What to Expect in 2018

The Economy

  • The unemployment rate is at its lowest point since 2000, yet turnover in the restaurant and hospitality is the inverse of the unemployment rate. It is incredibility difficult to have a full crew on a daily basis for an employer in retail/hospitality/senior living.
  • Restaurant sales and traffic are decreasing. Every restaurant group is looking for ways to reduce and/or manage their benefit costs.
  • Retail is in a state of disruption; and these employers are also looking for ways to reduce costs.
  • Many employers in this sector established strategies for running their business with part time employees. The objective was to minimize the benefits-eligible population and minimize benefit costs. Given tight labor markets, some employers may offer their best employees more hours, at the risk of making them benefits eligible.
  • Private equity wants to invest in these sectors, which more than anything increases the pressure to perform.

The ACA and Politics: What will happen to the Affordable Care Act?

  • It’s safe to say that it will not be completely repealed.
  • There is a little noise on repealing the Employer Mandate, a bill was recently introduced in the House of Representatives. Short of repeal, there has been no discussion regarding modifying details of the Employer Mandate, such as eligibility and affordability rules, or plan value minimums.
  • The IRS recently issued Employer Mandate non-compliance notices for the 2015 plan year. It’s safe to assume that notices for the 2016 plan year will be issued in 2018.
  • Some employers are thinking that with repeal of the Individual Mandate, they might be able to relax their requirements to manage eligibility and reporting. As the Employer Mandate is still in place, we believe it’s risky to assume that the IRS will be less diligent in enforcing the reporting requirements.
  • While Congress may pass legislation to stabilize the individual markets; shortening the enrollment window, reducing advertising and access to enrollment support could reduce participation in the individual market for health insurance, and drive up premiums.

Employer Plans

  • With repeal of the Individual Mandate, employees who are participating in medical coverage for the sole reason of avoiding the Individual Mandate penalty may drop out of the plan. Most groups have completed 2018 Open Enrollment, so people in this category won’t be able to drop coverage in the middle of the year. As employers plan for 2019, it’s a reasonable assumption that the number of people that joined the plan in the last year will equal those who drop out.
  • Changes to Association plans have been proposed, to include the ability to market across state lines and loosening required plan benefits. Until final regulations emerge, it’s too early to tell if this will have any value to variable hour employers.
  • In a survey we conducted last spring, 67% of employers said they would not change their benefit structure back to a pre-ACA design if the ACA was repealed. Many employers in this sector believe that employees now expect to be offered benefits; and plan to offer some type of program to lower-paid employees.
  • Market reform rules eliminated dollar limits on medical plans and instituted plan requirements. The Employer Mandate included provisions regarding plan minimum values and affordability. These provisions are part of the ACA law, so they can’t be eliminated by Executive Actions or Health and Human Services (HHS). As such, plan designs will continue to be compliance-centric instead of benefit-centric.
  • For those interested in obtaining health insurance coverage, as costs in the individual market increase, the best place to obtain good coverage at a reasonable price will be employer-sponsored plans.
  • While benefits may not be an initial reason for choosing an employer, we do believe that benefit participants have longer tenure than non-participants.

Managing Plan Costs

  • Since we see no relief from the Employer Mandate in 2018, employers looking to manage costs will need to look within their plans for potential savings, and manage the risk of potential cost spikes.
  • The biggest risk in plan costs is prescription drugs, largely driven by the impact of specialty drugs. Since 2011, the average cost of a specialty drug has tripled in cost, more important, there will be 50% more specialty drugs on the market in the next 5 years. Strategies for managing the usage and distribution of specialty drugs will be critical.
  • Many employers may benefit from carving out their Rx program from their medical plan. While there may be administrative challenges and member usage hassles, the savings could be worthwhile.
  • Medical management, i.e., building carrots and sticks in the plan design to steer employees from high cost providers such as the Emergency Room towards Urgent Care and Telemedicine should be adopted. We find that most employees in this sector will not establish a primary care relationship, so the next best thing is steering them toward lower cost providers.
  • High claims are a risk in this sector, and centers of excellence and reference based pricing models could be valuable in specific situations where there is a wide range of costs, or where final outcomes determine the complete cost.
  • Stronger players in this sector will have the opportunity to merge or purchase additional stores from weaker players. Several clients have asked us to review the health care plans of potential acquisitions. We focus on the age of the plan participants, especially the percentage above age 50 and age 60. This population typically drives high claims for employers in this sector.
  • Communication is a major ingredient for plan participants in this sector. Employees need to understand how to best use their plan when the need arises. Mobile has to be part of the communication equation, people look at their smart phones 150 times per day!
  • Employer groups that have the have built plans on one platform will have the best opportunity to manage administrative costs and the most flexibility to adapt new plan designs. They will be in the best position to communicate, enroll, and implement any plan changes.

Opportunity, Maybe?

We believe by focusing our time in this sector, we can assist our clients to best meet the opportunities presented, while at the same time, identifying the risks and managing to them. This information won’t be found in industry surveys from 2016 or comparing plan designs. It will be found by those who spend their time talking with people in these sectors on a daily basis.

For more information on effective cost management solutions for variable hour employers, check out our website: http://theparttimeproblem.com/, or contact your local representative.

Jay Wink
Consultant, Retail and Hospitality Sector
336 346 3500
Mobile 336 389-7891
jay.wink@trion-mma.com

Reid Wagner
Consultant, Retail and Hospitality Sector
216-401-2384
reid.wagner@trion-mma.com

Joe Sadik Consultant, Retail and Hospitality Sector
610 684 3416
Joe.Sadik@trion-mma.com

The Patient Protection and Affordable Care Act is a complex law. Any statements made by Trion Group, a Marsh & McLennan Agency, LLC Company concerning tax, accounting, or legal matters are based solely on our experience as insurance brokers and risk consultants and are not to be relied upon as accounting, tax, or legal advice. We recommend that you seek the advice of your own tax, accounting and legal advisers as to whether or not the health plans you select are compliant with the Patient Protection and Affordable Care Act, including the minimum essential coverage requirements.

No part of this document may be reproduced, quoted, or transmitted in any form or by any means (electronic, mechanical, photocopying, recording or by any information storage and retrieval system), without express, prior permission, in writing from Marsh & McLennan Agency, LLC.