Most Employers Planning to Continue Offering Health Coverage After Federal Reforms in Place
Many employees skeptical about benefits of federal healthcare reform
Although employers are encouraged to offer coverage under the new federal healthcare reform rules, they can choose not to. Most of those who currently provide coverage, however, plan to continue to do so: even though the penalty for opting out could be less than what they spend on employee health benefits.
In the 2010 National Survey of Employer-Sponsored Health Plans conducted by consulting firm Mercer, employers were asked how likely they are to get out of the business of providing healthcare once state-run insurance exchanges (mandated by federal healthcare reform) become operational in 2014. For the great majority, the answer was “not likely.” More than 2,800 employers participated in the survey.
Large and Small Employers
Responses varied by employer size, with large employers remaining committed to their role of health plan sponsor. Only 6% of employers with 500 or more employees and just 3% of those with 10,000 or more say they are likely to terminate their health plans and have employees seek coverage in the individual market in 2014.
“Employers are reluctant to lose control over a key employee benefit,” says Tracy Watts, a partner in Mercer’s Washington, D.C., office. “But beyond that, once you consider the penalty, the loss of tax savings, and grossing up employee income
so they can purchase comparable coverage through an exchange, for many employers dropping coverage may not equate to savings.”
The story is somewhat different for small employers. Small businesses generally offer fully insured health plans; with small risk pools and little purchasing power, they are vulnerable to large rate increases.
One-fifth of small employers overall (those with 10-499 employees) say they are likely to terminate their health plans. Small businesses with high employee turnover are even more likely to do so; about a third of wholesale/retail companies with fewer than 500 employees say they are likely to drop coverage.
“You can see why the idea of dropping employee health plans would be attractive to small employers,” says Beth Umland, who directed the study for Mercer. “[But] when you look at the experience in Massachusetts, where insurance exchanges have been operating under state-based health reform for over three years, it hasn’t happened.”
Employees on Same Page
That would be just fine with employees. According to Mercer’s 2010 Workplace Survey, the vast majority of employees (90%) who receive health benefits via their employers say that their benefits are as important as getting a salary. Moreover, 83% of participants say that the out-of-pocket expenses they pay are probably or definitely worth the cost, up significantly from 73% in 2008. The feeling that health benefits are “worth it” in relation to out-of-pocket expense is spread across all demographic sections and is particularly high among participants 50 years of age and older.
Skeptical About Reform
In contrast to the positive sentiment toward their employer-sponsored health benefits, employees are not yet comfortable with the impact healthcare reform may have on them personally. In fact, more than 43% of this covered population see their own situation as becoming “worse off” in light of healthcare reform.
This skepticism coincides with the general unease and anxiety participants already feel about planning for healthcare expenses in retirement. Just under four in ten (37%) participants are “somewhat confident” or “very confident” that they know how they will cover this expense, a statistic that has remained consistent since 2008.
This anxiety about healthcare reform is felt most keenly by those closest to retirement. Participants 50 years and older view healthcare reform more negatively than participants overall in every related aspect of the survey.
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