obamacare to trumpcare: where are we going?

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?

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ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™© 2016 GALLAGHER BENEFIT SERVICES, INC.

How did we get here?

PRE ACA: DYSFUNCTIONAL INDIVIDUAL INSURANCE MARKET

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Insurance Unaffordable Unavailable

Pre‐existing conditions

Limited benefits

Individual Underwriting

Annual & Lifetime Limits

High Risk Pools

PRE-ACA SYMPTOMS

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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


ACA ONLY ADDRESSED HALF THE PROBLEM

Access Improved Cost Increases Continued


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


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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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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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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


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PAST SUCCESSES

HSAs

CDHPs

Medicare Advantage

Medicare Part D

Quality Reporting


Common Themes• Personal Control/Responsibility• Coordinated Care• Flexibility• Transparency• Portable

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GOP GUIDING PRINCIPLES


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


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RECOMMENDATION: PURCHASING ACROSS STATE LINES

Purchase Insurance filed in other state

Ease interstate pooling

States Regulate Insurance

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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


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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


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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)


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RECOMMENDATION:MEDICAL LIABILITY REFORM


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

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RECOMMENDATIONS:INSURANCE REFORMS


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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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

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PROBABLY MODIFIEDExchanges

Mandate & Subsidies

Age‐Tiers & Stop‐Loss

Taxes & Penalties

Lifetime Limits & GI

Child Age 26

HSAs & HRAs

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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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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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obamacare to trumpcare: where are we going?

Health & Medicine