AmCham Member Briefing: The Future of Benefits Packages 15 th April Kindly hosted by

Transcription

1 AmCham Member Briefing: The Future of Benefits Packages 15 th April 2015 Kindly hosted by

3 Welcome Donal Lehane Partner

4 Welcome Miriam O Keeffe Programmes Director, AmCham Kindly hosted by

5 Tony Phelan Compensation & Benefits Consultant Intel Chair, Amcham Healthcare Policy Group

6 Healthcare Working Group set up in response to concerns over rising costs of Private Health Insurance Submission to Government 2014 recommended: No further Government imposed cost increases Policy certainty Multi-year contracts Greater price transparency Recognise well-being investment by companies Submission to Government 2015 requesting continuation of concession to corporate clients avoiding new standardised waiting periods Activity for rest of 2015: Refocus on multi-year contracts Explore recognition of well-being investment with the political system and policy makers

8 Patrick Brennan Head of Corporate Business Irish Health Insurance

9 PMI Market Update No 1 for Corporate Health Insurance Advice

10 PMI Market Refresher

11 Failings of the Market

12 Recent Market statistics

13 Recent Market statistics* Left the market? 275,000 Currently Insured? 2,025,000 Last quarter increase: 7,000 Percentage Insured? 43.9% Market Peak? 2.3 Million / 50.9% *Source:

14 2014 Market Changes Led by Government Action Increase in Health Insurance Levy Capping of TRS at 1,000 gross premium Bed Re-Designation Increasing cost of Public Hospital Bed from 75 to 813 per night

15 2015 Market Changes DoH met with Health Insurers with Good News in November 2014 No Increase in Levy for Advanced Plans Reduction in Levy for Non Advanced Plans Changes in Risk Equalisation Credits Positive measures that should increase affordability in time

16 May 2015 Changes Government have proposed changes to Community Rating system that is comprised of 3 elements: Lifetime Community Rating Further discounting for year olds Waiting periods being standardised across all ages for both initial & pre-existing conditions

17 Lifetime Community Rating

18 What is Lifetime Community Rating Up to 30 th April Everybody is charged the same premium for a particular health insurance plan, irrespective of their age, gender and the current or likely future state of their health. From 1 st May Modified to reflect the age at which a person takes out private health insurance. Late entry loadings are applied to the premiums of those who join the health insurance market at age 35 or over.

19 What is Lifetime Community Rating LCR Penalty applies to those who purchase health insurance for the first time at age 35 or over Penalty Mandatory 2% per year Maximum of 70% Key dates 1 st May 2015 Exemptions Those who ve had PMI in the past, received social welfare or lived abroad will be given credits

20 Examples where no loadings apply I am 37 years old and I take out health insurance for the first time during the grace period (before May 1 st ). No loading applies.

21 Examples where no loadings apply I am 34 years old and I take out health insurance for the first time following expiry of the grace period, will loadings apply? No - as the age of entry is less than age 35 so no loading applies.

22 Examples where loadings apply I am 45 years old and I take out health insurance for the first time following expiry of the grace period, will loadings apply? Yes and is calculated as follows: Age 45 - Less any qualifying credit Prior PMI cover - None Qualifying period of unemployment - None Age at entry (for loadings purposes) 45 Applicable loading (45 less 34 =11 x 2% per year) 22% loading applies

23 Examples where loadings apply I am 45 years old and I take out health insurance following expiry of the grace period, having had health insurance cover for 7 years (up to 2008). Will loadings apply to me? Yes and is calculated as follows: Age 45 - Less any qualifying credit Prior PMI cover - 7 Years Qualifying period of unemployment - None Age at entry (for loading purposes) 38 Applicable loading (45 less 34 = 11 less 7 = 4 x 2% per year) 8% loading applies

24 Waiting Period Changes

25 Open Enrolment Changes Age based waiting periods removed Definition of pre-existing condition changed Single band new waiting period applies for new and renewing business from 1 May 2015

26 Definition of Pre-existing Conditions Current New Any disease, illness, condition or injury that began before the person with the disease, illness, condition or injury started his/her cover under any health insurance contract. A pre-existing condition is determined from the date the condition commences rather than the date upon which the member becomes aware of the condition. A pre-existing condition may therefore be present before giving rise to any symptoms or being diagnosed by a doctor. pre-existing condition means an ailment, illness or condition, where, on the basis of medical advice, the signs or symptoms of that ailment, illness or condition existed at any time in the period of 6 months ending on the day on which the person became insured under the contract.

