Lessons Learned

 

Nevin AdamsBy Nevin Adams, EBRI

I joined EBRI with a passion for the insights that quality research can provide, and a modest concern about the dangers that inaccurate, sloppy, and/or poorly constructed methodologies and the flawed conclusions and recommendations they support can wreak on policy decisions.  While my tenure here has only served to increase my passion for the former, on (too) many occasions I have been struck not only by the breadth of assumptions made in employee benefit research, but just how difficult – though not impossible – it is for a non-researcher to discern those particulars.

We have over the past couple of years devoted some of this space to highlighting some of the most egregious instances, but as I close this chapter of my professional career, I wanted to share with you a “top 10” list of things I have learned in my search to find reliable, objective, actionable research:

There are always assumptions in research; find out what they are. Garbage in, garbage out, after all (the harder you have to look, the more suspicious you should be).

Just because research validates your sense of reality doesn’t make it “right.” But just because it invalidates your sense of reality doesn’t necessarily make it right, either.

Take the conclusions of sponsored research with a grain of salt.

Self-reported data can tell you what the individual thinks they have, but not necessarily what they actually have.

Sample size matters. A lot.

“Averages” (e.g., balances/income/savings) don’t generally tell you much.

There’s a certain irony that those who propose massive changes in plan design, policy, or tax treatment, frequently assume no behavioral changes in response.

When it comes to research findings, “directionally accurate” is an oxymoron.

In assessing conclusions or recommendations, it’s important to know the difference between partisan, bipartisan and nonpartisan.

In an employment-based benefits system, the ability to accurately gauge employee response to benefits change is dependent on the reaction of the employers who provide access to those benefits.

One of the things that I’ve always loved about the field of employee benefits was that there was always something new to learn, and with each position along the way I have gained a new and fresh perspective.  I’ll always treasure my time here as a member of the EBRI team, the opportunity I’ve had to contribute to this body of work – and I’m looking forward to continuing to draw on EBRI research for insights and analysis in my new position, as I have for most of my professional career.

That said, I’ll close by commending to your attention one of my favorite “lessons” – a quote attributed to Mark Twain, and one worth keeping in mind along with the 10 “lessons” above:

“It’s easier to fool people than to convince them they have been fooled.” 

Here’s to not being fooled.

Most Workers Would Look for Alternatives if Health Benefits Are Taxed

What if Congress decides to start taxing workers’ health benefits as a means to raise revenue as part of an effort to rein in the federal deficit? More than half of American workers would either switch to a less costly plan, shop around, or drop coverage, according to new research from EBRI.

The 2012 EBRI/MGA Health Confidence Survey (HCS) finds that if current tax preferences were to change and employment-based coverage became taxable to workers, 26 percent would want to switch to a less costly plan, 21 percent say they would want to shop for coverage directly from insurers, and 9 percent say they would want to drop coverage altogether.  However, nearly 4 in 10 (39 percent) individuals say they would continue with their current level of coverage, up 10 percentage points from last year’s HCS findings.

While changes resulting from the Patient Protection and Affordable Care Act (PPACA) have raised concerns as to whether employers will continue to offer health coverage in the future, the 2012 HCS finds that health benefits remain a key a factor for workers in choosing a job, and health insurance in particular continues to be—by far—the most important employee benefit to workers.

“Most Americans are satisfied with the health benefits they have now and prefer not to change the mix of benefits and wages,” said Paul Fronstin, director of EBRI’s health Research and Education Program and author of the report. “About three-quarters say they are satisfied with the health benefits they currently receive, while 15 percent say they would trade wages to get more health benefits, and 9 percent say they would surrender health benefits for higher wages.”

Full results of the 2012 Health Confidence Survey are published in the December 2012 EBRI Notes, “Views on Employment-Based Health Benefits: Findings from the 2012 Health Confidence Survey,” online at www.ebri.org

The HCS examines a broad spectrum of health care issues, including Americans’ satisfaction with health care, confidence in the future of the nation’s health care system and the Medicare program, as well as their attitudes toward certain aspects of health care reform.

