Employers and the impact of healthcare reform: Plan design considerations

Healthcare reform is complex. The Affordable Care Act poses challenges to employers that already offered employer-sponsored insurance. Through a customized strategic impact study, Milliman helps employers assess the financial and plan design implications of health reform.

See how Milliman’s actuarial analysis, expert tools, and understanding of today’s marketplace helped several companies adjust to the changing health benefits landscape.

Video transcript

Providing healthcare benefits has increasingly become a challenge for employers. Recently, we traveled the country to see how a variety of companies are adjusting to this changing landscape.

Tim Van Severen (Corporate Risk Manager, Krueger International): Healthcare has become much more complicated. It's much more regulated and that's created a lot of complexity, a lot of uncertainty, and, with 2014 coming up, we're not that far away.

John Sahlberg (Senior Vice President, Boise Cascade): You have to constantly be paying attention to what's going on and what your new responsibilities are under the Affordable Care Act. And the challenge we face is simply staying on top of that.

Mike Bailey (Vice President, MetLife): Various estimates of the cost of the law range from one to three percent of your annual cash spend. A one to three percent increase in your cost can really blow away your budget. When you're talking about a $500 million spend, well, three percent, that's $15 million. Nobody really wants to have an unexpected surprise of $15 million, no matter how large your company is.

Daniel Bostedt (Benefits & Communications Consultant, Milliman): In 30 years of working in benefits, healthcare reform is probably the most important due diligence item for an employer that I've ever seen. You don't want to wake up in a few years and realize that you're significantly impacted by healthcare reform and have no plan in place.

Analyzing the options

Kerry Brunner (Vice President of Benefits, Ministry Healthcare): Once the ACA came out we wanted to understand what the financial implications of any decision were. To run those numbers, we wanted to have someone that has the expertise, that has the in-depth knowledge, and that has the resources behind them, particularly to crunch the numbers given the fact that in the ACA a lot of the programming is based on “do you play or do you pay”?

Sue Taranto (Principal and Consulting Actuary, Milliman): The Milliman healthcare reform tool takes the employers' individual employee data and projects a number of things, including the expectation of whether employees will be eligible for Medicaid or exchange subsidies, the likelihood that employees will take coverage on the exchange versus stay on an employer plan, and also over time the implications of 2018 and later when high cost plans will be subject to the excise or Cadillac tax.

Mike Bailey (Vice President, MetLife): The biggest surprise that you get hit with is the sticker shock, the potential impact of all the various fees and additional costs that you may be subjected to as an employer provider of healthcare.

Robert Schmidt (Principal and Consulting Actuary, Milliman): Employers need to do a customized study because every employer is unique in their characteristics and there's really no one size-fits-all approach to a healthcare reform study. What we found is that the analysis we bring to the table is very valuable because healthcare is such a large portion of an employer's operating expense.

Linda Evans (Vice President of Human Resources, Douglas Dynamics): They came to the facility, sat down with me, my team, and walked us step by step through the presentation, as well as provided a document that was much more thorough but was very supportive of the presentation, and allowed us to ask questions. And then we have to make the decision if we want to absorb those costs or if we want to pass those costs on to the employees.

Daniel Bostedt: Our study provides a wonderful platform for an employer to come back with a series of anticipated plan design changes, have us rerun the study and then show them not only the short-term impact but also the impact with healthcare reform.

Kerry Brunner: So we had the study done twice to look at current state, and then another study done with the same data we had offered but with what that future world looks like given the changes that we're looking at making. And the second study really did validate our decisions as far as where we wanted to go with our programs.

Robert Schmidt: We don't always tell employers what they want to hear. We tell them what we think is going to happen and then we help them to plan a long-term strategy to deal with the changes that ACA brings.

Tim Van Severen: The impact study that was done by Milliman provided not only the costs that we were going to see from K.I.'s standpoint with or without healthcare reform, but it also provided information on whether or not we were going to be impacted by the Cadillac tax, whether we were going to be impacted by in-migration into our plan.

Daniel Bostedt: What differentiates the Milliman study is the fact that it's strategic-focused. It's not just generating numbers from some general assumptions. It's really designed to provide the key information and data that an employer needs to build a multi-year response plan and includes plan designs that they can target to get to, to avoid things such as a Cadillac tax or to significantly mitigate the impact of healthcare reform.

Kerry Brunner: The analysis provided a spectrum: worst-case, best-case, and in-between. It allowed us to understand fully the impact were we not to provide health insurance—which would be in direct conflict with our culture and our values.

Linda Evans: In talking with our executive officers, whenever you can put something in a financial model that shows the actual impact just helps sell that, so we made the decision to utilize Milliman to come in and do the actuarial study for us.

John Sahlberg: The report validated some of the planning we were doing. It also made us aware of some additional planning that we needed to do. It's always good to know that you're on the right track. It's also good to know when you need to address some additional issues and this pointed that out to us.

The value of perspective

Kerry Brunner: The healthcare reform act is extremely complex, and if you're a benefits manager or a benefits leader for an organization, you have to be up to speed and understand what the impact of it is, and that's where a third party coming in to do that analysis makes a lot of sense. It is money well spent.

Linda Evans: We took the recommendations that Milliman provided to us. Probably 80 percent of those were already in our plan, but what the study from Milliman provided us was the necessary information that we needed to accelerate some of those items on our strategic plan. And we've taken the recommendations from them, have taken them to heart and have implemented most of them already.

Mike Bailey (Vice President, MetLife): Milliman's objectivity and independence played a very important factor in us asking them to complete this analysis for us, and in providing a lot of the other consulting work that they do for us. For us to be able to just eliminate any question as to what the motives behind any analysis may be was very important to us.

Sue Taranto: Milliman is a good choice to do reform analysis for a couple of reasons. One, we are actuaries and bring actuarial rigor to the process so our financial information is going to be solid and strong. Second, we have wonderful tools. The tools that we're using are tools that were developed in part through some of our work with the provider community so we've got the benefit of our experience in delivery of healthcare across the spectrum and that experience plays very well in terms of understanding the employer's specific marketplace.