The Q2 issue of “The Key: Quarterly Newsletter Covering Pertinent Issues Across the Retirement Landscape” highlights 403(n) compliance, monitoring target date funds and asset allocation for retirement plan, among more. Get a copy of The Key here: The Key_2013_Q2.
The seventh annual MullinTBG/PLANSPONSOR Executive Benefits Survey shows a vast majority of companies (91%) are now offering NQDCPs. Higher tax rates and historically low interest rates present potentially greater challenges for highly compensated employees trying to save for retirement and meet other financial goals, making deferring compensation into a nonqualified plan especially attractive.
The survey also highlights that more companies are offering executives financial planners to help create effective retirement planning strategies. In 2012, 52.7% of firms offered financial planning benefits, compared with 34% in 2009.
“This year’s survey results have once again confirmed the enduring appeal of nonqualified plans in both helping high income earners achieve a secure retirement and meeting an important need in the marketplace,” said George Castineiras, Prudential Retirement’s senior vice president of Total Retirement Solutions. “I believe that NQDCPs have the potential to become even more relevant for high-income earners looking to increase their savings power and lessen tax impacts in the coming years.”
Average monthly premiums for individual health insurance plans are 47 percent higher than average when they cover a comprehensive list of eight health benefits, but they also yield lower deductibles, a new industry report reveals.
The report by eHealth, the parent company of eHealthInsurance, is the latest to predict higher premiums for health coverage coming next year when the bulk of the Patient Protection and Affordable Care Act kicks in.
The report examined the cost of about 30,000 individual plans that included eight health benefits and were purchased across 32 states through eHealthInsurance. The benefits include laboratory and X-Ray; emergency services; prescription drugs; chiropractic; maternity; OB/GYN; periodic exams; and well baby care. Similarly, the PPACA created a list of 10 essential health benefits that all major medical health insurance plans must cover at an actuarial value of 60 percent or more in order to fulfill the federal mandate for health coverage, beginning in January 2014.
“These data provide valuable insight into the cost of health insurance plans as consumers prepare to enroll in the more comprehensive health plans that will become available with the Affordable Care Act,” says Robert Hurley, eHealth senior vice president of carrier relations.
Hurley noted the report doesn’t provide an “apples to apples comparison of plans that cover the essential health benefits established in the PPACA,” but it does indicate potential problems with affordability with new benefits standards.
The eHealth report said its average premium for an individual policy covering the eight benefits was $279 a month compared to $190 a month without that full coverage. The annual deductible on the more comprehensive policy was $2,257 versus $3,079 on the other policies, a 27 percent decrease.
The average premium for a family was $605, compared to $412. The average family deductible will decrease 16 percent when a plan covered all of the benefits tracked in eHealth’s Cost and Benefits report ($3,422 vs. $4,079).
Reposted from HealthAffairsBlog
Health spending by state via Federal Bureau of Economics
One of the interesting features of the Affordable Care Act is that reform basically takes place at the state level. Yet the states are very different. Some spend more than twice as much on health care as others, as a percent of state income.
For example, health care spending in three states — Maine, West Virginia and Mississippi — accounts for one out of every five dollars of state GDP. Conversely, Wyoming spends less than 9 percent. (See the table at the end of this post.) If every state were like Wyoming, the United States as a whole would be spending less of its income on health care than about three-fourths of the other developed countries.
But the other states are not like Wyoming and the United States spends considerably more on health care than other countries, at least by conventional measures (although these measures have been challenged). Many believe that the key to why the U.S. spends more lies in the way private sector medicine is practiced across the different states. Among the fifty states, however, a study by the National Center for Policy Analysis finds that the public sector exhibits much more variability from state to state than the private sector; public sector medicine, rather than private sector medicine, may be the culprit.
For example, over a 40-year period:
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In general, private sector spending is much more similar from state to state than government spending. Overall:
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The two programs also operate very differently from state to state. For example:
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The Limitations Of Generalizing From Medicare Data
Another issue raised by the study is the tendency on the part of some policy analysts to generalize from Medicare data. Researchers at Dartmouth find widespread variation in per capita Medicare reimbursements across the country. Atul Gwande made a similar observation in a New Yorker article, comparing high Medicare spending in McAllen, Texas with lower Medicare spending in El Paso. In both cases, commentators used these facts to infer that we could save an enormous amount of money if doctors in the high-spending areas practiced medicine the same way as doctors in the low-spending areas.