Notes.Dec12.HCS.Fig5

“Next” Step

By Nevin Adams, EBRI

Adams

Adams

On December 13, EBRI will hold its 71st biannual policy forum, “’Post’ Script: What’s Next for Employment-Based Health Benefits?” It is a question that has been on the mind of employers, lawmakers and policymakers alike for some time now. It predates the time that the structure for the Patient Protection and Affordable Care Act (PPACA) was put in place, has evolved, but not been resolved, as regulations were, and continue to be issued subsequent to its passage. It has remained on the minds of employers, providers, and policymakers following the various courts’ assessment of the various challenges to the constitutionality of the law, and even as the nation went to the polls last month.

Today we know more than we once did about certain aspects of the law, its provisions and applications.¹And yet there is much yet to know about its broader implementation: How the insurance exchanges might work,² for example, or how their presence might affect or influence cost, access, or employer plan designs. Will employers step away from their traditional role in providing these benefits, or will these changes lead to an environment in which employers find them to be of even greater value to their retention programs and strategies? In addition, an overarching concern at present—not just for health benefits, but workplace benefits overall—is the potential impact that changes in tax policy³ could have on these programs, both direct and indirect.

Our next policy forum will bring together a wide range of national experts on U.S. healthcare policy to share a post-election perspective on fiscal impacts from the federal budget, findings from the EBRI Center for Research on Health Benefits Innovation, and a sense of how employment-based health benefits might evolve as a result of the changes set to come.

In a field as complex and sensitive as healthcare policy, we may not always know “what’s next”—but it’s our hope that the information, and interaction, at the EBRI policy forum will provide insights and clarity that can help.

EBRI’s 71st biannual Policy Forum will be held on Thursday, Dec. 13, from 9:00 a.m.–12:30 p.m. at the Henry J. Kaiser Family Foundation, 1330 G Street NW, Washington, DC 20005. The agenda and registration information are available online here. For those not able to attend in person, a free live webcast of the policy forum will be provided by the International Foundation of Employee Benefit Plans, online here.

Notes

¹ A summary of EBRI Research on PPACA and its Potential Impact on Private-Sector Health Benefits is available online here.  Of specific topical interest are:

² For insights on the topic of health insurance exchanges, see “Private Health Insurance Exchanges and Defined Contribution Health Plans: Is It Déjà Vu All Over Again?” online here.

³ See “Employment-Based Health Benefits and Taxation: Implications of Efforts to Reduce the Deficit and National Debt,” online here.

Self-Insured Health Plans Growing, Driven by Large Employers

Large private-sector employers are driving a trend toward more “self-insured” health plans, according to a new report by EBRI.

Among employers that offer health coverage to their workers, there are two basic types of insurance plan:

* A self-insured plan, in which the employer assumes the financial risk related to health insurance; or

* A fully insured plan, in which an insurance company is paid to assume the risk.

Historically, large employers have been far more likely to self-insure than have been small employers, the EBRI report notes, and there are significant incentives for them to do so: Large multi-state employers can provide uniform health benefits across state lines if they self-insure (lowering administrative costs) and also are not required to cover state-mandated health care services—as are fully insured plans.

Following the passage and implementation of the Patient Protection and Affordable Care Act (PPACA), there has been speculation that an increasing number of smaller employers would opt for self-insurance. As the EBRI report explains, some employers think that components of PPACA, such as the strict grandfathering requirements, the minimum-creditable-coverage requirement, the breadth of essential health benefits, affordability requirements, as well as taxes on insurers, medical-device manufacturers, and pharmaceutical companies and reinsurance fees will work to drive up the cost of health coverage.

“Employers generally, and small employers particularly, concerned about the rising cost of providing health coverage may view self-insurance as a better way to control expected cost increases,” notes Paul Fronstin, director of EBRI’s Health Research and Education Program and author of the report. “This new analysis provides a baseline against which to measure future trends.”

Among the findings of the EBRI report:

  • The percentage of workers in private-sector self-insured health plans has been increasing. In 2011, 58.5 percent of workers with health coverage were in self-insured plans, up from 40.9 percent in 1998. To date, large employers (with 1,000 or more workers) have driven the upward trend in overall self-insurance. The percentage of workers in self-insured plans in firms with fewer than 50 employees has remained close to 12 percent in most years examined.
  • Massachusetts, the only state to have enacted health reform similar to PPACA, has seen an increase in the percentage of workers in self-insured plans among all firm-size cohorts, except among workers in firms with fewer than 50 employees.
  • Overall, 58.5 percent of workers were in self-insured plans in 2011, but the percentage ranged by state, from a low of 30.5 percent to a high of 73.8 percent.

