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employers not dropping insurance but concerned about costs: mercer study

August 4, 2011

in health care

mercer released the results of a study exploring employers’ attitudes and concerns about upcoming health care reform changes. some of the highlights include:

  • only 2% of the 894 participating employers say they’re “very likely” to drop medical insurance; 6% say they’re “likely to do so.”
  • employers expect that compliance with 2014 changes will drive up their costs by 2%-5%; 15% of employers say their plan’s already in compliance.

    employers rely on health-consciousness to stem costs

  • employers’ biggest concern remains the excise or “cadillac tax” for richer benefits plans; in response to this concern, 92% of employers are likely to rely on programs that’ll “encourage more health-conscious behavior” as part of their long-term cost-management strategy.
  • employers are also considering alternative approaches to cost containment: carve-outs of voluntary benefits, reduction in dependents’ coverage and migration to a defined contribution plan; retailers will transform their staffing arrangements to have fewer employers working the 30 hours that stipulate mandatory health coverage.

as employers weigh these alternatives and set their strategy, communications and employee involvement will play a key role in their ultimate effectiveness. so too will an employer’s readiness to involve themselves in community and public health discussions—particularly if they want to gain traction when it comes to health-consciousness. most of our decisions about what we eat and whether we exercise happen outside of work and are influenced by design and policy.

read mercer’s press release.

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Bob Merberg August 4, 2011 at 3:25 pm

I’m not an expert, but I suspect these study results may give a false sense of security to those who love employer-based medical coverage. I’ve actually spoken to benefits people at very large employers who are sitting on the sidelines to see how the health exchanges take shape. Some are anticipating that they can drop medical coverage, have their employees find good coverage through the exchanges, pay the penalty, supplement the exchange coverage with good programs (such as wellness, DM, etc.), and still come out ahead financially. These are companies that, in my opinion, are conscientious about employee well-being. From what I’ve heard, all eyes will be on a few bellwether employers, esp. WalMart (though I would not include them in the group of those who are conscientious about well-being). If one or two major employers drop coverage, we may see a domino affect. (Although, realistically, such an impact is probably to occur years after the 2014 implementation of penalties.) I’ve even heard it hypothesized that this was an ulterior motive behind the design of PPACA penalties — to shift control of the health care payment system out of employers’ hands and into the exchanges.
But, again, we’ll have to see what the exchanges bring. Certainly, the variability of the exchanges from state to state will present challenges to companies with employees in multiple states.
When Mercer survey respondents said that they are unlikely to drop coverage, that may mean they are unlikely to drop coverage based on what they know now. But they don’t know very much…yet.

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fran August 5, 2011 at 1:12 pm

i had this exact conversation with another benefits strategist and economist. we also considered the likelihood of a domino effect after a few large employers drop coverage. we didn’t go so far as to hypothesize the ulterior motive bit. interesting! slow migration to a more universal approach?

either way, employers have a lot to consider and to communicate. while we steadily march toward 2014, employers need to keep employees in tune with what’s on the table, what’s not, and what impact it has on their finances and safety nets.

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