there is an equal and opposite reaction.  To this day, I have a “Newton’s cradle” at my desk.

While Newton’s laws were intended to explain the motion of objects, they do seem to have application in matters of human interaction as well.  One need only look at the increasingly strident levels of partisanship on Capitol Hill to appreciate the stridency of “equal and opposite” reactions.

A recent EBRI publication[1] noted that recent decisions by some employers to eliminate health benefits for spouses who were eligible for coverage through their own employer could represent a “tipping point” in employment-based health benefits.  While the report noted that in 2012, 7 percent of employers did not cover spouses when other coverage was available to them, it also cautioned that as of late 2012–early 2013, another 8 percent of large employers were reporting that they planned to exclude spouses from coverage when other coverage was available.

These decisions come at a time when employers are wrestling with how to control the rising cost of providing health benefits to workers, in part due to the requirements of the Patient Protection and Affordable Care Act of 2010 (PPACA).[2]  In fact, one large employer that recently made the decision to drop spousal coverage under those circumstances specifically said, “since the Affordable Care Act requires employers to provide affordable coverage, we believe your spouse should be covered by their own employer.”

EBRI’s analysis indicates that the costs of covering spouses may well represent a tempting cost reduction target for some.  The report notes that, in 2011, policyholders spent an average of $5,430 on health care services, compared with $6,609 for spouses, and—even adjusting for factors such as gender, age, and overall health status—found that spouses still have health care costs that are roughly 7 percent higher than policyholders.

The report cautions, however, that while “first-mover” firms may save money in the short run by eliminating working spouses from their plan, those costs could come back to them over time as other employers embrace that approach—basically returning policyholders to their coverage who heretofore were covered as spouses in other programs.

Ultimately, any savings from those moves will depend upon each firm’s composition of couples and their respective employment statuses.  Indeed, given prevailing levels of cost sharing, the report notes that employers might end up worse off under a change in spousal coverage policies, particularly since employers generally subsidize employee-only coverage more than they subsidize family coverage.

As the EBRI report reminds us, decisions about benefit plan design, like so many other decisions, should be made thoughtfully—and with an eye toward the realization that, for every action there can be an equal, opposite, and sometimes greater, reaction.


[1] “The Cost of Spousal Health Coverage” is available online here.

[2] PPACA requires that employers with 50 or more workers provide health coverage to workers and dependent children until they reach age 26. It does not, however, require employers to provide health coverage to spouses, whether or not they are eligible for other health insurance.

“Believe” Able

By Nevin Adams, EBRI

Nevin Adams

Nevin Adams

In that holiday classic “Miracle on 34th Street,” a man named Kris Kringle (who claims to be “the one and only” Santa Claus) winds up having his sanity challenged in court. Ultimately, the judge dismisses charges that would have resulted in Kringle’s institutionalization—not because he actually is persuaded to believe by the evidence that Kris is the REAL Santa Claus, but because he finds it convenient to demur to the determinations of a higher authority (in this case, the US Postal Service).

While belief may not always be a portent of reality, it can be a powerful force, as any parent who has ever nurtured Santa’s existence well knows.

The 2013 EBRI/Greenwald & Associates Health and Voluntary Workplace Benefits Survey¹ (WBS) reveals that most workers believe their employers or unions will continue to provide health care insurance— although there have been employer surveys indicating that, at some point in the future, some may not. Not that workers fail to appreciate future uncertainties: While 46 percent of worker respondents to the WBS indicate they are extremely or very confident about their ability to get the treatments they need today, only 28 percent are confident about their ability to get needed treatments during the next 10 years.

Similarly, when it comes to retirement, the Retirement Confidence Survey² has, for nearly a quarter century now, shown a remarkable resilience in worker confidence regarding their financial future in retirement, belying the aggregate savings levels indicated in that same survey. Over the course of that survey, we’ve seen confidence wax stronger and then wane―and while we’ve seen distressingly low levels of preparation, more recently we’ve also seen a growing awareness of the need for those preparations. The RCS has also documented a consistent trend in workers believing they will be able to work, and to work for pay, longer than the experience of retiree respondents suggests will be a viable option.