The NCPA study, however, suggests that different types of spending may substitute for each other. In states where there are more uninsured and therefore more unpaid bills, for example, Medicare spending per enrollee is higher. In some states where Medicare spending is high, private sector spending is low and vice versa. For example,Texas is fifth from the top in Medicare spending per enrollee,but the state is fourth from the bottom in per capita private health care spending. On the other hand,Wyoming is seventh from the bottom in Medicare spending per enrollee,but the state is twelfth from the top in per-capita private sector spending.
As for McAllen Texas, part of the reason for its high Medicare spending is that it has almost four times the national average in “disproportionate share” spending (to compensate for a high volume of uninsured and Medicaid patients). In the private sector, McAllen actually spends less per person than El Paso does.
Challenging An Article Of Faith
For some time, an article of faith among many health reformers has been the idea that we can substantially reduce health care spending by having providers in high-spending areas practice medicine the way it is practiced in low-spending areas. The evidence reviewed here suggests that if we want the high-spending states to emulate the low-spending states, the place to start is with the public sector, not the private sector.
But it’s more likely that the entire idea is misdirected. Another NCPA study found that 80 percent of the variation in Medicare spending per enrollee could be explained by demographics (age, race, sex, etc.), income, and the uninsured rate. After making adjustments for these variables, the study asked how much money Medicare could save if every state matched the performance of the five lowest-spending states? The answer: about 10 percent. For all health care spending, how much could be saved if every state matched the performance of the five lowest-spending states? Answer: about 5 percent.
And remember, you don’t even get the five percent unless you copy perfectly.
This finding is consistent with other research. A new paper by Louise Sheiner, an economist at the Board of Governors of the Federal Reserve System, concludes that health and socioeconomic factors — e.g., the prevalence of smoking, obesity and diabetes — best explain why health spending in some regions of the country is higher. This is also the view of Richard “Buz” Cooper of the University of Pennsylvania.
According to the survey, 83% of employers now offer their employees incentives for participating in programs that help employees become more aware of their health status. These actions may include taking a health risk questionnaire or participating in biometric screenings.
This 83% of employers offer:
“Questionnaires and biometric screenings are the key tools in providing that important information and serve as the foundation that links behaviors to actions,” said Jim Winkler, chief innovation officer for health and benefits at Aon Hewitt. “Motivating people to participate through the use of incentives is a best practice in the industry and these strategies will continue to be a critical part of employers’ health care strategies in the future.”
More from Plansponsor.com
Recent studies conducted by two of the largest U.S.-based health insurers indicate that employers sponsoring consumer-directed health plans have been substantially more successful in controlling medical costs than traditional HMO and PPO plans over the past several years.
Employees and dependents enrolled in one of Bloomfield, Conn.-based Cigna Corp.’s “Choice Fund” CDHPs reported an average 7% decrease in medical costs during their first year of enrollment, compared with an average 7% one-year increase among HMO and PPO enrollees, according to Cigna’s seventh annual Choice Fund Experience Study.
Cigna’s study, released last week, examined claim experiences among 1,900 client group plans covering more than 2.5 million individuals. Overall, Cigna said combined enrollment in its Health Reimbursement Arrangement and Health Savings Account CDHP programs grew by 26% in 2012.
Cumulatively, Cigna’s group CDHP clients saved approximately $1,300 per employee in the first year, the study found. Per-employee savings compounded among CDHP clients in each subsequent plan year, totaling $7,800 by the fifth year.
In a statement accompanying the study, Cigna President and CEO David Cordani said the lower medical costs reported by CDHP enrollees are attributable in part to that group’s higher rate of participation in health and disease management programs, as well as more frequent use of online pricing and quality-of-care rating indices.
Thirty-one percent of CDHP enrollees completed a health risk assessment in 2012, compared with 15% of HMO and PPO enrollees. Almost three-quarters of CDHP participants registered to use Cigna’s online health care pricing directories and decision-making tools, compared with 47% of HMO and PPO plan members.
Read more from Business Insurance.
The Wall Street Journal featured this somewhat comical story on “how the new mandates are already reducing full-time employment.”
