Some employers may end health coverage, accept the penalties
Firms ponder effect of federal law on profits
By Tom Murphy
Associated Press / August 25, 2011
INDIANAPOLIS – Nearly one of every 10 mid-size or large employers expects to stop offering health coverage to workers once federal insurance exchanges start in 2014, according to a benefits consultant’s survey.
In the survey, completed last month, Towers Watson also found that an additional 20 percent of the companies are unsure what they will do.
Another big benefits consultant, Mercer, found in a June survey of large and small employers that 8 percent are “likely’’ or “very likely’’ to end health benefits.
Employer-sponsored health insurance has long been the backbone of the health system. But studies suggest that some employers, especially retailers or those offering low wages, may accept fines and taxes rather than continue to provide benefits that eat up more of their budgets every year.
The exchanges, devised under the national health care overhaul, may offer an alternative. The exchanges aim to provide a marketplace for people to buy insurance that can be subsidized by the government, based on income levels.
A large majority of employers in both studies said they expect to continue offering benefits once the exchanges start. But a former insurance executive, Bob Laszewski, 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 comes with potential payroll-tax headaches and could subject companies to fines. It also would give their employees a steep compensation cut if their pay is not raised.
“Dropping coverage is going to be very difficult for these [companies] to do,’’ said Laszewski, a consultant who was not involved with the studies.
Towers Watson’s Randall Abbott said the survey results should be seen as a snapshot of current conditions; there are still many unresolved variables. No one knows what the exchanges will be like or whether consumers will accept them, and companies may change their thinking.
The health care overhaul also faces court challenges, and President Obama is seeking reelection, variables that could shape what happens in 2014.
© Copyright 2011 Globe Newspaper Company.
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