Next month we’ll field the 24th annual version of that Retirement Confidence Survey, where we will (among other things) seek to gain a sense of American workers’ preparation for (and confidence about) retirement, as well as some idea as to how those already retired view the adequacy of their own preparations. Is a lack of worker confidence about retirement finances a troubling indicator? Or does it suggest that they have a greater appreciation for the need to prepare?

Later in the year the WBS will, as it has since 1998, probe sentiments about health care and voluntary benefits: Will workers sense a continued commitment by their employers and unions to provide health care coverage? If not, how might that affect their commitment to their work and their workplace? How might concerns about health coverage affect and influence retirement preparations?

In the cinematic “Miracle,” there seems to be a connection between believing something will happen and its reality. Little Susan Walker goes so far as to intone “I believe… I believe… It’s silly, but I believe!” even as she stumbles upon the home of her dreams.

In the real world, the linkage between belief and reality isn’t generally so convenient. And employers, providers, and policy makers alike, know that being able to anticipate those potential gaps between belief and a future reality can be critical.

In addition to providing financial support to two of the industry’s most highly regarded employee benefit surveys, underwriters of the RCS and WBS have access to special early briefings on the findings, in addition to a number of other benefits. If you’d like to know more, email Nevin Adams at nadams@ebri.org

You can find additional information about the RCS online here and information about the WBS (previously called the Health Confidence Survey) online here.

Notes

¹ See “2013 Health and Voluntary Workplace Benefits Survey: Nearly 90% of Workers Satisfied With Their Own Health Plan, But 55% Give Low Ratings to Health Care System,” online here.

² See “The 2013 Retirement Confidence Survey: Perceived Savings Needs Outpace Reality for Many,” online here.

System Upgrades?

By Nevin Adams, EBRI

Adams

Adams

I recently upgraded the operating system on my iPhone. Not that that would normally be a big deal—I generally try to keep such things current, despite the occasional “bumps” that inevitably come with software upgrades. But this time the upgrade wasn’t just about improving performance and fixing issues that had been identified since the last update.  No, this one not only LOOKED different, some core functions were said to work differently—and “different” in this case appeared to be a problem for a number of users.

So, before I took the “plunge,” I spent some time trying to do some research—trying to find out what kinds of improvements I could anticipate, and to better understand the complaints associated with an upgrade from which there was, apparently, no “return.” The upgrades were readily quantified (on the vendor’s website most notably), although I think it’s fair to say they had a motivation in promoting the new system. However, most seemed to be relatively unimportant in terms of how I used, or planned to use, my device. As for the problems: Well, they were equally easy to find, but harder to quantify. And, like those product ratings on any website, were from people I did not know and whose judgments I had no particular reason to trust.

Consequently, stuck between conflicting perspectives, and seeing no particular advantage in making a change, I did what most human beings do. Nothing. Until, with my current contract expiring, I realized that the upgrade was likely to be imposed on me at that point, regardless of my preferences.

On October 1, the public marketplaces (formerly known as connectors or exchanges) associated with the implementation of the Patient Protection and Affordable Care Act (PPACA) will begin to come online—in various phases and, from what one can discern from published reports and official updates, in various states of readiness. The advantages have been outlined, as have the potential pitfalls. Doubtless the experiences will be as varied as the experience(s) and expectation(s) of the individuals involved.

However, it’s hardly a new idea. Back in 1980 the conservative Heritage Foundation began advocating that the Federal Employee Health Benefit Program (FEHBP—a marketplace for multiple insurers and scores of plan options) become a model for expansion of health coverage through an individual mandate. Today, simply telling those in Washington, DC, that “the marketplaces are just a version of FEHBP” brings an immediate understanding of the concept.

