Health Care Reform. Bill Lindsay, Lockton Companies February 19, 2015 L O C K T O N C O M P A N I E S

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1 Health Care Reform Bill Lindsay, Lockton Companies February 19, 2015 L O C K T O N C O M P A N I E S

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5 Key Point # 1 What Is the Problem We Are Attempting to Address? Insurance reform, or Health care reform 4

6 Key Point #1 The Dilemma Cost vs. Access 5

7 This Is Complicated Stuff Nobody in football should be called a genius. A genius is a guy like Norman Einstein. Joe Theismann 6

8 Key Point #2 Multiple Factors Interact Government Cost Shift Malpractice Cost Uninsured Lifestyle Choices Utilization of Services Research & Development Costs Aging Population Regulation Growth of Technology Mandates Prescriptions Bad Debt Administrative Costs Consumer Demand Investment Returns 7

9 Key Point #3 Trends Aging work force Percent of GDP spent on health care Spending on health care vs. other aspects of our economy Increasing percent of state/federal budget Quality of care in U.S. is concerning 8

10 Average Annual Premiums for Covered Workers with Family Coverage, by Firm Size, $18,000 $16,000 $14,000 $12,000 $10,000 $8,000 $6,000 $4,000 $8,109* $9,737* $8,946* $6,395* $7,113* $5,845 $7,781* $6,959* $6,521* $5,683 $12,973* $11,575* $12,233* $11,025* $12,091* $10,046* $11,835* $11,306* $9,127* $10,587* $13,704* $14,038* $15,980* $15,520* $14,098* $12,696* $13,250* $16,715* $15,581* $15,253* $2,000 $ All Small Firms (3-199 Workers) All Large Firms (200 or more Workers) *Estimate is statistically different from estimate for the previous year shown. SOURCE: Kaiser/HRET Survey of Employer-Sponsored Health Benefits,

11 Cumulative Increases in Health Insurance Premiums, Workers Contributions to Premiums, Inflation, and Workers Earnings,

12 Employers 11 Self-Funding Strategies Steadily Gaining Ground Percentage of Covered Workers in Self-Funded Plans ACA Benefits Standards Avoidable Through Self-Funding 70% 65% 60% 55% 54% 59% 61% Essential Health Benefits Guaranteed Issue and Renewability 50% 49% 45% 40% Modified Community Rating Medical Loss Ratio Requirements Source: Gabel JR et al., Small Employer Perspectives On The Affordable Care Act s Premiums, SHOP Exchanges, And Self-Insurance, Health Affairs, 32(11): ; Health Care Advisory Board interviews and analysis. 11

13 Commercial Payers 12 Employer Shifting Risk by Increasing Cost-Sharing Particularly Severe for Out-of-Network Care Percent of Covered Workers Enrolled in a Plan with a $1,000+ Deductible by Firm Size Single Coverage Average In- and Out-of-Network Deductibles for Group Plans n = 1,100 employers 58% $2,110 40% 46% 50% 49% $1,380 $1,750 $1,570 $1,230 13% 17% 22% 26% 28% $680 $1,000 $760 $1,010 $ Small Firms (3-199 Workers) Large Firms (200+ Workers) In-Network Out-of-Network Source: Kaiser Family Foundation and Health Research & Educations Trust, Employer Health Benefits 2013 Annual Survey, August 2013; PwC, Medical Cost Trends: Behind the Numbers 2014, June 2013, available at: Health Care Advisory Board interviews and analysis. 12

14 Key Point #4 Foundational Aspects of ACA Insurance reform Individual mandate Exchanges 13

15 Positives of ACA Basic insurance reform Getting uninsured to enroll 14

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17 Lessons From The Clinton Era Have Congress take the lead vs. the oval office Use the bully pulpit but don t peak too soon Avoid including too much detail in the bill (gives the other side a target to shoot at) Find a way to neuter the special interests (insurance, Pharma, hospitals, etc.) 16

18 Reality Watching legislation is like watching sausage being made. Neither is for the faint of heart. It s not rocket surgery, it s harder 17

19 Employer Issues Coverage for part-time/ineligible employees Increased reporting and administrative requirements Increased cost shift Small employers and individuals forced to use exchanges Benefit/contribution standards for employer plans Cost continues to escalate 18

20 Where Have We Been? 19

21 National Marketplace Plan Selection* Number who have selected a marketplace plan 8,019,763 Enrollment by Gender Female 54% Male 46% Enrollment by Age Age <18 6% Age % Age % Age % Age % Age % Enrollment by Metal Level Bronze 20% Silver 65% Gold 9% Platinum 5% Catastrophic 2% 65% *Taken from ASPE Issue Brief, Department Health and Human Services, May 1,

22 Arizona National Marketplace Plan Selection* Number who have selected a marketplace plan 169,597 Enrollment by Gender Female 54% Male 46% Enrollment by Age Age <18 22% Age % Age % Age % Age % Age % Enrollment by Metal Level Bronze 19% Silver 70% Gold 7% Platinum 3% Catastrophic 2% 55% *Taken from ASPE Issue Brief, Department Health and Human Services, May 1,

23 Possible Solutions - Examples Allowing states to have more flexibility in testing access/ benefit approaches (e.g., Medicaid waivers, block grants, etc.) Enabling the young with the ACA s catastrophic plans to get subsidies for non-metal plans Allowing states to experiment with federal subsidies (e.g., buying private insurance vs. Medicaid) State based cost management mechanisms. Etc. 22

24 Then It Gets Really Easy 23

25 I Challenge You! Be a catalyst for change Don t just react to it Introduce new concepts Challenge standard conventions Seek real innovations Don t nibble around the edges Be evidence-based Don t allow yourself to be sold concepts Get engaged 24

26 The greatness of America lies not in being more enlightened than any other nation, but rather in her ability to repair her faults. Alexis de Tocqueville 25

27 Conclusion Picking a healthcare financing system is kind of like picking someone to marry you re picking a set of problems you are prepared to live with. Marc J. Roberts, Ph.D., Harvard School of Public Health 26

28 Our Mission To be the worldwide value and service leader in insurance brokerage, employee benefits, and risk management Our Goal To be the best place to do business and to work Lockton, Inc. All rights reserved. Images 2015 Thinkstock. All rights reserved. 27