Full results are published in the November 2012 EBRI Notes, “Self-Insured Health Plans: State Variation and Recent Trends by Firm Size,” online at www.ebri.org

The Impact and Influence of Tax Incentives on Health and Retirement Benefits

Workers routinely rank their employment-based health coverage as the most important benefit they receive, followed by a retirement plan—but the tax preferences that support them are drawing increased scrutiny.

To examine the implications for private-sector health and retirement benefits, as well the costs and consequences and what the numbers are, the nonprofit, nonpartisan Employee Benefit Research Institute (EBRI) recently held a day-long policy forum in Washington, DC. Titled “’After’ Math: The Impact and Influence of Incentives on Benefit Policy,” this was EBRI’s 70th biannual forum on benefits issues. It drew about 100 experts, benefits professionals, and policy makers to provide their perspectives and predictions.

As a new EBRI report about the forum notes, the reach and impact of these benefits is immense. Employment-based health benefits are the most common form of health insurance in the United States, covering almost 59 percent of all nonelderly Americans in 2010 and about 69 percent of working adults. Assets in employment-based defined benefit (pension) and defined contribution (401(k)-type) plans account for more than a third of all retirement assets held in the United States, and a significant percentage of assets held today in individual retirement accounts (IRAs) originated as a rollover account from an employer-sponsored program. Workers routinely rank their employment-based health coverage as the most important benefit they receive, followed by a retirement plan.

Since private-sector health benefits alone rank as the largest single “tax expenditure” in the federal budget, various proposals have been made to either reduce or even phase out the cost of that program to the government. Both for employers that sponsor these benefits—and the workers who receive them—the implications are enormous, the EBRI report points out.

“When you look at some of the recent proposals for reform, benefit plan tax incentives are an area of total and complete volatility, and neither employers nor workers can have any certainty of what lies ahead,” said Dallas Salisbury, president and CEO of EBRI.

The press release is online here. The full report is online here.

Decision Decisions

By Paul Fronstin, EBRI

ImageMost employers find that while they would like to continue providing health benefits to employees and their dependents, longer-term cost trends are unsustainable.  Those trends, combined with the forthcoming decision by the Supreme Court of the United States (SCOTUS) on the constitutionality of the Patient Protection and Affordable Care Act (PPACA) (in whole or in part – notably the individual mandate), and uncertainty related to the future of health care delivery and financing in the United States are causing many employers to start to rethink their role as a provider of health coverage in the workplace.

While there is a possibility that the entire law could be declared unconstitutional, most of the controversy surrounding the PPACA has involved the law’s requirement that individuals either purchase insurance or pay a penalty, the so-called “individual mandate.”  There are basically four ways1 in which SCOTUS might rule on the constitutionality of this provision in the PPACA:

  1. Rule that the individual mandate is constitutional and let implementation of the law proceed;
  2. Rule that the individual mandate is unconstitutional, but that the individual mandate is severable and therefore implementation is allowed to proceed with all other parts of the PPACA;
  3. Rule that the individual mandate is unconstitutional but severable from the remainder of the law, but discards other connected parts of the PPACA, such as guaranteed issue and community rating;
  4. Rule that the individual mandate is unconstitutional, and that the individual mandate is not severable from the PPACA, therefore the entire PPACA is found to be unconstitutional.

As of this writing, only the justices know the decision, but speculation (and odds making) is occurring on a daily basis.  It is unlikely that the court would strike down the individual mandate and discard other connected parts (option 3 above), because it does not have the equivalent of “line-item” veto power of laws passed by Congress.  If the ruling finds the mandate severable from the rest of the law (option 2 above), Congress will inevitably try to fix the PPACA, but it is impossible to predict what the fix may look like given the current political climate and the potential for political gridlock regardless of the outcome of the next election.  If the court rules that the law is unconstitutional (or that the individual mandate is, and is inseparable from the rest of the law, necessitating its rejection), the status quo of the past will return, but with a potential nightmare scenario where the parts of the PPACA that have already been implemented would need to be  “unimplemented” (such as funding provided to the states to establish exchanges, or the deductibility of health care coverage offered to the newly created category of adult dependents under the PPACA that would ostensibly now be subject to taxation), potentially triggering numerous lawsuits and additional political ill will.

