Liazon White Paper on Afforable Care Act

7/27/2019 Liazon White Paper on Afforable Care Act

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New Survey:

Small Businesses May Respond More Positively

to Aordable Care Act Than Larger

Businesses/Corporations


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Practical Considerations About Costs/Beneft Management May

Outweigh Initial Negative Reaction to Reorm

A number o recent studies have suggested that most companies will continueto oer employee healthcare benefts even ater the Patient Protection andAordable Care Act (PPACA) is ully implemented and all Americans are mandatedto obtain coverage.

Most o these studies have ocused on medium-sized and large businesses,which have greater buying leverage in securing coverage or their employees.The potential impact o PPACA among small businesses has been let largelyunexplored.

To fll this gap, Liazon sponsored independent research with small businesses (nomore than 50 employees) nationwide to understand what decisions they wouldmake about the Aordable Care Act particularly their willingness to oerhealth insurance coverage to their employees versus opting or public or private

exchanges.

While the overarching goal o the research was to explore awareness levels andthe potential impact o healthcare reorm among small businesses, the researchwas also designed to stand as a comparison to earlier published research, whichsuggested the likelihood o business as a group to continue oering employeehealth benefts. In many o these other studies, representatives o businesses andcorporations were asked what they were likely to do without being presented withdirect choices and sufcient inormation.

The Liazon study found:

Smallbusinesseshaveapoorunderstandingofhealthcarereformlegislation even two years ater it passed. Nearly 75% o small businessessay they are at least somewhat amiliar with PPACA, but awareness ospecifc eatures o healthcare reorm is limited. In particular, companieswith 26-50 employees are more likely to be amiliar with healthcare reormlegislation than frms with 10-25 employees (75% vs. 68%).

Familiarity

with PPACA

NOT AT ALL

FAMILIAR

VERY

FAMILIAR

NOT VERY

FAMILIAR

SOMEWHAT

FAMILIAR

5%

23%

57%

15%

NOT FAMILIAR VERY FAMILIAR

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Q: How amiliarare you withthe PatientProtection andAordable CareAct (sometimesreerred to asObamacare)as it relates tohealth coverageoered bycompanies suchas yours?


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Closetohalfofallsmallbusinesses(47%)saytheyhavedevotedlittleornoeort to preparing or the healthcare reorms that arise rom PPACA. Firmswith higher revenue are more likely to have invested a good deal o eort inplanning or PPACA.

Forcompaniesthatareunsureabouthowtheirbusinesseswillrespondtohealthcare reorm, the overwhelming majority (70%) say they just dontknow enough about healthcare reorm to make a decision. These companieswill be looking or more specifcs about their options.

Beforebeingeducatedaboutvariousdetailsofhealthcarereform,mostsmall businesses said they were unlikely to discontinue company-sponsoredhealth coverage as a result o healthcare reorm. One in ten companieswho are unsure about the path they will ollow say they will do whatever ischeaper.

Closeto50%ofsmallbusinessdecisionmakersbelievehealthcarereformwillhaveanegativeimpactontheircompanies,ontheU.S.economy,andon employee satisaction. Others are less sure but dont like the change,despite having little knowledge about the details. Only 15% o smallbusinesses harbor avorable views o reorm, while 18% say their companyseelings about the law are neutral.

EortInvested in

Preparing

or PPACA

Pre-Exposure

Assessment o

Likely PPACA

Impact

3% 6%

27%37%

Some

A lot Not sure

None

Little

or None

43%

48%

49%

52%

48%

Some

49%

41%

40%

33%

37%

A Good Deal

8%

11%

10%

15%

15%

Annual revenue less than $1M

Annual revenue $1M-$2.49M

Annual revenue $2.5M-$4.99M


Annual revenue $10M+

54% 33% 44% 57%

24%

30%

33%

10%

3% 9%

6%

52%

29%

5%

6%

11%

39%

28%

16%

2%

11%

30%

30%

27%

Definitely not

Probably not

Might

Probably would

Definitely would

Top 2-Box

Unlikely to discontinue

coverage

Total 50% or less 51% to 75% 76% to 100%

% of benefits-eligible employees

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Q: How much eort hasyour company investedso ar in preparingor and respondingto healthcare reormresulting rom thePatient Protection andAordable Care Act?

Q: Given what youknow about thePatient Protectionand AordableCare Act, how likelydo you think yourcompany would be todiscontinue employeehealth coverage?

Likelihood of Discontinuing Employee Health Coverage as a Result of PPACA


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Afterlearningmoreaboutthedetailsofhealthcarereformpotentiallylower costs, less administrative work, most premiums paid by thegovernment, no one denied coverage the attitudes o many smallbusiness decision makers change. Greater levels o awareness o specifcPPACA eatures lead to an increased likelihood o a positive impressiono PPACA overall. Lower levels o awareness result in a higher number o

negative impressions. Together, these fndings suggest that resistance tohealthcare reorm dissipates as small businesses learn about the details.When understood, the economics o reorm are seen as more compelling.