A year ago, EBRI published an Issue Brief that outlined the issues related to private health insurance exchanges, possible structures of an exchange, funding, as well as the pros, cons, and uncertainties to employers of adopting them. That report contained a summary of recent surveys on employer attitudes, as well as some changes that employers have made to other benefits that might serve as historical precedents for a move to some type of defined contribution health benefits approach. It is a report that provides both current analysis alongside a historical perspective—a resource for those looking to better understand and plan for the potential changes ahead.¹

That said, when Paul Fronstin, EBRI’s director of Health Research and the EBRI Center for Research on Health Benefits Innovation, updates the information in the future, he may well call them marketplaces, unless the name “upgrades” again in the weeks ahead!

Notes

¹ See “Private Health Insurance Exchanges and Defined Contribution Health Plans: Is It Déjà Vu All Over Again?” online here.

You can find a catalogue of recent EBRI research on PPACA and its potential impact on employment-based health benefits online here.

Future Tense?

By Nevin Adams, EBRI

AdamsAmericans have long had a beef of sorts with the U.S. health care system.

Asked to rate that system, a majority of workers describe it as poor (21 percent) or fair (34 percent), and while nearly a third consider it good, and less than half that many rate it as very good (12 percent) or excellent (2 percent), according to the 2013 Health and Voluntary Workplace Benefits Survey (WBS). Perhaps more significantly, the percentage of workers rating the health care system as poor doubled between 1998 and 2006, according to the 1998–2012 Health Confidence Survey (HCS).

On the other hand, workers’ ratings of their own health plans continue to be generally favorable. In fact, one-half (51 percent) of those with health insurance coverage are not just content with the coverage they have, they are extremely or very satisfied with it.

Satisfaction with health care quality continues to remain fairly high, with 50 percent of workers saying they are extremely or very satisfied with the quality of the medical care they have received in the past two years.

In fact, dissatisfaction with the health care system appears to be focused primarily on cost: Just 13 percent are extremely or very satisfied with the cost of their health insurance plans, and only 11 percent are satisfied with the costs of health care services not covered by insurance.

And, despite the ongoing (and frequently dramatic) news coverage of changes (current and contemplated) resulting from the Patient Protection and Affordable Care Act (PPACA), workers continue to be generally confident that their employers or unions will continue to offer health insurance. In 2013, 28 percent of workers report that they are extremely confident their employers or unions will continue to offer coverage, 37 percent are very confident, and 28 percent are somewhat confident.

On the other hand, confidence about the health care system decreases as workers look to the future. While 46 percent of workers indicate they are extremely or very confident about their ability to get the treatments they need today, just 28 percent are confident about their ability to get needed treatments during the next 10 years; and while 39 percent are confident they have enough choices about who provides their medical care today, fewer than-  1 in 4 are confident about this aspect of the health care system over the next 10 years.

Finally, 25 percent of workers say they are confident they are able to afford health care without financial hardship today, but this percentage decreases to 18 percent when they look out over the next decade.

Ultimately, the findings of the 2013 Health and Voluntary Workplace Benefits Survey provide not only valuable insights into how Americans view and value their health care now, but also a sense that the current comfort and confidence levels could be relatively short-lived.

“The 2013 Health and Voluntary Workplace Benefits Survey: Nearly 90% of Workers Satisfied With Their Own Health Plan, But 55% Give Low Ratings to Health Care System” is available online here.

”Charge” Accounts

By Nevin Adams, EBRI

Adams

Adams

I was a late convert to the convenience of NetFlix, and while I appreciated the convenience of delivery, when they expanded the offering to include online movie viewing “at no additional charge,” I didn’t really “get” it. Aside from the fact that, at that time, my DVD player wasn’t wireless compatible, the selection (certainly in those early days) was unremarkable at best. In fact, I remember telling a friend once that the online movies were free, and worth every penny.

