Policy Theory vs. Reality
Lockton Health Reform Advisory Practice
March 2017 • Lockton Companies
W HY TAX IN G H EA LT H IN S URA NCE I S
Average Amount Employers Pay in Premium Costs
100%
B A D P OL I C Y
$5,306
$12,865
82.5%
Taxing Employees on Health Insurance Threatens the
Group Market
71%
Reducing the income tax exclusion for employer-provided insurance
increases taxes on employees or forces employers to increase employee out0%
of-pocket costs, or both.
Employee
Only
Employees most likely to opt out of coverage are the healthiest and
Family
43+57y
Percent of Current Group Plan Enrollees Who
youngest employees. Those remaining will be the heaviest users, skewing
Would Qualify for Medicaid or ACA Subsidies
the group plan’s risk profile.
Threats to the Group Market Could Shift Enormous Costs to
the Government
43%
Over 177 million Americans receive health insurance through an employer.1
Employers pay more than $668 billion annually2 to insure their
employees, more than the federal government spends on Medicare. This
amounts to, on average, $5,306 toward the premium for employee-only
coverage and $12,865 for family coverage.3 Of those enrolled in group
plans today, 43 percent would qualify for Medicaid or ACA-like tax
credits, if not for their group plan.4
L
O
C
K
T
O
N
C
O
M
P
A
N
I
E
S
Lockton Health Reform Advisory Practice
POLICY THEORY VS. RE
Other Revenue Streams Are Already in Place
According to the Congressional Budget Office (CBO), taxing health insurance
on premiums above the 75th percentile of average group premium costs
would generate $174 billion from 2020 to 2026.5 A tax on premiums above the
90th percentile yields considerably less.6 Other larger revenue streams, unrelated to
1+6+511626A
How likely is your company to give
additional wages to make up for the
reduction in benefits?7
We probably would
NOT increase wages.
51%
We probably would
increase wages.
5.7%
807
We would
definitely
increase
wages.
.25%
respondents
We definitely would
NOT increase wages.
16%
I am not sure.
27%
13
+
y
87
Where Costs Are Generated
13%
of Group
Plan Enrollees
18+82y
health insurance, already exist under the ACA.
Taxing Employees Won’t Lead to Higher Wages or Reduce
Healthcare Consumption
Imposing taxes on insurance premiums merely forces employers to reduce
premium costs by imposing higher deductibles and slashing benefits. Despite rosy
policy arguments, employers won’t increase wages to compensate for benefit cuts.
Of Lockton survey respondents, 67 percent said they definitely would
not or probably would not increase wages to offset health insurance
cuts; 27 percent were unsure what they’d do. Fewer than 6 percent would definitely
or probably increase wages.7
Nor will taxing health insurance reduce healthcare consumption. More than
80 percent of medical claim costs are incurred by only 13 percent of plan
enrollees. These, the sickest of the sick, will consume the care they need no matter
what their deductible or other out-of-pocket cost.8
Generate
82%
of Claim
Costs
The problem isn’t how employers provide insurance; the problem is with the general
health of Americans. And employers are far more engaged in combating health risks
than the individual health insurance market.
A L I TY
E MPLOYE RS MA N A G E H EA LT H C A RE C OSTS
B E TTE R THA N T H E I N D I V ID UAL MA RKE T
Employers provide health insurance to 177 million Americans and manage costs
better than the individual market by promoting:
83+17y
Employers That Offer Some Form
Health
of Wellness Program9
Efficient
Appropriate
Healthcare
Utilization
Delivery
83%
Promoting Health
™™
Eighty-three percent of employers offer on-site biometric screenings,
weight loss programs, hypertension management programs, or other
workplace wellness programs.
™™
Wellness programs achieve demonstrable results. For example, prenatal care
Promoting Appropriate Utilization
Employers drive appropriate care through plan design, transparency tools, nurse
helplines, telemedicine, preventive care promotion, and on-site clinics.
Increase in Healthcare Costs
86+35
programs alone save, on average, $1,200 per enrollee.
9
8.6%
3.5%
Promoting Efficient Healthcare Delivery
Employers work to ensure they have the most cost-effective program,
Employers not
implementing costsavings programs
Employers
implementing costsavings programs10
continuously evaluating vendor partners, healthcare funding methods, pharmacy
management, and reference-based pricing.
Employer-Provided vs. Individual Market
Healthcare Cost Increases
15.53%
Employers With a Culture of Health Report
Employees are satisfied with
their job experience
Employees take responsibility
for their health
Employees know how to
navigate the healthcare system
64% 17% 53% 10% 39% 9%
with a culture
of health
without a culture
of health
with a culture
of health
Source: Optum 2016: The five keys to building a culture of health
without a culture
of health
with a culture
of health
without a culture
of health
4.63%
Lockton
Employers
Individual
Market
Our Mission
To be the worldwide value and service leader in insurance brokerage,
risk management, employee benefits, and retirement services
Our Goal
To be the best place to do business and to work
R I S K MA NA G E ME NT | E M PLOYE E B E N E FITS | RE T IRE ME N T S E RV ICE S
lockton.com
See https://www.census.gov/content/dam/Census/library/publications/2016/demo/p60-257.pdf
A “straightline” reduction in lieu of interpolation yields an estimate of $70 billion in net revenue
1
6
US Bureau of Economic Analysis, Table 6.11D https://www.bea.gov/iTable/iTable.
cfm?ReqID=9&step=1#reqid=9&step=3&isuri=1&903=219
7
2
http://files.kff.org/attachment/Report-Employer-Health-Benefits-2016-Annual-Survey, p. 1
3
U.S. census 2016 Annual Social and Economic Supplement to the Current Population Survey
4
S&P Health Care Cost Index
Lockton survey of its insured and self-insured businesses
Analysis of Lockton’s Infolock data on its self-insured clients
8
SCIO Health Analytics Case Study.
9
32014–2015 Lockton Infolock® data.
10
4
Options for Reducing the Deficit: 2017-26 (Dec. 2016), p. 274
5
© 2017 Lockton, Inc. All rights reserved.
kc:28224