Infact,whengivenaseriesofhealthbenetscenariosunderPPACAvs.company-sponsored health plans, nearly 50% o respondents now oeringemployer-sponsored plans are likely to opt or public or other exchanges a much higher than expected percentage, especially in light o responsesound in other surveys o larger businesses and corporations.

Fortythreepercentofsmallbusinessesarelikelytodiscontinuecompany-sponsored health plans or their employees primarily because they ear thecost o private plans will spiral out o control.

Basedonthesurvey,wecanseethatsmallbusinessdecisionmakersinitially

spoke emotionally about healthcare reorm responding to political disagreementsportrayed in the media but react rationally when they have a deeperunderstanding o the coverage options and their related fnancial impact. We believelack o knowledge explains a great deal o the animosity toward reorm.

Tax incentives are the health reorm eature most likely to entice some smallbusinessestocontinueofferingemployeehealthcarecoverage.Butthefearofpaying

higher insurance rates in traditional programs and the promise o lower costs are theeatures most likely to encourage small frms to discontinue oering coverage.

Individual Exchange vs. Company-Sponsored Plan

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Individual Healthcare Exchange (Option A)

All carriers, all plan types

Includes ACO option

$0 deductible plan available

Deductible as high as $6,000

Cost or $2,000 deductible plan is 20% less than$0 deductible plan

Cost or $6,000 deductible plan is 60% less

Your company does not oer healthcare so there areno administrative requirements or your company

Government subsidies or qualifed employees

Paid or with Post-Tax dollars by employees

Company-sponsored health coverage (Option B)

2 plan options rom 1 carrier

Deductible as high as $6,000

Cost or $2,000 deductible plan is 20% lessthan $0 deductible plan

Cost or $6,000 deductible plan is 60% less

Your company administers the plan

No Government subsidies

Paid or with Pre-Tax dollars

44% 56%

Q: Assume your company was aced withthe two employee healthcare optionsdescribed above and these were youronly choices. Which would you select?

Option A

57%

47%

40%

46%

36%

Option B

43%

53%

60%

54%

64%

Annual revenue less than $1M


Annual revenue $2.5M-$4.99M


Annual revenue $10M+


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Two Scenarios

Here are two hypothetical cases that indicate why small businesses are morelikely to go with public exchanges:

Bothcompaniesareequalineveryrespect,having30enrolledemployeeswith $260,513 in total spend on health insurance 18 males and 12femaleswithagesrangingfrom22to64(averageageof37)andwithsalariesthatrangefrom$28,000to$210,000(averagesalaryof$50,467).Coverage break down: Employee only 9; employee and spouse 5;Employee and amily 16.

Company X continues to pay or health insurance, covering 75% othe health insurance cost. Employees on average have a tax rate o21%.Inthisscenario,theemployeepost-taxcostis$51,451,andthe employer pays $195,385, pre-tax.

Company Y sends its employees to the public exchange. Eightypercent o employees would be eligible or a subsidy rom the publicexchange.Totalsubsidyamountforindividualsis$137,830.Subsidyamountsrangefrom$43-$12,910withanaveragesubsidyof$4,594.Employeeposttaxcostis$122,683.Employerwillprovideadditional compensation to oset any pre-tax beneft.

At frst glance, Company X appears to have the better outcome with a totalpre-taxcostof$195,385andemployeepost-taxcostof$51,451.

Company Y comes with $137,830 in government subsidies and appears toshit the ull post-tax cost o $122,683 to the employee. However, CompanyY would oset any pre-tax beneft amount with additional compensationof$90,167(Savings:$122,683$51,451ofemployeecostata79%tax rate). This results in a savings o $105,218 ($195,385 $90,167 =$105,218).

Ater you consider government subsidies AND the additional compensation

to oset any pre-tax beneft, Company Y will enjoy a 54% savings.

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Regional Dierences

Regional dierences in responses are also telling about how political and culturalviewpointscoloropinions.FirmsintheSoutharemorelikelytoreactnegatively

toward PPACA, while those in the West and Northeast are signifcantly more likely tobe neutral or positive about the reorm.

IntheSouthandMidwest,57%and52%,respectively,hadstrongnegativeimpressions o healthcare reorm beore learning details about available options.ThiscontrastswithlowernegativeimpressionsintheNortheast(34%)andWest(31%).