27 Younger Persons Discount

28 Young Persons Discount Sets maximum premiums for younger persons aged years that can be charged on all products chosen by insurer Age group Minimum premium as % of adult rate Maximum premium as % of adult rate years 0% 50% 21 years 51% 60% 22 years 61% 70% 23 years 71% 80% 24 years 81% 90% 25 years 91% 100%

29 Young Persons Discounts Insurer has choice of products to which it applies If choose to apply, insurer must apply discount to all persons solely based on age Same discount must apply for each age Discount applies to gross premium (i.e. premium including tax relief at source) Tax relief at source is applied at child rate for persons and adult rate for persons 21 years and over

30 Considerations for Employers How will LCR affect the company? Who Pays?

31 The Employee will pay the loading and it simply becomes a cost of employment for the candidate The Employer opts to pay the loading where it arises Company opts to consider their options on a case by case basis

32 Other Considerations... Search Employees on probationary periods Data Capture

33 Hope for the Future?

34 Summary All positive moves since Nov 2014 LCR & YPD Should encourage New & Lapsed Members back into the market. Precedence exists Should stabilise inflation levels down to single digits Waiting Periods less onerous for new joiners

36 Rob Wood Consulting Director

38 Topics The Rising Cost of Health Insurance 4 The Impact of Regulatory Change 7 Lifetime Community Rating A Case Study 9 Industry Initiatives 11 Product Development Claims Technology Wellness and Complimentary benefits Summary Deloitte & Touche. All rights reserved 38

40 The Rising Cost of Health Insurance Lifetime Community Rating (LCR) and Young Persons Discounts are long awaited measures that have been introduced against the backdrop of austerity and concerns about affordability. Key drivers are: Shrinking Market Affordability Claims Inflation 2015 Deloitte & Touche. All rights reserved 40

41 Premium ( ) The Rising Cost of Health Insurance Shrinking Market, Affordability & Claims Costs Shrinking Market Reduction in market & number of young people insured age group declined 32% between 2009 and Affordability The average cost of private health insurance for a household among all policy holders was 2,105 in up significantly from an average of 1,688 in The average cost of private health insurance Average Premium for a Paid household increasedamong all average policy by holders 9.5% per is annum 2,105 since in up significantly Average Premium from an Paid average of 1,688 in Claims The average cost of claims paid have been increasing by about 10% per annum or 12.6% per insured person since It is estimated that 3% of the annual increase is due to an ageing populous. 3 The cost of claims incurred accounted for approximately 92% of the total premium earned in Overall there was an increase of 40% in the number of insurance related hospital admissions between 2007 and Source: 1. HIA (The Private Health Insurance Market in Ireland 2014), 2. Department of Health (Cost_Review_Report), 3. HIA (Presentation to the 10th Health Summit 19 February 2014) 2015 Deloitte & Touche. All rights reserved 41

43 The Impact of LCR & Young Persons Discounts A Positive Change? A Positive Move Young Person s Discounts (YPD) & LCR will attract and retain younger people in the market. Employers can expect to see a reduction in premiums for younger employees. The introduction of these initiatives will prevent price increases in the short term. It remains to be seen whether they will start to drive a reduction in premiums. Administration & Reporting Scheme administration will be more complex. If managing a salary deduction scheme there is potentially a higher impact on payroll departments: Will loadings be covered and if not how with these be managed. Certain plans may attract different levels of Tax Relief depending on whether YPD s are applied. New Business, Renewal & Switching Decisions required on whether to pay for loadings. Employee s seconded to roles abroad may pay higher premiums when they return to Ireland. It will be more difficult to obtain accurate pricing for Health Insurance Benefits due to loadings which could effect strategic decisions in provider selection. Maintaining a subsidy for students will be a key question to address now and at renewal. Future Changes? Online self service Tools or Benefit consultants may start to play a greater roll in group schemes of all sizes. The increase in companies providing a fixed contribution may be inevitable. 43

45 PHI Cover (% population) Lifetime Community Rating (LCR) Case study Australia Health Insurance cover as a % of the total Population 47% 45% 43% 41% 39% 37% 35% 33% 31% 29% 34.4% 33.4% 31.8% 30.3% 31.6% 45.7% 45.2% 44.5% Year Introduction of LCR in Q Following the introduction of LCR the % insured increased from 31% to 45%. 1 The average age of insured fell from 39.9 to 37.7 between 1999 and Number of claims per insured decreased subsequent to the introduction of LCR. Health Insurance membership has continued to increase however the average age of insured in 2014 increased to Although premiums initially reduced, they have increased 6.10% in the last 6 years. 2 Source: 1.PHIAC.gov.au (Market Statistics), 2. Health.gov.au 45

47 Industry Initiatives What are Health Insurers doing to reduce premiums / provide better value? Product Development Tailoring / Unbundling cover Claims Tackling Fraud / Waste / Abuse Technology / Other Online GP services Hospital Networks Excesses Reduction of benefits Split Cover Convertible Cash Plans Introduction of e-claims Utilisation management / Admission procedures / Process changes Diagnosis Related Groups (DRG) Investment in online platforms and self service Loyalty & Reward Wellness Health Screening Providing complimentary cover Dental, Life & Travel Insurance either free or on a discounted basis Deloitte & Touche. All rights reserved 47

49 Summary 01 The regulatory changes being made are positive and should prevent any further price increases in the short term This is dummy text it is not here to be read. The is just text to show where you could insert text. This is dummy text. LCR & YPD together should drive younger and more healthier people back into the market. Regulatory changes alone aren t necessarily a long term fix but should prevent prices increasing. This is dummy text it is not here to be read. The is just text to show where you could insert text. This is dummy text. Additional changes are required to be made across the industry to ensure the affordability issue can be addressed in the long term Deloitte & Touche. All rights reserved 49

