What will health care reform cost your organization?
Your CEO’s first question to you about health care reform is likely to be, “How much is this going to cost us?” How will you respond?
Buck Consultants can help you answer the tough questions senior management is now posing. We’ve developed a high-level actuarial model to determine the financial impact of health care reform on your organization. View sample outputs of the model.
Are your costs likely to increase?
Your business could face significant cost increases, driven by:
- More covered members, as a result of broader eligibility rules, fewer opt-outs, or both
- Enhanced benefit requirements in the form of broader coverage or reduced cost sharing for some services
- New taxes on your RDS subsidy and high-value health plans
- Penalties resulting from new employer mandates
Our model will enable you to give your senior management an initial impact analysis now.
Should you play or pay ?
The health care reform bill contains the notion of an employer mandate with penalties for not providing coverage. Buck’s model calculates the mandates and shows the net employer costs of three strategic courses of action:
- Do nothing: You make no changes to your benefit programs regardless of whether your current plan meets the provisions of the bill
- Enhance plans: You improve the benefit design only to the extent necessary to comply with the new provisions; your current contribution strategy is maintained
- Drop coverage: You drop coverage completely and instead pay the “Play or Pay” penalty
By looking at these alternatives, you can begin to formulate an HR action plan. In some cases, your analysis might lead to different strategies for different business units or employee groups. |
What are the effects of the Cadillac tax?
A source of funding reform under the bill is the so-called Cadillac tax on high-value plans beginning in 2018. Our model will help quantify the amount of this excise tax on your population, including the required threshold adjustments for high-risk occupations. It will also graphically show you the growth in this levy over time as medical inflation outstrips the growth in the exclusion amount. In addition to quantifying the tax, the model will enable you to run “what if” employer responses such as absorbing the tax, cost-shifting it to employees, and, finally, reducing core medical benefits. These illustrations will help you formulate your action plan based on hard financial data.
Which of your employees will be better off in the Exchange?
Health care reform will create new state-based Exchanges with generous federal subsidies. This new alternative to traditional employer plans creates both risks and opportunities for you. If your employees choose to participate in the Exchange, you could be liable for a Free Rider assessment. However, this could still be cheaper than covering some employees under your plan. Predicting which of your employees will be eligible for and which will join the Exchange and what the added costs or savings will be is very sensitive to each employer’s unique demographics and plan design. Our model explicitly takes these factors into account.
How do you account for employees’ total household income?
Whether your organization is better off playing or paying, and whether some — and how many — employees will be better off continuing in your plan or moving to the new Exchanges are big questions for many employers. The answers will be heavily influenced by your employees’ eligibility for federal subsidies, which depends on their total household income level. However, your payroll and HRIS systems don’t offer you information about other household income.
Buck’s actuarial model features a robust econometric module that forecasts the unknown (household income) based on known data points such as age, gender, employee base pay, geography, and industry, based on census and labor bureau data. While the model cannot predict household income for individual employees, it can produce actionable data across your entire workforce. Knowing what portion of your workforce will qualify for federal subsidies is an essential first step in formulating your health care reform action plan. In turn, you will be able to provide management with better information on projected impacts to your organization, for better informed business decisions.
How can you get started?
To get started, we just need some basic information from you:
- A brief description of your medical plan offerings (e.g., SPDs or enrollment guides)
- COBRA rates/employee contributions
- Employee census data (including compensation)
Contact Us
For more information or to request a financial impact analysis, contact your Buck Account Executive or email info@buckconsultants.com.