Majority of Employers Would Reduce Health Benefits to Avoid Proposed Excise Tax, Survey Finds.

Nearly two-thirds (63 percent) of employers in a recent survey by Mercer say they would cut health benefits to avoid paying an excise tax included in the Senate’s Patient Protection and Affordable Care Act, unveiled November 18. Mercer estimates that one in five employers offer health coverage that would be deemed “too generous” and thus be subject to the Act’s 40 percent non-deductible tax on the excess value.

In early November, Mercer surveyed 465 employer health plan sponsors to find out how they might respond to such a tax on their health plans. Respondents included roughly equal numbers of small employers (fewer than 500 employees), mid-sized employers (500-4,999 employees) and large employers (5,000 or more employees).

In general, excess annual costs under the legislation are those above $8,500 for employee-only coverage or $23,000 for family coverage, starting in 2013. Higher annual cost thresholds – $9,850 and $26,000 – would apply to retiree plans, coverage for certain workers in high-risk jobs and coverage in certain high-cost states.

In all cases, annual costs include employer-paid, employee-paid, pre-tax and after-tax premium or premium-equivalent amounts for the health, dental and vision coverage. Annual expenses also include pre-tax (not after-tax) contributions to flexible health spending, and employer contributions to health reimbursement and health savings accounts.

As health care costs continue to trend upwards, the proposed tax is predicted to apply to about a fifth of all employers if it becomes effective in 2013. The percent of employers impacted by the cap would increase annually because the Act proposes that the baseline trend be inflated by the annual consumer price index (CPI) plus 1 percent, which is about half the average health care trend.

According to Linda Havlin, a Worldwide Partner with Mercer, “For many employers, it’s a matter of when, not if, they will hit the cap. While some policy analysts expect the cap would prompt employers to make major changes to cut back on excessive health care spending, it’s important to note that not all the plans that would be subject to the tax are particularly generous. There are other factors beside plan design that drive up cost.”

Nearly two-thirds (63 percent) of employers who responded say they would cut covered benefits to avoid paying the excise tax. About a fourth of respondents (23 percent) say they wouldmaintain their current plan, but pass along the cost of the tax to their employees. Just 2 percent say they would keep their plan, but absorb the new tax themselves. These employers may be constrained by bargaining agreements from shifting cost or they may simply feel that out-ofpocket costs are already as high as their employees can tolerate.

Seven percent of the responding employers say they would terminate the high-cost plan. Notably, 9 percent of small employers – which typically offer only one medical plan choice – saythey would terminate their plans, potentially forcing their employees into the individual market.

Ms. Havlin noted, “Small employers have been exiting the health market for years and this statistic is another indicator of their frustration. Only 60 percent of employers with fewer than 50 employees offered coverage last year compared to 99 percent of large employers. In some markets that have expensive benefit mandates and taxes on insurance, such as New York City, we’re seeing an uptick in that exit rate.”

Of those employers that would reduce covered benefits, 75 percent say they would use the familiar strategy of raising deductibles and copays. Forty percent would add an alternative lowcost plan to their benefit offerings and 32 percent would replace their current plan with a lowcost option.

Many of the larger employers would attempt more sophisticated strategies. One-fourth of employers with 5,000 employees say they would seek quality and cost-efficiency improvements through high-performance networks, medical homes, and health management incentives.

“We all need to work to take the inefficiencies and inappropriate spending out of health care,” Ms. Havlin stressed. “The risk to employers is that reform has a lot of other costs that will make it even harder to stay under the cap. For example, employers will likely bear the brunt of the government’s $156 billion fees on insurers, manufacturers, hospitals and other suppliers – and they will pass the cost on to employees.”

The largest responding employers would also be the most likely to terminate employer contributions to flexible health spending, health reimbursement and health spending accounts: 25 percent of those with 5,000 or more employees would do so, compared to 19 percent of all sizes.

One argument that some have made in favor of the excise tax is that employers cutting benefits would return the savings to employees in the form of higher wages. However, less than a fifth of respondents (16 percent) say they would convert their cost savings into higher pay.

