Global trends in medical cost inflation – and new healthcare legislation
The rising cost of medicine and health care is a global topic of concern, and for multinational companies a big challenge as the cost of providing employee medical benefits has increased in almost every region of the world and, in particular, in countries that are scaling back on public health care.
Recent reports by Towers Watson and PWC show that the rate of medical inflation has stabilized in some markets to a certain extent, but in average worldwide the medical costs are still increasing. Furthermore, an additional pressing issue around the globe is access to and affordability of medical care and also medical insurance for certain parts of the population.
In fact recent surveys show concerns about affordability of medical care and, in particular, at an older age rank as high as concerns about pension income after retirement.
Governments are trying to cope in many different ways with these challenges. In the following we illustrate how in France and in the US this topic is approached and what legislative changes have or will be introduced in this context.
France
The law of June 14, 2013, on the protection of employment in line with the National Inter-Trade Agreement (ANI) of January 11, 2013, extends complementary health cover to all employees from January 1, 2016. Its objective is to enable all employees to benefit from complementary health cover.
As the level of collective cover remains inadequate, a decision was made to implement cover for all employees with a minimum level of guaranteed benefits, as of January 1, 2016, where employees are not yet covered. The cover must correspond, as a minimum, to a safety net of 125% of the social security rate for dental prostheses and EUR 100 for eye treatment. The employer will pay at least 50% of the cost.
In addition, following loss of employment, the employee will retain his or her complementary health, death and disability insurance for 12 months free of charge (as opposed to nine months hitherto). The implementation of mandatory collective cover will result from a ruling subject to the discretion of the representative social partners at industry or company level, or a decision by the employer if made
unilaterally.
The new law applies to all company employees who do not have mandatory complementary collective health cover. To proceed with the implementation of this complementary cover, negotiations must be held at industry level from June 1, 2013, and from July 1, 2014 at companies with a union representative. If these negotiations have not been successfully concluded by January 1, 2016, companies will be
obliged to offer their employees a minimum safety net of 125% of the social security rate for dental prostheses and EUR 100 a year for eye treatment financed, to at least 50%, by the employer.
Swiss Life is adapting to this new regulatory regime by tailoring its strategy to its clients and ensuring that it is ready in good time to help its clients to meet the new challenge.
USA
Three years ago, the United States Congress passed into law the Affordable Care Act (ACA), the most sweeping health care legislation in the USA since the adoption of Medicare and Medicaid in the 1960s. Sometimes called Obamacare during the political debate, this signature programme of President Barack Obama aims to help all Americans obtain affordable health coverage, sets a number of requirements for health insurers, and seeks to improve people’s health and reduce health care costs for individuals and government.
On January 1, 2014, many of the main provisions of the Affordable Care Act will come into effect. One requirement is that all US taxpayers, with a few exceptions, will be required to have health insurance or face a possible tax penalty. Special marketplaces, called Exchanges, will be set up, where individuals and small businesses can purchase health coverage. Along with its mandate of universal coverage, the Affordable Care Act sets certain standards for US insurers and certain US health benefit plans. Generally, the law bars exclusions for pre-existing conditions, bans annual and lifetime limits on essential health benefits, and prohibits insurers from dropping coverage or raising premiums if the insured gets sick. In addition, the new health plans for individuals and small businesses must mirror typical employer-sponsored plans by including a package of essential benefits that includes dental and vision care for children, maternity, and mental health coverage among other benefits that were difficult for individuals and small businesses to obtain before reform.
In recognition of the importance of prevention, the new US health law also requires plans to include a set of preventive services, such as certain screenings and wellness check-ups, at no charge to the insured.
Health care plans for US expatriates underwritten by a US insurer will need to comply with the provisions of the Affordable Care Act. Last March, however, the US government granted temporary relief to certain expatriate plans. Recognising that the complexity of aligning group plans that cover expatriates with US requirements and other countries’ health cover provisions, the US government is temporarily exempting fully insured group plans for plan years ending on or before December 31, 2015, from certain Affordable Care Act requirements.
Self-insured plans for US expatriates, however, are not subject to this short-term stay and must comply starting in 2014. Plans offered to US expatriates by our new US partner, Aetna, wil be compliant with all the provisions of the Affordable Care Act that are required of these particular plans.
Norway: Proposed new corporate pension plans offer new options to companies
New rules under discussion for corporate pension plans are due to come into effect in 2014. These should enable companies to customise their occupational pension schemes to take account of the new social security reforms.
In Norway, new legislation is being planned that will take the best features of defined benefit and defined contribution plans, and provide opportunities to adapt current pension plans to fit the new social security situation. Draft rules from the Banking Law Commission indicate that existing defined benefit plans will need to be transferred and adapted to the new corporate pension plan format, or a defined contribution plan, by the end of 2017. Since the final rules have not yet been decided, patience is required until all the details are published.
When Norway’s social security scheme was amended in 2010, flexibility and incentives for longer careers were central objectives. This was followed by similar changes to the rules on early retirement in the private sector. The Banking Law Commission’s task now is to find solutions for corporate pensions that are based on the same principles.
The main points of the new bill
- All years count when the pension is calculated There will be preliminary maximum limits for the total pension premium:
- Salaries <7.1 G: 8%
- Salaries 7.1 G to 12 G: up to 25%
Note: the sum insured is based on the current base amount (G): NOK 85.245 since May 1, 2013. The base amount is adjusted annually by the government in line with changes in the cost of living and general income levels
- The aim is a total pension of 66% of salary after 40 years of qualifying
service
- Asset management solutions with a guaranteed interest rate and individual management of pension funds will be possible If a member of the pension plan dies, the accrued pension amount will be transferred to the insured group in the plan (and not to the surviving spouse as for defined contribution plans)
- Age adjustments and proportions for pension payments will apply as for the new social security scheme.
Work in progress
The Banking Commission is currently looking into how current products can be converted to the newly suggested solution. The industry is hoping that there will be flexible options to ensure a smooth transition for all parties.
Maximum limits for defined contribution plans will also be evaluated, and it is expected that the limit will be increased. However, definitive answers on how existing and new pension products will be linked together are not expected before the end of 2013.
The new occupational pension product, transitional rules for defined benefit plans, and new maximum limits for defined contribution schemes, will be effective as of 2014.
Swiss Life Network clients who are potentially affected by the changes in the legislation are advised to contact their local Network Partner, who will be glad to provide expert advice and assistance.