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Obamacare to Trumpcare:Where are we going?CHARLES MCLAUCHLIN | FEBRUARY 2017
AGENDA
How Did We Get Here?Important DriversWhat’s the Republican Plan?Where Do We Go From Here?
1
ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™© 2016 GALLAGHER BENEFIT SERVICES, INC.
How did we get here?
PRE ACA: DYSFUNCTIONAL INDIVIDUAL INSURANCE MARKET
3
Insurance Unaffordable Unavailable
Pre‐existing conditions
Limited benefits
Individual Underwriting
Annual & Lifetime Limits
High Risk Pools
PRE-ACA SYMPTOMS
4
Increasing Uninsured
31.2
48.1
‐
10.0
20.0
30.0
40.0
50.0
60.0
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
In millions
Uninsured
Increase Uninsured16.9 million 1990‐2010
Increasing Cost
Source: Table 22 2015 CMS National Health Expenditure Data
10.3%14.7%
0.0%2.0%4.0%6.0%8.0%
10.0%12.0%14.0%16.0%
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
% GDP Personal Health Care
% GDP
% GDP HealthcareIncrease 4.4% 1990‐2010
Per Capita Annual Trend 5.5% 1990‐2010
Source: Table 1 2015 CMS National Health Expenditure Data
ACA ONLY ADDRESSED HALF THE PROBLEM
Access Improved Cost Increases Continued
Source: Table 24 2015 CMS National Health Expenditure Data
48.1
29.2
‐
10.0
20.0
30.0
40.0
50.0
60.0
2010 2011 2012 2013 2014 2015
Uninsured MedicaidIndividual Exchanges
Decrease Uninsured18.9 million 2010‐2015
14.7% 15.1%
0.0%2.0%4.0%6.0%8.0%
10.0%12.0%14.0%16.0%
2010 2011 2012 2013 2014 2015
% GDP Personal Health Care
% GDP
Per Capita Annual Trend 3.6% 2010‐2015
2.3 times CPI‐U
Source: Table 1 2015 CMS National Health Expenditure Data
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PUBLIC EXCHANGE PREMIUM INCREASES
Sampling Across U.S. New York State
5.8% 10.1%25.0%
‐40.0%‐20.0%0.0%
20.0%40.0%60.0%80.0%
100.0%120.0%140.0%
2015 2016 2017
High Low Average
5.7% 7.1%16.6%
‐40.0%‐20.0%0.0%
20.0%40.0%60.0%80.0%
100.0%120.0%140.0%
2015 2016 2017
High Low AverageSource Analysis of Premium Changes in the ACA Health Insurance Marketplaces Kaiser Family Foundation
Source Department of Financial Services Press Releases 9/4/2014, 7/31/2015, 8/5/2016 6
2016 NY STATE OF HEALTH
0%
10%
20%
30%
40%
50%
60%
70%
NYC Long Island North/Hudson Western Central
EP QHP Medicaid CHP TotalSource: NY State of Health 2016 Open Enrollment Report August, 2016
Uninsured rate declined from 10% to 5% from 2013 to 20152.8 million people (15% entire population) enrolled • 270,000 in QHPs (54% receive ACA subsidies)• 380,000 in Essential Plan 1st year (95% funded by ACA subsidies)• 1,970,000 in Medicaid (9% due to ACA expansion)• 220,000 in Child Health Plus
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NY STATE EXCHANGE EXPERIENCE
0%
5%
10%
15%
20%
25%
30%
<18 18 ‐25
26 ‐34
35 ‐44
45 ‐54
55 ‐64
65+
4%8%
20%17%
22%
28%
1%
NY Public Exchange Enrollment 2016 2016 individual premium
rates on average 50% lower than pre‐ACA32%
Key NY Differences Pre‐2010• Guaranteed Issue• Mandated Benefits• Community‐Rating • No High‐Risk Pools
Source: NY State of Health 2016 Open Enrollment Report August, 2016
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REPUBLICAN CONCERNSFederal Overreach• Individual Mandate, Medicaid Expansion, Essential Health Benefits
Complexity• Federal subsidies, Forms 1094/1095, Reinsurance Risk Transfers
Abuse of Authority• Legislative process, regulatory process, executive orders
Cost• Cadillac tax, Health Insurer Tax, Premium increases
Source: A Better Way: Our Vision for a Confident America Health Care June 22, 2016
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ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™© 2016 GALLAGHER BENEFIT SERVICES, INC.