Large employers more likely to favor the individual mandate

Both the House-passed bill and the reform plan headed to the Senate floor would require all individuals to obtain coverage if they can afford it, either through their employer or in the individual market. A majority of responding employers (52 percent) is in favor of the individual mandate: 37 percent are opposed and 11 percent have no opinion. The largest responding employers (those with 5,000 or more employees) are the most in favor: 65 percent favor the individual mandate, while only 45 percent of the small responding employers support this mandate.

Respondents overwhelmingly agree that if individuals are required to have coverage, Congress should allow employers and insurance companies to offer low-cost, catastrophic plans (86 percent), which would not be permitted under the current House and Senate proposals. On this point, Ms. Havlin notes that “Expensive plans aren’t appealing for many self-employed or low wage earners. These people are more likely to take the risk of being uninsured, particularly if they are young. The individual market is an opportunity for us to offer a variety of plans that meet different needs, including some plans that provide breakthrough ideas in quality, compliance and outcomes.”

Source: Mercer

Diabetes Population to Double, Diabetes Costs to Nearly Triple, in 25 Years, New Study Shows.

Findings Underscore Urgent Need to Reform CBO Scoring of Preventive Care

The diabetes population in the United States will almost double over the next 25 years and annual medical spending on the disease is projected to hit $336 billion, up from $113 billion today, according to a study published in the December issue of Diabetes Care. The National Changing Diabetes® Program (NCDP), a program of Novo Nordisk, commissioned the analysis by a team from the University of Chicago.

According to the forecast, the number of Americans living with diabetes will rise from 23.7 million in 2009 to 44.1 million in 2034. For the Medicare program, the increases over the next 25 years are even more dramatic: the number of Americans living with diabetes and covered by Medicare will rise from 6.5 million to 14.1 million, and Medicare spending on diabetes will almost quadruple, skyrocketing from $45 billion this year to $171 billion in 2034. Based on this projection, “Medicare spending alone will represent just over 50% of direct spending on diabetes in 2034,” the authors concluded.

Factors not used in government budget analysts

Unlike past efforts to predict trends in diabetes, the model developed by the University of Chicago team considers the natural progression of the disease, effects of treatment and obesity rates in the United States, which are “factors that are currently not used by government budget analysts,” according to the authors.

“Obesity is a significant driver of future increases in the number of Americans with diabetes,” said Michael O’Grady, Ph.D., one of the study authors and a senior fellow at the National Opinion Research Center at the University of Chicago. “While our modeling, as well as that done by the Centers for Disease Control and Prevention, project obesity rates leveling off, neither model has obesity rates lowering substantially. High obesity rates among the American population over an extended period of time substantially increases the probability of developing type 2 diabetes.”

This forecasting model, which the authors contend improves the rigor of the estimates of health care spending for diabetes, was designed to inform policymakers as they explore ways to control spiraling health care costs. Currently, official government estimates of the potential costs and cost offsets associated with proposed preventive health legislation do not consider savings that may occur more than 10 years out, thus providing an incomplete view of preventive health measures as an investment.

“The size of the current diabetes population exceeds many prior forecasts and we expect that the future growth of population and its associated costs will be explosive. Finding ways to reduce the number of people who develop diabetes is both a national public health priority and a fiscal imperative,” said Dr. Elbert Huang, the lead author of the paper and an assistant professor of medicine in the Department of Medicine at the University of Chicago. “The best way to stem the dramatic rise in diabetes is to implement proven preventive care programs on a national level. This will require that policymakers understand that diabetes prevention is a long-term investment that will only reap benefits over decades, not years.”

The Congressional Budget Office (CBO), which assesses the cost of proposed legislation, does not typically consider any cost savings beyond 10 years. Because diabetes develops over a long period of time, with the highest costs coming later in life of the disease, savings are far more apparent at 25 years than at 10 years. For this reason, policymakers need a long-term analysis of costs in order to make accurate decisions that reflect the true impact of prevention programs.

“Managing diabetes means preventing the pain and expense of diabetes complications, including heart disease, amputation, kidney disease, and blindness,” said Michael Mawby, Chief Government Affairs Officer and director of the NCDP, a diabetes leadership initiative established by Novo Nordisk to drive health systems change at the national and local level, which funded the research. “Therefore, it is critical that lawmakers see the long-term projections of the impact of diabetes interventions.”

