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10% of Large Employers May Drop 2014 Health Benefits

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acorrding to new emploer surveys nearly 1 of every 10 midsized or big employers expect to stop offering health coverage to workers after insurance exchanges begin operating in 2014 as part of President Barack Obama's PPACA health legislation.

Two recent employer surveys were conducted by Towers Watson and Mercer Health and results were reported by Insurance News Net.

Towers Watson found in its July survey that an additional 1 in 5 companies are unsure about what they will do after 2014. Another big benefits consultant, Mercer, found in a June survey of large and smaller employers that 8 percent are either "likely" or "very likely" to end health benefits after the exchanges start.

Large companies that are considering endiung health insurance benefits for their employees face uncertainty in reactions from the public and their business partners. That being said, with high and ever-rising health insurance premiums it makes sense for these companies to leave their options open, espeically considering the laging economic recovery.

The surveys, which involved more than 1,200 companies, suggest that some businesses feel they will be better off dropping health insurance coverage once the exchanges start, even though they could face fines and tax headaches. If they follow through, it could start a trend that chips away at employer-sponsored health coverage, a long-standing pillar of the health system since post World War II.

Former insurance executive Bob Laszewski , now a consultant, said he was surprised that as many as 8 or 9 percent of companies already expect to drop coverage a couple of years before the exchanges start.

Such a move would give their employees a steep compensation cut if they don't receive a pay raise, too. "Dropping coverage is going to be very difficult for these (companies) to do," Laszewski said.

In addition, global market research and consulting firm Market Strategies International predicts a net 10 percent reduction in access to employer-sponsored health benefits in 2014.

The Towers Watson survey also found these results:

  • Over two-thirds (71%) of the respondent companies indicate that they will continue offering health care benefit coverage to their active employees through 2014.
  • Among the remaining 29%, most are unsure about whether they will continue sponsorship or offset the loss of health care benefits (if they exit) with an equivalent salary increase.
  • For retirees, more than half of employers (54%) that offer health care benefits plan to discontinue them for both pre-65 and post-65 retirees.
  • A majority of employers (53%) are confident that health care reform will be implemented within the anticipated timeline.
  • However, 70% of employers are skeptical that health insurance Exchanges will provide a viable alternative to employer-sponsored coverage for active employees in 2014 or 2015.
  • In addition, 56% of employers believe that they will trigger the excise tax by 2018. Yet more than three-quarters believe that health care benefits will continue to be a key component of their overall employee value proposition beyond 2014.

These results indicate the pervaisveness of uncertainy inn the health insurance market and among emoloyers of all sizes.

Additionally, the Towers Watson results show employers are considering further strategy changes in 2014 and 2015:

Among survey respondents, 47% say thay will substantially reduce the health care benefit value of active employees. Further, 57% plan to reduce employee health care contributions for lower-paid workers.

2012 Health Care Costs Analysis

The average reported annual cost of medical and pharmacy coverage is $11,204 per employee for active coverage. It has also been reported that roughly two-thirds of employers (66%) will increase employees' share-of-premium contributions for single-only coverage for 2012, and 73% will increase them for employees with dependent coverage.

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