Employer Reactions to Health Reform

For better or worse, employment-based health insurance is the main source of payment for health care needs for most Americans.  The system has its detractors, and it has become a cost nightmare for companies, but increasingly employers recognize the link between health, wellness and job productivity.  Therefore, many employers might be reluctant to lose a lever to help encourage employees to be more productive workers.  The recently enacted health law will have a significant impact on employment-based health benefits.   Some of those will be unintended or unanticipated.  Business of Insurance published the results of a survey of employers to get an early reaction to the effects of the law.  (Employer Survey)

The survey included executives at over 3,000 companies, of all sizes and across all industry sectors.  Two primary questions were asked.  One was whether the organization agreed that it would be better of if it just dropped employee health coverage and paid the fine instead.  Sixty-eight percent somewhat or strongly disagreed with that statement.  But it is worth noting that 14% strongly agreed and another 18% somewhat agreed.  The second statement was whether the company would continue to offer health care coverage because it was a crucial part of recruiting and retention efforts.   Over 91% of respondents agreed strongly or somewhat with that statement.  Finally, most respondents indicated a lack of understanding of what was really in the law and what its impacts on their firms would be.

The survey results reflect employers’, particularly larger employers’, continuing commitment to health benefits and acceptance of the value of those benefits to their workers, even though many think they would be better off if they stopped offering those benefits.  But the results also suggest that, more so for smaller companies, there is a significant likelihood that many firms will simply throw their hands up and drop coverage, paying the fines, which cost less, instead.  That would be economically rational.  If premiums continue to increase rapidly over the next few years before the new law’s coverage mandates become effective, the number of employers who will drop coverage will likely grow.