Legislation introduced earlier this year is designed to lead to a more accurate assessment of the costs and benefits of preventive health, including preventing complications and delaying progression of chronic diseases such as diabetes. The bipartisan Preventive Health Savings Act of 2009 (HR 3148), calls on the CBO to weigh clinical or observational studies when modeling projected costs and savings related to preventive health, and in certain circumstances, to look beyond the traditional 10-year budget window.

About the National Changing Diabetes® Program

The National Changing Diabetes® Program (NCDP) is a multi-faceted initiative that brings together leaders in diabetes and policy to improve the lives of people with diabetes. NCDP strives to create change in the U.S. health care system to provide dramatic improvement in the prevention and care of diabetes. Launched in 2005, NCDP is a program of Novo Nordisk. For more information, please visit

About Novo Nordisk

Novo Nordisk is a healthcare company with an 86-year history of innovation and achievement in diabetes care. The company has the broadest diabetes product portfolio in the industry, including the most advanced products within the area of insulin delivery systems. In addition to diabetes care, Novo Nordisk has a leading position within areas such as hemostasis management, growth hormone therapy, and hormone therapy for women. Novo Nordisk’s business is driven by the Triple Bottom Line: a commitment to social responsibility to employees and customers, environmental soundness and economic success. With headquarters in Denmark, Novo Nordisk employs more than 27,550 employees in 81 countries, and markets its products in 179 countries. Novo Nordisk’s B shares are listed on the stock exchanges in Copenhagen and London. Its ADRs are listed on the New York Stock Exchange under the symbol ‘NVO’. For global information, visit; for United States information, visit

Source: National Changing Diabetes Program

Health Plans That Use Member Enrollment Data to Push Their Political Agenda Might Violate HIPAA.

HEALTH PLAN WEEK is reporting is this week’s issue that health plans could face stiff penalties under HIPAA if they use enrollment information to contact members without their permission and urge them to join grassroots advocacy campaigns or take a stance on a political issue.

As a case in point the article cites a September incident where Humana Inc. pulled 900,000 names and addresses from its Medicare Advantage database and sent those beneficiaries letters recommending that they fight against proposed “significant cuts” to the MA program. CMS ordered Humana to cease all such mailings, which it says violated the health insurer’s Medicare contract. CMS also says the letters might have violated HIPAA, and asked the HHS Office for Civil Rights (OCR) to investigate

However, Jeff Drummond, a partner Dallas-based law firm, says Humana could defend the use of its enrollment data as falling into the HIPAA exemption for operations, contending this was an effort to communicate benefits information to its members, much like describing changes in a drug formulary, he tells HPW.

For more information visit the original article here.

How Health Care Reform Could Fall Apart. is pointing out that just because Senate Majority Leader, Harry Reid eked out 60 votes on a procedural motion to start the health care debate Saturday night there’s no guarantee he can pass a bill on the merits.

The article says that the reasons are clear: deep divides among Democrats on a public insurance plan, abortion, tax hikes and cost-cutting. Liberals want the plan to be generous enough. Moderates fear a budget-buster. And everyone is trying to avoid angering seniors.

For more information visit the original article here.

Democrats Focus on G.O.P. Senators From Maine.

The New York Times is reporting today that Obama administration officials and their Congressional allies are stepping up overtures to select Senate Republicans in hopes of winning their ultimate support for the healthcare reform bill.

Sen. Harry Reid

Sen. Harry Reid

The two moderate Republican senators from Maine, Susan M. Collins and Olympia J. Snowe, both say Senator Harry Reid, the majority leader, reached out to them after he unveiled the Senate measure, encouraging them to bring forward their ideas and concerns.

The Times reports that both senators have been talking privately with Democrats and independents about devising joint amendments in such areas as cost control, and both said they would continue to look for compromises.

“I’m prepared to continue to work to improve the legislation,” said Ms. Snowe, who said how her proposals are handled will “be a true test of whether there is a will to improve this legislation in a non-ideological, bipartisan manner.”