The quality and breadth of selection improved over time, until of course, there came that fateful decision to charge a fee for that online movie access separate and apart from the home DVD delivery. All of a sudden, a service that had been a nice-to-have “at no additional charge” had to be viewed through a whole new prism―it was now a benefit with a cost.

Under the Patient Protection and Affordable Care Act (PPACA), group health plans that offer dependent coverage are required to extend coverage to workers’ children until they reach age 26, regardless of student status, marital status or financial support by the employees. It has been estimated that 3.1 million young adults have acquired health coverage as a result of the adult-dependent mandate (ADM) provision, and overall, 31 percent of employers enrolled adult-dependent children as a result of the mandate, according to a recent EBRI report (online here).

However, under PPACA, employers are not allowed to directly charge higher premiums for the cost of this “adult-dependent” coverage. An EBRI analysis of the experience of a single large employer during the period Jan. 1, 2010, through Dec. 31, 2011, found that nearly 700 adult children enrolled in the employer plan in 2011 as a result of the adult dependent mandate―and this group used about $2 million in health care services in 2011 (about 0.2 percent of the over $1 billion in total spending on health care services by that employer that year).

The EBRI report also looked at the claims behaviors of the ADM group compared with a group of dependent children ages 19–25 that were covered prior to Jan. 1, 2011, some 13,000 young adults. Both groups had health coverage for the entire 2011 calendar year through the employer examined in this study. Average spending in the ADM cohort was higher: 15 percent higher than the comparison group, in fact. While the period of review was short, and the experiences associated with that of a single large employer, the ADM group used more inpatient services than the comparison group, and, in what is perhaps the most interesting finding of the analysis, were more likely to incur claims related to mental health, substance abuse, and pregnancy.

So, while this adult-dependent coverage is currently offered “at no additional charge” (certainly for those already carrying family coverage), there are almost certainly additional costs―costs that employers and workers will (and indeed already have begun) to share through claims payments, cost sharing, and worker premiums.

Of course, as a result of this expanded coverage, there also are individuals who might otherwise not have the benefit of the coverage, either because they wouldn’t have access, or would find it to be prohibitively expensive―and this coverage might well be less expensive than the alternative consequences. Little wonder that the debate continues as to whether the provisions of PPACA will serve to increase or decrease long-term health care spending trends.

It will be interesting to see how the health care spending trends of this younger demographic change over time, and how employers respond. It also underlines the importance of ongoing research on these spending and usage patterns as implementation of the PPACA proceeds, even as it serves to remind us that there can be a difference between no additional charge, and no additional cost.

Some Rare Good News: Retiree Health Savings Needs Slip

Projections for how much elderly Americans need to save for out-of-pocket health care in retirement have edged lower, due to a provision the federal health reform law that will cover more of their prescription drug costs, according to a new report by EBRI.

The Patient Protection and Affordable Care Act (PPACA) reduces cost sharing in the Medicare Part D “donut hole” to 25 percent by 2020. This year-to-year reduction in coinsurance will continue to reduce savings needed for health care expenses in retirement, all else equal, for individuals with the highest prescription drug use, EBRI reports.

The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) added outpatient prescription drugs (Part D) as an optional benefit. When the program was originally enacted, it included a controversial feature: a coverage gap, more commonly known as the “donut hole.” PPACA included provisions to reduce (but not eliminate) this coverage gap.

Medicare generally covers only about 60 percent of the cost of health care services (not including long-term care) for Medicare beneficiaries ages 65 and older, while out-of-pocket spending accounts for 13 percent (see figure, below).

The EBRI analysis finds 1–2 percent reductions in needed savings among individuals with median (mid-point, half above and half below) drug use and 4–5 percent reductions in needed savings among individuals at the 90th percentile in drug use since its last analysis in 2011.

The full report, “Savings Needed for Health Expenses for People Eligible for Medicare: Some Rare Good News,” is published in the October EBRI Notes, online at www.ebri.org

The press release is online here.