The HR Specialist

Health care reform: Will employers keep offering coverage?

04/12/2011

Most employers are not considering canceling health benefits as a result of the year-old health care reform law, according to a pair of recent surveys. The Affordable Care Act (ACA) may be politically unpopular, but employers assume that it will be a business fact of life for the foreseeable future.

Health benefits still key

“Health insurance remains a recruiting and retention tool,” said Amy Bergner, an attorney and health policy expert with the benefits consulting firm Mercer.

Speaking earlier this spring at the Society for Human Resource Management’s Employment Law and Legislative Conference, Bergner said maintaining health benefits is, for now, a business imperative for most employers. “The fact of the matter is, if you drop health insurance, you will probably have to pay your employees more. That could knock out any savings gained by discontinuing coverage.”

Employers seem to agree. A survey of more than 1,000 companies conducted by the International Foundation of Employee Benefit Plans revealed that 87% of employers said they were planning to continue offering health benefits. Reason: They are a key recruitment tool.

Twenty percent of employers said they extended health benefits to employees' adult children before they were statutorily required to do so (i.e., for plan years beginning on or after Sept. 23, 2010), and 75% said that extending coverage impacted their costs.

Other survey results include the following:

  • 42% of employers also extended dental coverage to employees' adult children; 32% extended vision coverage.
  • Only 4% of employers that had plans that utilized lifetime or annual limits removed those limits before the statutory deadline of plan years beginning on or after Sept. 23, 2010.
  • 21% of employers added or increased the visibility of high-deductible health plans, and 70% of those employers linked those health plans to tax-advantaged health savings accounts.
  • 66% of employers will take advantage of the health care reform law's increase in wellness incentives—to 30% of the total cost of coverage (i.e., employer and employee contributions), up from 20%.
  • 52% of employers that have retiree health plans participate in the Department of Health and Human Services' reinsurance program for early retirees.

No ax to nonmedical benefits

Forty-three percent of employers that participated in a MetLife survey responded that in the wake of the health care reform law, nonmedical benefits—disability insurance, life insurance and dental insurance—remain important elements in their overall corporate strategy.

The MetLife survey also took the temperature of employees' attitudes toward these benefits and the health care reform law.

  • Only 10% of employers with fewer than 500 employees are planning to reduce spending on nonmedical benefits. The percentage increases to 20% for employers with 500 or more employees.
  • 71% of employees who said they had a good understanding of the health care reform law said that nonmedical benefits are key to their loyalty toward their employer. The percentage dropped to 57% for employees who lacked a good understanding of the law.
  • On the other hand, the law may be forcing small employers—those with fewer than 50 employees—to make changes in plan design.

Note: Plans forfeit their grandfathered status if design changes impose or increase employees' co-insurance, decrease the employer's contribution by more than 5%, eliminate benefits, or make more than minor adjustments to employees' deductibles and co-pays. Plans may increase employees' premiums without jeopardizing their grandfathered status when insurers raise their rates.

  • 45% of employers with fewer than 50 employees have yet to decide whether to make changes in plan design. The percentage dropped to 18% for employers with more than 500 employees.
  • Design changes are contemplated by 22% of employers with fewer than 50 employees, 28% of employers with fewer than 500 employees and 39% of employers with 500 or more employees.
  • Of employers considering increases in employees' cost-sharing, 24% have fewer than 50 employees; 28% have between 50 and 500 employees.

 

Health care reform 2011: What should employers be doing now?

Mercer health policy expert Amy Bergner doesn’t believe recent calls to repeal the Affordable Care Act health care reform law will succeed—at least until the 2012 presidential election has been decided. In the meantime, she counsels HR professionals to take advantage of a relative lull this year in ACA implementation.

The goal: Assess your current health benefits and the current and future needs of both your business and your employees.

“The question is how to create a win/win so employers can keep providing coverage to employees while managing costs,” Bergner told participants at SHRM’s Employment Law and Legislative Conference in March. Her to-do list for HR pros this year:

  • Assess your current health insurance plan, who it covers and how much it costs.
  • Get your broker’s help to project your insurance needs for 2012 to 2014. Factors to consider: Your organization’s projected staffing, premium increases you can anticipate and your recent claims history.
  • Engage senior leadership now. HR alone can’t make all the health benefits decisions that will affect your business in the next two years. “A lot of you are probably getting more C-Suite interest in benefits than ever before,” Bergner noted. “You’re going to need their support as you move forward.”

If top management is leaning on you now, consider that a vote of confidence in the value of the HR function to contribute to bottom-line business results.


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