While the two women are the main focus of Democrats at the moment, officials said they will be weighing opportunities to appeal to others. They also hope that any final joint House-Senate proposal could attract at least a few Republicans in each chamber.

For more information visit the original article here.

Blue Cross Blue Shield Association says Senate Bill Would Make Healthcare Less Affordable.

The Blue Cross and Blue Shield Association (BCBSA) issued the following statement regarding the Senate introduction of the “Patient Protection and Affordable Care Act”:

The Blue Cross and Blue Shield Association is committed to working with Congress and the Obama Administration to enact bipartisan legislation this year that improves quality, reins in costs and extends coverage to everyone.  However, we are disappointed that the Senate bill includes a government-run health program, even though the Senate Finance Committee rejected such a proposal.  Analyses, including those by the Congressional Budget Office, show that a government-run plan would do nothing to make healthcare coverage more affordable for consumers and will in fact have the opposite effect.  Not only would a new government-run plan be more expensive than coverage offered in the current marketplace, but it also would jeopardize access to coverage for the 160 million people who receive their benefits through their employers today.  Given the negative impact such a plan would have on both affordability and access, creating a government-run plan is misguided public policy that will compromise the impact of broader healthcare reform.

To be successful and sustainable, healthcare reform must not only expand coverage to the uninsured, but it also must make healthcare more affordable for everyone.  Many provisions in the Senate bill, including allowing people to wait to buy coverage until they are sick, limiting age discounts for the young and healthy, and a new $6.7 billion annual insurer tax, will increase costs for millions of consumers.  Any bill that raises costs for people buying coverage fails to pass the affordability test.

As we review the bill, the Blue Cross and Blue Shield companies will continue to work with the Congress to educate Senators on the unintended consequences of this legislation and to help fix the bill in order to create affordable and sustainable healthcare reform for everyone.

The Blue Cross and Blue Shield Association is a national federation of 39 independent, community-based and locally operated Blue Cross and Blue Shield companies that collectively provide healthcare coverage for 100 million members – one-in-three Americans. For more information on the Blue Cross and Blue Shield Association and its member companies, please visit

AHIP Reacts to Proposed Senate Heath Legislation.

Karen Ignagni, President and CEO of America’s Health Insurance Plans (AHIP), released the following statement on the release of proposed Senate healthcare reform legislation:

Karen Ignagni

Karen Ignagni

“The promise of health care reform is that it will provide all Americans coverage, allow them to keep their coverage if they like it, and bends the cost curve to put the system on a sustainable path.  These are the standards by which any reform bill should be judged, and the Senate bill falls short of meeting them.  We believe that these issues can be addressed and improved to achieve these goals, and we will continue to work with policymakers toward that end.

“We believe that all Americans, regardless of health status or medical history, should have guaranteed access to affordable coverage.  We have proposed guarantee issue coverage with no exclusions for pre-existing conditions in conjunction with a coverage requirement and adequate subsidies for working families.  We also have made a commitment to do our part by proposing far-reaching administrative simplification reforms that improve efficiency, reduce costs, and free up time for physicians to focus on patient care. We stand by these commitments, but agree with a wide range of health policy experts that market reforms will not work if there is not an effective coverage requirement.

“This proposal encourages people to wait until they are sick to purchase coverage, which will significantly drive up costs for those who are currently insured. The legislation also imposes rating rules that will raise the cost of coverage for millions of young families in more than 40 states.

“The new health care taxes and fees will raise the cost of coverage for individuals, families, and employers.  Health plans will be required to pay a $6.7 billion tax beginning next year for the next 10 years, in addition to ‘stabilization’ fees of $25 billion in 2014, 2015, and 2016.  According to Fortune magazine’s analysis of the companies listed under ‘Insurance and Managed Care’, earnings in 2008 totaled $8.61 billion with a profit margin of 2.2% — ranking the industry 35th on the Fortune list.

“This bill will also exacerbate the health care cost shift as health care providers offset reductions in public program reimbursements by charging more to families and employers who have private coverage. The new government plan will cause even more cost-shifting and threaten the employer-based coverage with which Americans are overwhelmingly satisfied.

“The $117 billion in cuts to Medicare Advantage will threaten the choices that seniors have across the country and significantly reduce seniors’ benefits in many major metropolitan areas.


