New Reports Indicate Disturbing Trends for Costs and Employer-Sponsored Coverage

PriceWaterhouseCoopers (PwC) issued two new reports last week on the cost of health insurance and its resulting impact on employer-sponsored coverage. The first study shows that on average, employers can expect an 8.5 percent increase in their medical costs next year due in some part to the health care reform law. A separate survey of large employers released by the firm showed that as a result of PPACA and its cost-impact, many employers are being forced to make disturbing choices about their health benefit plans.

The cost report report identified the following drivers as the reasons for the price increase:

Consolidation among hospitals and physicians.
Increased cost-shifting to private insurers by providers seeking to make up the difference between low Medicare and Medicaid reimbursements; and
Stress-induced illnesses following the recession.
“The big question is how much of the medical cost increase will be passed on to employees, as employers recognize the economic burden on their workers given that wages have been stagnant over the past few years,” PwC said.

But the firm’s own employer survey, also released last week, answers some of those questions. According to that study, more than four in five (84%) employers are likely to make changes—e.g., raise premiums, deductibles, and co-payments—to offset increased costs. Other key takeaways include:

More than five in six (86%) employer respondents are likely to re-evaluate their overall benefits strategy;
More than half (51%) of employers did not expect to maintain “grandfathered” health status—meaning employees will forfeit their current health coverage and pay higher premiums as a result of federal mandates introduced on their new coverage;
Nearly two in three employers (65%) expect to be affected by the “Cadillac” tax on employer health plans;
Almost half (45%) of companies “indicated they were likely to change subsidies for employee medical coverage” as a result of the law—quite possibly “dumping” their employees on to government-run exchanges; and
Exactly one-half (50%) are considering “significantly changing or eliminating company subsidies for dependent medical coverage.”
The PWC survey covers primarily large employers—more than three-quarters of firm respondents have more than 500 active employees, and over a third have more than 5,000.

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