Important Drivers
HIGH RISK POOLS: HIGH CLAIMANTS DRIVE OVERALL COST
0%
20%
40%
60%
80%
100%
Highest1%
Highest5%
Highest10%
Highest15%
Highest20%
Highest50%
Lowest50%
23%
50%
66%76% 82%
97%
3%
Concentration of Health Care Spending U.S. Population
Source: High Risk Pools for Uninsurable Individuals Henry J.. Kaiser Family Foundation
45% Turnover Annually
Key Drivers of Individual Premium Increases Associated with ACA:Guaranteed Issue + No Annual/Lifetime Limits + Community Rating
80/20 Rule
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2016 AVERAGE MONTHLY PREMIUM TAX CREDITS
Subsidies R D
Low 1 3
Mid‐Low 10 9
Mid‐High 14 6
High 6 1
Political Reality: Many Republican States have much to lose
74% Mid‐High/HighVoted for Trump
Source: Estimated Total Premium Tax Credits Received by Marketplace Enrollees 2016 Henry J.. Kaiser Family Foundation 12
REPEALING WITHOUT REPLACING
Personal• 2016: 19M people lose medical insurance
• Most due to Medicaid expansion
• Increases to 24M in 2020
Economic• 10‐Year deficit impact: $353B
• $137B w/ 0.7% GDP bump
• Impact grows after 2025
Source: CBO Budgetary and Economic Effects of Repealing the ACA
ACA Repeal Increases Federal Deficit
Tension: Choice & Unlimited Guaranteed Coverage vs Cost Control
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ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™© 2016 GALLAGHER BENEFIT SERVICES, INC.
What’s the Republican plan?
REPEAL OBAMACARE!
Individuals• Individual Mandate• Individual Subsidies
Employers• Employer Mandate / Reporting• Cadillac Tax
Insurers• Health Insurer Tax• Reinsurance / Risk-Transfer Payments
States• Essential Health Benefits• Medicaid Expansion
Source: A Better Way: Our Vision for a Confident America Health Care June 22, 2016
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PAST SUCCESSES
HSAs
CDHPs
Medicare Advantage
Medicare Part D
Quality Reporting
Source: A Better Way: Our Vision for a Confident America Health Care June 22, 2016
Common Themes• Personal Control/Responsibility• Coordinated Care• Flexibility• Transparency• Portable
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GOP GUIDING PRINCIPLES
Source: A Better Way: Our Vision for a Confident America Health Care June 22, 2016
Higher Quality
Lower Cost
Choice
Innovation
Reform Medicaid
Flexibility
Protect Medicare
Portability
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RECOMMENDATION:EXPAND CDHPS/HSAS
Expand Age 55 Catch-Up
60-Day HSA Creation Grace
Period
Increase Maximum HSA
Contribution ($6,550 / $13,100)
Expand HSA Accessibility to
non-HDHP
Source: A Better Way: Our Vision for a Confident America Health Care June 22, 2016
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RECOMMENDATION: PURCHASING ACROSS STATE LINES
Purchase Insurance filed in other state
Ease interstate pooling
States Regulate Insurance
19
RECOMMENDATION:EXPAND POOLING OPPORTUNITIES
Association Health Plans (AHPs)
AHP
Firm C
Firm B
Firm A
Individual Health Associations (IHPs)
IHP
Person C
Person B
Person A
• Freedom from state mandated benefits• Lower overhead costs• Guaranteed issue required (no pre‐existing conditions)• Community rating (cannot charge sicker more)
Source: A Better Way: Our Vision for a Confident America Health Care June 22, 2016 20
RECOMMENDATION:PORTABLE COVERAGE SUPPORT
Medical plan follows you
Age‐based monthly tax credit for premiums, OOP or HSA
Plans available through multiple portals
Healthcare “backpack”
HHS Nominee Price: Opt‐out of employer insurance
Potential to hurt employer risk pool
Source: A Better Way: Our Vision for a Confident America Health Care June 22, 2016
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RECOMMENDATION:CAP INSURANCE TAX DEDUCTION
• Key differences from current Cadillac Tax: – tax impact varies by individual
and employer bracket rather than flat 40%.