While health care reform discussions that ultimately led to the passage of the PPACA started out as discussions regarding system reform that would result in lower health care costs, they quickly morphed into discussions about coverage that largely ignored the overall cost of health care services and health insurance coverage.  Thus, regardless of the outcome of the Supreme Court decision, or the fall elections, health care costs are expected to continue to increase in the future.

What Will Employers Do?

If employers go down the current road they are on and stay with the status quo, we will likely continue to see cost-shifting to workers and the introduction of and experimentation with carrots and sticks in order to change the health behaviors of workers and their dependents.

However, were employers to decide to move away from traditional employment-based health coverage, there are a number of alternative approaches they might consider:

1) De-link health coverage from work.  Employers might endorse a system where they have absolutely no connection to health coverage.  Some have proposed a single-payer system, and others have proposed a purely individual market; there are precedents for both.  Medicare began as the equivalent of a single-payer system for health coverage for seniors but has since evolved into a hybrid public-private partnership, as private plans are an alternative for Medicare beneficiaries.  The private-plan part of Medicare could be expanded to move away from the predominant single-payer-system aspect of Medicare to one that looks more like an individual market (such as that contemplated in the proposal put forth by Congressman Paul Ryan (R-Wisconsin)). Under a single-payer system alternative to the current employment-based system, employers would no longer provide coverage.  Instead, either the federal government or the states would provide coverage, with financing provided through some type of tax.  Alternatively, a purely individual market might look very much like the exchanges contained in the PPACA, with subsidies for low-income workers, or a voucher-type system (also as proposed by Congressman Ryan for Medicare).  Financing for either would come from some type of tax system as well.

2)  Re-define the link between health coverage and work.  Employers have been interested in the concept of “defined contribution” for years as a way to provide health coverage to workers.  While there is no one way in which to define such a concept, presumably it would work in a way in which employers are able to better control or “define” their contribution towards health coverage.  Under that scenario, public exchanges as described in the PPACA could be the vehicle through which workers would get their coverage, with employers either paying some kind of coverage charge (such as the $2,000 penalty included in the PPACA), or the employer may itself seek to make coverage arrangements through third-party private exchanges. Such a system may or may not produce short-term cost savings to employers, depending on individual specifics of how employers transition to such a system, but could provide long-term savings if employer contributions do not rise as fast as premiums would otherwise have grown, or if premium growth is flat (due to the more market-driven system). In such a system, employers would no longer be involved in decisions regarding the design of health care.  Rather, they would simply provide the funding mechanism for workers to purchase health coverage through a party separate from the employer.  Employers have shown interest in this concept in the past through position papers published by the CED  and the ERISA Industry Committee as recently as 2007.  Moving towards these private exchanges would not require a change in law, regardless of the SCOTUS decision, and would be permitted under current law unless prohibited by a future Congress.

After three+-plus years of contentious debate and the challenges associated with understanding and attempting to comply with the new law, it seems that employers are at a crossroads: try to continue with the current employment-based system of health coverage, or undertake to try to fundamentally redefine the system that the United States has essentially lived with since World War II.

It is unlikely that employers will simply take the fork when they come to it in the road.

Notes:

1. There is, of course, also the possibility that SCOTUS will remand the issue of severability back to the lower court, tying up the PPACA in court for a longer period of time, creating more uncertainty, but basically leaving things in play for the time being.

Health Care Access Remains an Issue

Americans continue to report difficulty getting access to health care services, regardless of their type of health plan, according to a new report by the nonpartisan Employee Benefit Research Institute (EBRI).

When comparing traditional health plans with “consumer-driven” health plans (CDHPs), which include high-deductible health plans that offer a health savings account or health reimbursement arrangement, the latest EBRI survey finds that between 30−40 percent of respondents (depending on the question) reported some type of health care access issue for either themselves or family members in 2011.

Individuals in high-deductible health plans were more likely than those with traditional coverage to report access issues. Differences between those with traditional coverage and CDHP enrollees have been seen in the past, but no statistically significant difference was found in 2011.

However, people who had health problems and those at lower income levels were consistently more likely to report problems with health care access, according to EBRI.

“We find that access to health care services is an issue across the board,” said Paul Fronstin, director of EBRI’s Health Research and Education Program, and author of the report. “Regardless of health plan type, individuals with health problems and those in households with less than $50,000 a year were more likely than their counterparts to report access issues.”

The press release is online here. The full report is online here.