50 Contact Details Rob Wood Consulting Director, Strategy & Operations Insurance Deloitte robwood1@deloitte.ie Deloitte &

51 Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms. With nearly 2,000 people in Ireland, Deloitte provide audit, tax, consulting, and corporate finance to public and private clients spanning multiple industries. With a globally connected network of member firms in more than 150 countries, Deloitte brings world-class capabilities and high-quality service to clients, delivering the insights they need to address their most complex business challenges. With over 210,000 professionals globally, Deloitte is committed to becoming the standard of excellence. This publication contains general information only, and none of Deloitte Touche Tohmatsu Limited, Deloitte Global Services Limited, Deloitte Global Services Holdings Limited, the Deloitte Touche Tohmatsu Verein, any of their member firms, or any of the foregoing s affiliates (collectively the Deloitte Network ) are, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your finances or your business. Before making any decision or taking any action that may affect your finances or your business, you should consult a qualified professional adviser. No entity in the Deloitte Network shall be responsible for any loss whatsoever sustained by any person who relies on this publication Deloitte & Touche. All rights reserved 51

52 Daryl Hanberry Director, Tax & Legal & Lisa Buckley Senior Manager, Total Rewards & Benefits

53 Compensation & Benefits Strategies & Potential Alternatives Daryl Hanberry, Director, Global Employer Services, Deloitte Lisa Buckley, Senior Manager Total Rewards & Benefits, Deloitte April 2015 Deloitte &

54 Agenda 1. What Motivates Employees 2. Typical Benefits in Kind 3. Share Based Remuneration 4. Pension Implications 5. Summary and Questions Deloitte &

55 1. What Motivates Employees Deloitte &

56 What motivates employees? Professional Training & Development Challenging Work Creative & Dynamic Environment Remuneration & Advancement Deloitte &

57 2. Typical Benefits in Kind Deloitte &

58 Taxation of Health Insurance Tax Credit for health insurance premium Prior to 16 Oct % of premium Renewal on/after 16 Oct % or 1,000/ 500 Say gross premium for 2013/14 was 1,400 Net cost was 1,120 for individual If gross premium increased by 14% to 1,600 in 2014/15 Net cost is now 1,400 for individual 25% increase Deloitte &

59 Typical Employee Benefits Performance Bonus Mobile Phone & Technology Additional Leave Preferential Loans Company Car Canteen Facilities Pension Contributions Education & Exam Fees Health Insurance Typical Employee Benefits Other nontaxable benefits Deloitte &

60 Issues to Consider Salary sacrifice pension contributions Flexibility in relation to share awards Value of rewards for the workforce Deloitte &

61 3. Share Based Remuneration Deloitte &

62 Share Based Remuneration Restricted Stock Units Share Options Restricted Clog Shares Save As You Earn Schemes Share Based Remuneration Forfeitable Shares Approved Profit-Sharing Schemes Joint Shares Growth Shares Deloitte &

63 4. Pensions Deloitte &

64 Current issues in Pensions & Savings Types of Provision Move from DB to DC continues Industry calling for simplification to the pensions system Standard Fund Threshold More employees due to be affected by SFT Any funding in excess of SFT very tax inefficient (70% TAX!!) Employees looking for alternatives Corporate Savings Useful for providing benefits in excess of SFT Benefit could be extended to wider workforce Deloitte &

65 Future issues in Pensions & Savings GOVERNMENT Plans for Auto- Enrolment REGULATOR Higher trustee standards Reduction in number of schemes EUROPE Draft EU Directive Pan-European Pensions Master Trusts Deloitte &

66 5. Summary & Questions Deloitte &

67 Contact Details Daryl Hanberry Tax Director, Global Employer Services Deloitte dhanberry@deloitte.ie Lisa Buckley Senior Manager, Deloitte Total Reward & Benefits Deloitte lbuckley@deloitte.ie Deloitte &

68 Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms. With nearly 2,000 people in Ireland, Deloitte provide audit, tax, consulting, and corporate finance to public and private clients spanning multiple industries. With a globally connected network of member firms in more than 150 countries, Deloitte brings world-class capabilities and high-quality service to clients, delivering the insights they need to address their most complex business challenges. With over 210,000 professionals globally, Deloitte is committed to becoming the standard of excellence. This publication contains general information only, and none of Deloitte Touche Tohmatsu Limited, Deloitte Global Services Limited, Deloitte Global Services Holdings Limited, the Deloitte Touche Tohmatsu Verein, any of their member firms, or any of the foregoing s affiliates (collectively the Deloitte Network ) are, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your finances or your business. Before making any decision or taking any action that may affect your finances or your business, you should consult a qualified professional adviser. No entity in the Deloitte Network shall be responsible for any loss whatsoever sustained by any person who relies on this publication Deloitte & Touche. All rights reserved 68