– HSA contributions not subject to tax (HRAs too?)
Similar to Current Retirement Limits
Cap Higher in High‐Cost Areas
Most Plans Not Impacted
HHS Nominee Price Suggested Caps: $8,000 single / $20,000 non‐single
Source: A Better Way: Our Vision for a Confident America Health Care June 22, 2016
22
RECOMMENDATION:PROTECT SELF-INSURANCE FLEXIBILITY
Remove federal issues limiting size of group that may purchase stop-loss reinsuranceClarify that stop-loss is not “group health insurance”Eliminate SHOP exchangesDefined contribution (HRA)
Source: A Better Way: Our Vision for a Confident America Health Care June 22, 2016
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RECOMMENDATION:MEDICAL LIABILITY REFORM
Source: A Better Way: Our Vision for a Confident America Health Care June 22, 2016
Lower Costs
Cap non‐economic damages
Limit attorney fees
Pre‐discovery medical panels
Loser pays court costs
Safe harbor treatment
Encourage State experimentationCA and TX offered as models
24
RECOMMENDATIONS:INSURANCE REFORMS
Source: A Better Way: Our Vision for a Confident America Health Care June 22, 2016
Patients
• Guaranteed renewable (guaranteed issue?)• No lifetime limits (annual?)• Retain age‐26 rule for dependents• Extend portability rules to individual market (new individual mandate?)
Carriers
• $25B funding for high risk pools (capped premium no wait lists)• Expand age‐tiered premium ratio from 3 to 5 (optional)• Innovative Purchasing Platforms (Public Exchanges?)• State innovation grants
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ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™© 2016 GALLAGHER BENEFIT SERVICES, INC.
Where do we go from here?
QUICK CAVEAT
Anything said here will be wrongExpect the unexpectedQuick policy twists & turnsNo one sure of outcomeEXTREMELY fluid
That said…
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RECENT ACTIVITY
2016
• HR 3762 & Campaign Proposals• Eliminate: mandates, penalties, Medicaid expansion• Retain: pre‐existing conditions, dependents age 26
Budget
• Committees budget bills reducing deficit by $1B• Establish financial framework for appeal• Deadline: January 27, 2017 (“aspirational”)
EO 1/20
• Minimize economic/regulatory burdens of ACA• Waive/defer/delay provisions that impose burdens• Comply with the Administrative Procedure Act
Indicates that this may not be a quick replacement
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POTENTIALLY GOING AWAY
Employer Mandate
Forms 1094/1095
Medicaid Expansion
New York state impact: 825,000 enrollees
29
PROBABLY MODIFIEDExchanges
Mandate & Subsidies
Age‐Tiers & Stop‐Loss
Taxes & Penalties
Lifetime Limits & GI
Child Age 26
HSAs & HRAs
30
POSSIBLY NEW
Individual
States
Other
• HIPAA portability• IHAs
• Medicaid block grants• Interstate Sales• Innovation grants
• Medical Tort Reform• High Risk Pools
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ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™© 2016 GALLAGHER BENEFIT SERVICES, INC.
Questions?
Thank you!The intent of this presentation is to provide
you with general information regarding the status of, and/or potential concerns related to, your current employee benefits issue. It does not necessarily fully address all your specific issues. It should not be construed as, nor is it intended to provide, legal or tax advice. Questions regarding specific issues should be addressed by the your organization's general counsel, tax advisor, or an attorney who specializes in this practice area.
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