You might be breathing a sigh of relief that open enrollment issues and compliance deadlines about health benefits for 2016 are finally being resolved or are over. But is that true?
What about TrumpCare? Now that Donald Trump is the President-elect, what will happen to the Affordable Care Act? We think the word “TrumpCare” is a fitting word, since it will probably eventually trump ObamaCare.
But, it will take many months after Jan. 20, 2017 when Trump takes office to implement TrumpCare. After all, if we just reset the clock back before 2010 when there was no ACA it would still cause issues and have unintended consequences.
There seems to be consensus among the consulting and broker community that some good things actually happened with the ACA that will need to be examined and perhaps retained under TrumpCare. The three key good things were:
1) Coverage for uninsurables with pre-existing chronic diseases and conditions
2) Over 20 million more Americans have some type of coverage since 2010
3) No annual maximum coverage limits
In our opinion, you should be focused now more than ever in 2016 on what the ACA can do to your company and employees in 2017. You need to be what we call a forward-thinker. Even if the ACA is repealed, reformed, or replaced; these issues below must still be addressed. These will still be issues under TrumpCare. Here are six ways to be a forward-thinker:
1) The Cadillac tax. The Cadillac tax has been delayed from starting in 2018. Now it will begin for plans starting on or after Jan. 1, 2020. But the 40% tax penalty is of major concern to employers. How does an employer avoid that tax? And how can an employer curtail or just slow down the inflationary spiral of healthcare costs?
Even if TrumpCare removes the Cadillac tax; we feel it is a good thing to be concerned about escalating healthcare costs. Make sure your health plans do not exceed the Cadillac tax levels.
The employer must do major plan re-design, major communications, and try to find ways to reduce current and future medical costs. All of this must have a real and verifiable savings in healthcare costs over the next few years. Why? Maybe TrumpCare will keep that 40% Cadillac tax. But more important is to have employers focus on strategies to slow the inflationary increase of healthcare costs.
2) Self-funding. We suggest that now is the time to consider self-funding your medical plans. Seriously consider using partial or full self-funding all types of medical and health benefits administration to reduce your costs of administration. Administration costs typically make up about 20-30% of the total healthcare premium costs. So you might be thinking that you already have a third party administrator or carrier processing and paying your medical claims. But is that enough?
As you can imagine, reducing the costs of administration is a good first step. But you also need to reduce the actual medical claims and improve the health of your entire employee population as well.
3) Wellness, disease management, data analytics. This is the next step to reducing actual medical claims. Every major carrier and administrator promotes they have created internally the best wellness, disease management and data reports using cost containment analytics. So why are healthcare costs rising faster than regular inflation? (In 2015, medical inflation was 6.8% versus 1.4% Consumer Price Index non-medical inflation). We believe these internally created programs do not work as well as outsourced options.
When the market can compete and bid on an employer’s wellness and disease management administration; usually there are increased efficiencies with lower costs. In fact, the growth of private health exchanges has forced further competition and “best of breed” for such services. That is why there are so many new technologies and options offered when you separate your wellness, disease management and data analytics/reporting from your current carrier/administrator.
Be a forward-thinker by exploring and putting out to bid these services. You will not be disappointed in the answers you find. We have researched and found about 37 qualified providers of such services that you can request and we will provide a complimentary copy of the “best in breed.” And it could increase efficiency and lower your total overall healthcare costs.
4) Wrap legal plan documents. Many employers are confused and end up paying someone to prepare the numerous Form 5500 filings each year for all ERISA benefits. These include separate Form 5500’s for medical/dental, vision, hearing, drug, AD&D, limited term life, Section 125 POP, cafeteria, health FSA, HRA, HSA, group voluntary and critical illness group benefits. The solution to consider is to implement just one wrap legal plan document and file just one form 5500. Then you can focus on and update annually any plan changes, eligibility rules and IRS mandated benefits within the one wrap document.
We spent hundreds of hours researching all the requirements and who offers such a document and updates. We are happy to offer you a complimentary listing of such providers and services.
5) Benefits outsourcing/offshore. In the next few years, consider the benefits of outsourcing medical claims processes and data analytics to a trusted third party; even offshore. This could mean even outside the United States. Why? The cost of doing business will make it unprofitable to do it the way we always have.
You need to look at all sources including, Professional Service Organizations. Get a bid from them for your next plan year. You should even consider offshoring your administration to the lowest priced sources
For example, most major carriers will drop individual health plan offerings since it must comply with the 80% rule. That 80% of the entire premium collected must be spent on actual medical claims, wellness, and preventative services. Many carriers are discovering that they cannot process and administer their plans on a 20% margin. They are losing money. That is the unintended consequence of ACA.
So, U.S.-based carriers are not cost-effective enough to survive on a 20% margin. Do you really think that 20% margin can be achieved under TrumpCare? Therefore, employers and their carriers will begin to realize and be incentivized to outsource medical claims processes, wellness initiatives, disease management, and data analytics to an outsourced entity.
6) Forms and filings are continually changing. For example, TrumpCare might remove some forms and filing deadlines but add some others. IRS forms 1094 and 1095 filings might be repealed but still might have to be filed for tax year 2016.
Many benefits professionals hope TrumpCare might reduce healthcare costs. But there could be unintended consequences. So just when you thought you didn’t need to worry about the ACA for the rest of 2016, we disagree.