Patient Protection and Affordable Care Act by the Numbers.

$2.5 trillion — Cost of the bill is  over 10 years of full implementation

$848 billion — Subsidies provided through the exchanges, increased net outlays for Medicaid and the Children’s Health Insurance Program (CHIP), and tax credits for small employers.

$493.6 billion — New taxes on individuals and employers

$464 billion — Cuts to Medicare

$149 billion — Excise tax on high-premium insurance plans

$130 billion — The projected net reduction in federal deficits of  over the 2010-2019 period

$120 billion — Changes to existing law regarding tax preferences for health care and effects of other provisions on tax expenditures for health care

$25 billion — Unfunded state mandates in additional Medicaid expenditures over the 2010–2019 period

$15 billion — Amount allocated to  establish a Prevention and Public
Health Fund.

$8 billion — Penalty payments by employers whose workers received subsidies

25 million –  People who would purchase their own coverage through the new insurance exchanges

24 million — People would be left without insurance

19 million — People who will get a subsidy to help them buy health insurance

4 million — People the CBO estimates will choose the public option

$23,000 — The initial threshold for a single policy that will be subject to a
40 percent excise tax

$8,500 — The initial threshold for a single policy that will be subject to a
40 percent excise tax

2,074 — Number of pages of the bill

2,014 — The year most nonelderly people with income below 133 percent of the Federal Poverty Level would be made eligible for Medicaid.

$750 — The penalty an employer would have to pay for each full-time worker who obtained subsidized coverage (See 50)

50 — The number of workers an employer must have before they would have to pay a penalty if they did not offer coverage (See $750)

Source: CBO letter to Senate Majority Leader Harry Reid dated November 18, 2009. Website:

Illinois Takes Decisive Step Towards Health Insurance Reform.

While the U.S. Congress is still working to strike a comprehensive health reform package, Illinois is said to be leading the way for the rest of the nation with legislation aimed at helping consumers who are forced to go the private insurance market to get the care they need. An AARP-backed bill establishing stronger consumer protections in the private health insurance market passed in the Illinois House on Thursday night, and is on its way to the Governor’s desk for his signature.

According to a release, The Individual Health Insurance Fairness Act (House Bill 3923), introduced by State Representative Greg Harris (D-Chicago), and State Senator Heather Steans (D-Chicago), addresses key barriers facing consumers who struggle with unfair and inconsistent industry practices.

According to AARP Illinois, which strongly backed the bill, The Individual Health Insurance Fairness Act will:

  • Bring transparency to the insurance industry in Illinois – letting consumers see critical information regarding industry profits and premium increase.
  • Establish, for the first time in Illinois history, the right to an independent external review for members of PPO plans (approximately 90 percent of the insured market in the state).
  • Simplify the complex application process for both individual and small group markets by creating a standard application, making it easier for them to get the coverage they need.

The release notes that nationally, over 4 million people have lost their health care since the recession began, while roughly 17 million purchase their own coverage. In the private market, an average annual premium for a family of four has risen to nearly $5,500, while an individual premium costs $2,500 in Illinois. A recent AARP study found that adults aged 50-64 spend roughly 10% of their income on health coverage, and paying three times as much as their peers with employer-sponsored coverage.

State Lawmakers Push for Health Care Opt-out.

The Kansas City Star has picked up on a story that could begin the shape the healthcare reform process. Apparently, three Republican lawmakers in Kansas want to give the state an opt-out should Congress pass health reforms that mandate individual health insurance. The amendment would say no law can require individuals or employers to buy health insurance.

The Star goes on to say that their proposal, which would alter the Kansas Constitution, is similar to efforts under way in more than half the states. It’s a pointed attempt to get President Barack Obama and Congress to back off efforts to retool the nation’s health care system.

These state initiated efforts may be more of an attempt to influence policy in Washington than they are legitimate effort s to block legislation that may get passed by Congress.

To be added to the state constitution in Kansas, the legislation must be passed by a two-thirds majority of the Kansas House and Senate and then be approved by voters next year.

Still, it will be interesting to see if any of these state level push-backs build any traction.