It’s already happening across the country at fast-food restaurants, as employers try to avoid being punished by the Affordable Care Act. In some cases we’ve heard about, a local McDonalds has hired employees to operate the cash register or flip burgers for 20 hours a week and then the workers head to the nearby Burger King BKW -1.11% or Wendy’s to log another 20 hours. Other employees take the opposite shifts.
Welcome to the strange new world of small-business hiring under ObamaCare. The law requires firms with 50 or more “full-time equivalent workers” to offer health plans to employees who work more than 30 hours a week. (The law says “equivalent” because two 15 hour a week workers equal one full-time worker.) Employers that pass the 50-employee threshold and don’t offer insurance face a $2,000 penalty for each uncovered worker beyond 30 employees. So by hiring the 50th worker, the firm pays a penalty on the previous 20 as well.
These employment cliffs are especially perverse economic incentives. Thousands of employers will face a $40,000 penalty if they dare expand and hire a 50th worker. The law is effectively a $2,000 tax on each additional hire after that, so to move to 60 workers costs $60,000.
A 2011 Hudson Institute study estimates that this insurance mandate will cost the franchise industry $6.4 billion and put 3.2 million jobs “at risk.” The insurance mandate is so onerous for small firms that Stephen Caldeira, president of the International Franchise Association, predicts that “Many stores will have to cut worker hours out of necessity. It could be the difference between staying in business or going out of business.” The franchise association says the average fast-food restaurant has profits of only about $50,000 to $100,000 and a margin of about 3.5%.
Because other federal employment regulations also kick in when a firm crosses the 50 worker threshold, employers are starting to cap payrolls at 49 full-time workers. These firms have come to be known as “49ers.” Businesses that hire young and lower-skilled workers are also starting to put a ceiling on the work week of below 30 hours. These firms are the new “29ers.” Part-time workers don’t have to be offered insurance under ObamaCare.
The mandate to offer health insurance doesn’t take effect until 2014, but the “measurement period” used by the feds to determine a firm’s average number of full-time employees started last month. So the cutbacks and employment dodges are underway.
The savings from restricting hours worked can be enormous. If a company with 50 employees hires a new worker for $12 an hour for 29 hours a week, there is no health insurance requirement. But suppose that worker moves to 30 hours a week. This triggers the $2,000 federal penalty. So to get 50 more hours of work a year from that employee, the extra cost to the employer rises to about $52 an hour—the $12 salary and the ObamaCare tax of what works out to be $40 an hour.
Moving to 33 hours a week costs the employer about $10 an hour more in ObamaCare tax. Look for fewer 30-35 hour-a-week jobs. The law that was sold as a way to help business and workers is thus yanking a few more rungs from the ladder of economic upward mobility.
Many franchisees of Burger King, McDonalds, Red Lobster, KFC, Dunkin’ Donuts and Taco Bell have started to cut back on full-time employment, though many are terrified to talk on the record. Activist groups have organized boycotts against Darden Restaurants, DRI -2.12% which owns Olive Garden and Red Lobster, for daring to publicly criticize ObamaCare. It’s safer to quietly dodge the new costs and avoid becoming a political target.
But the damage won’t be limited to franchisees or restaurants. A 2012 survey of employers by the Mercer consulting firm found that 67% of retail and wholesale firms that don’t offer insurance coverage today “are more inclined to change their workforce strategy so that fewer employees meet that [30 hour a week] threshold.” This week Nigel Travis, the CEO of Dunkin’ Donuts, asked Congress to change the health law’s definition of full-time to 40 hours a week from 30 hours so worker hours won’t have to be cut.
The timing of all this couldn’t be worse. Involuntary part-time U.S. employment is already near a record high. The latest Department of Labor employment survey counts roughly eight million Americans who want a full-time job but are stuck in a part-time holding pattern. That number is down only 520,000 since January 2010 and it is 309,000 higher than last March. (See the nearby chart.) And now comes ObamaCare to increase the incentive for employers to hire only part-time workers.
Democrats who thought they were doing workers a favor by mandating health coverage can’t seem to understand that it doesn’t help workers to give them health care if they can’t get a full-time job that pays the rest of their bills.
A version of this article appeared February 23, 2013, on page A12 in the U.S. edition of The Wall Street Journal, with the headline: ObamaCare and the ’29ers’.
