TPG’s Healthcare Review: March, 2015
“Three Months In”
Welcome to the First Quarter 2015 edition of TPG’s Healthcare Review, a forum to keep our current clients, prospective clients, and candidates apprised of the ever-changing landscape of healthcare in a post-reform world. Now that the Employer Mandate of the Patient Protection and Affordable Care Act of 2010 (PPACA) is in place, we will publish this newsletter on a quarterly basis. We thank you in advance for your interest, and welcome your comments and questions throughout the year.
Last week, the Obama administration took time out to trumpet the fifth anniversary of the signing of the healthcare law (March 23rd) by releasing statistics regarding the current state of the uninsured. In a report titled “Accomplishments of the Affordable Care Act,” the administration stated that 16.4 million previously uninsured individuals have gained coverage due to the law. The primary driver of those numbers was the federal premium subsidies for lower-income individuals to use to purchase coverage (more to come on this issue). Another large part of these statistics was the expansion of the Medicaid program to states that agreed to increase maximum income limits and retain eligibility for that program.
To a lesser degree, yet still impacting the reduction in the uninsured numbers, was the law’s provision making it illegal for plans to deny coverage for those with pre-existing medical conditions. The final piece of the puzzle for reduced numbers of the uninsured was PPACA’s requirement that group health plans extend coverage to an employee’s adult children up to age 26, no matter their academic status. This change has increased the number of adults ages 19 to 25 with health insurance by 2.3 million. The estimated number of individuals that were uninsured at the law’s signing was 50.0 million, so there is still plenty of work to do, and the acceptance of the law remains mixed.
There have been dozens of attempts to repeal PPACA since it was signed into law in 2010, and amendments to its provisions have been made based on the administration’s requests rather than by legislative methods. The Supreme Court reviewed the law in 2012 and declared that most of it met Constitutional muster, yet a current challenge to the subsidies may gut the funding mechanism that has accounted for the largest reduction in the numbers of uninsured. Over the past few weeks, the Republican-controlled House and Senate have approved budgets which repeal the law in order to move toward the elusive balanced budget. After five years, it appears that the debate is not over regarding whether the Affordable Care Act is a positive or a negative for our country. One thing that has occurred on the law’s anniversary is the discovery that tax time has become significantly more complex for many Americans.
According to the Associated Press, 95 percent of households that received aid from the government to purchase insurance got it wrong. The Kaiser Family Foundation released a report last week indicating that half of the households eligible for subsidies will need to repay some of that aid this tax season due to under estimating income for 2014. This may bring about the ire of many subsidy recipients as these repayments may cut into or even erase the tax refunds of the affected individuals. Kaiser is estimating that the average repayment will be nearly $800 per household. On the flip side, there should be 45 percent of eligible households that didn’t receive enough assistance, and those households will receive some sort of refund. H&R Block has stated that thus far this tax season 52% of the people that signed up for coverage through the public exchanges had to pay back a portion of their tax credit. Block’s average pay back has been $530 which represented a decrease in refunds of about 17%. This issue has occurred to those who complied with the law and does not include the millions of individuals who will be hit with tax penalties for not having health insurance.
We will now focus on the Employer Mandate and its impact on business throughout the country. There was great concern going into 2015 that employers would see large increases in enrollment to company sponsored plans, and as a result, increased costs. According to a global healthcare consulting firm Mercer, there was virtually no change in the percentage of employees who enrolled into these plans. While there was a 1.6% increase in the number of employees enrolled, there was a 2.2% increase in the size of the workforce. Why didn’t the changes have a bigger impact on enrollment? Mercer found that 81% were already in compliance with the eligibility requirement before 2015. Among those employers that did extend coverage to more employees, many found that few of the newly eligible chose to enroll.
This last point is a worry of the supporters of PPACA who wanted to see that everyone in the country would have healthcare insurance over time. It appears that the rate of healthcare enrollment has already slowed. Some states have experienced strong numbers in their initial drives to sign up participants, yet in large states like New York and California, growth in 2014 was only 2% and 1%, respectively. The Obama administration’s goals for 2015 have been rolled back to reflect this slowdown in enrollments. Whether it is the complexity of how the health law works or the relatively small tax penalty that the uninsured face this year, many Americans continue to choose not to participate in this post-reform world of insurance.
Will we see a change in enrollment trends over the coming months? Will the Supreme Court rule against the expansion of subsidies to the federal healthcare exchange by the Internal Revenue Service? Will the law be repealed or opened up for amendments which would address some of the inherent weaknesses in the law? These are just some of the questions we will be asking and watching for answers throughout 2015. We will continue to report our findings to you on a quarterly basis.
Once again, we at The Performance Group appreciate your interest in this newsletter, our company and our services. We concluded 2014 by letting you know that we were ready for the Employer Mandate, and our clients that chose the “pay as you go” option are benefitting from cost savings as a result. It is not too late to enjoy some of those savings at your company. Please let us know if you have any questions and a TPG representative will be glad to sit down and discuss these potential savings with you.
At The Performance Group, we are glad to leave winter behind and see spring start with a return to more seasonable weather. Happy Easter to all of you who celebrate at this joyous time of year. Be safe, and we’ll report more events over the coming quarter.
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