Whenmoreinformationwaspresented,negativeimpressionsintheSouthdroppedto48%,whichsuggeststhatmoreinformationhelpedbreakdownearlierbiases.Nevertheless, impressions o healthcare reorm remain predominantly negative,both beore and ater exposure to key benefts o the healthcare reorm plan. More

inormation did not substantially change impressions in the Northeast and West.

Knowledge Helps Decision Making

Smallbusinessesthathaveapositiveimpressionofhealthcarereformaremorelikely to be aware o key eatures and benefts o the legislation, including theestablishment o public and private exchanges through which employees canindependently choose their own healthcare plans with employer support. Those withnegative impressions are less likely to be aware o most eatures, but they believerates will be higher.

Nevertheless, once small business owners and operators do the calculationsand understand that exchanges could lower their costs and save administrativetime, exchange options become more acceptable, suggesting that peoples initialimpressions are driven by politics and media hype, well beore they calculate whatmight be best practically or their businesses and their communities.

Nearly a quarter o small frms say they will drop their private coverage i thegovernment-sponsored plans proves to be a more cost-eective option or i thepenalties they are subject to end up being less o an expense than their contributiontowards the coverage.

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Sticking with the Status Quo

Whilealargerpercentage(43%)ofsmallbusinessesaremorelikelytodropcoveragefor

individual exchanges than initially expected, the majority o small businesses even

ater being exposed to details about healthcare reorm still believe PPACA will beharmfulfortheircompaniesandtheU.S.economy.Morethan50%ofsmallbusinessessay that, given what they know o PPACA, they will continue to oer employee healthcoverage.Severalreasonswilldrivethedecision:

Manyofthesecompaniesbelievethatemployeewell-beingismoreimportantthancost, asserting that employees need and depend on the coverage the companyprovides.

Thesecompaniesplantocontinueofferingcoveragebecauseitisanimportantpart o their compensation package, and they are committed to oering thebeneft.

Unlikelargecorporations,wherepersonalrelationshipsarelimited,smallbusinesses tend to have a deep-seated loyalty to their employees, many o whomthey know personally, and want to provide or them directly.

Somesmallbusinessrespondentswillcontinuetoofferplansprimarilybecausethey believe that healthcare benefts signifcantly help to attract and retain talentand that the benefts they oer are more extensive than competitors plans.

Within the small business segment surveyed, companies with higher income and higheremployee salaries were less likely to consider giving up employee beneft plans, in partbecause they are not eligible or subsidies, than businesses with lower income and loweremployee salaries and wages that are eligible or subsidies.

Firms with revenue o at least $10 million are the most likely to say they will continueoering health coverage; the likelihood o continuing coverage tends to decline with salesrevenue. In all o the trade-os, preerence or Individual or other exchange options ishighest or lower revenue companies.

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A Tidal Wave?

While one-third o small businesses are not sure how their competitors will respond toPPACA reorms, many believe the competition will wait and see what other companies do

beore making any decisions.

Basedonthesurveyndings,andgivenhumannature,wecanassumethatoncetheearly adopters choose to stop providing coverage, and decision makers begin to see thatemployees will be well-covered through exchanges at a potentially lower cost and withoutthe administrative headaches, many more small businesses will opt to abandon privatecoverage and move to individual exchanges than previously thought

With these shiting attitudes among small businesses, carriers and brokers will be orcedto adjust and fnd new ways to keep them satisfed.

Small-businessdecisionmakersarenotinthehealthinsurancebusinessandshouldntbeexpectedtounderstandallthecomplicatedchangesthatareforthcoming.Brokers,

thereore, have an opportunity to educate and guide their clients through the maze sothey can understand the available choices and the impact on their businesses. It is nolonger good enough or brokers just to maintain the status quo, because there is nonstatus quo, at least or a while.

The time has come or brokers to gather independent inormation rom carriers and otherexperts, demonstrate their knowledge, communicate clearly and eectively, and lead thebusiness community as a trusted partner in a changing world. This is the only path toretain relevance.

How the Survey was Conducted

Theresultsofthe2012LiazonPPACAImpactandAwarenessSurveyarebasedon601online interviews conducted by Phoenix Marketing International between December 10and December 21, 2012, with 601 benefts decision-makers at companies with no morethan 50 employees.

To minimize political bias, the survey was perormed ater the outcome o the 2012Presidential Election had eliminated much o the uncertainty surrounding implementationo PPACA.

Participants were selected on the basis o their role in healthcare benefts decision-making or their company. The sample included a random selection o 501 frmsnationwide,plusanoversampleof100smallbusinessesinNewYorkState.Intheory,

in 95 cases out o 100, overall results based on a national sample o this size will dierbynomorethan4.4percentagepointsineitherdirectionfromwhatwouldhavebeenobtainedbyseekingtointerviewallsmallbusinessesintheUnitedStates.

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Documents

Liazon White Paper on Afforable Care Act