Employers Underestimate Cost of Health Care Reform

Employers Underestimate Cost of Health Care Reform

Plansponsor.com by Kevin McGuinness

employers feeling the pinch

March 11, 2013:

While employers seek to avoid cost increases for their group health plans, more than half are underestimating the cost of complying with health care reform, says a survey from Willis Group Holdings.

Specifically, when asked about the impact of health care reform on various aspects of plan design and benefits offered to employees, the majority of employers (most of whom had not studied the cost impact of health care reform on their plans) said that health care reform has not yet affected their plans. However, among employers who have tracked the cost of compliance, nearly two-thirds indicate that health care reform has increased their costs.

The survey also found that because many employers assume that health care reform will generally not affect their costs, only 20% of surveyed employers plan to adjust other rewards (i.e. retirement, dental, vision, salaries, vacation, bonuses) in order to offset the cost of health care reform compliance. The vast majority of employers still hope to comply with health care reform and expand their health coverage as necessary, but without reducing other benefits.

Other key findings from the survey include:

• Fifty-five percent of employers felt that competitors would shift costs to employees; however, only 34% of employers indicated that they might take this same action.

• Employers indicated they are now much more likely to voluntarily relinquish grandfathered status (this year 39% of employers chose to voluntarily forego grandfathered status; last year, only 13% of employers made the same decision).

• Most employers intend to “play” under the “pay or play” mandate, and are predominantly planning to offer coverage that exceeds the “minimum essential coverage” requirement, and then adjust coverage and contributions after the fact in order to manage expenses.

“The survey suggests that employers continue to recognize the value of providing medical benefits, how important those benefits are to their employees, and that providing benefits allows them to attract and retain the employees they need. Therefore, they generally plan to continue offering competitive medical benefits,” said Jay Kirschbaum, Practice Leader – National Legal and Research Group, Willis Human Capital Practice. “However, they are considering several potential options, even including the possibility of coverage through state exchanges.”

The Health Care Reform Survey 2013 represents the findings from more than 1,200 employers of varying sizes, industry sectors and geographic regions.

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