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Survey Finds Employers Are Unlikely to Drop Health Care Benefits

April 9, 2010
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Related Topics: Benefit Design and Communication, Health Care Reform, Health and Wellness, Featured Article, Legal
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A nationwide survey of business executives indicates that most U.S. employers, at least for now, are unlikely to stop offering health care benefits in the wake of the landmark federal health care reform law.

The online survey of nearly 3,700 executives, conducted by Crain Communications Inc. publications Workforce Management and Business Insurance, found that 52.5 percent strongly disagreed with the statement that it would be better for their organizations to stop offering health care benefits and pay a fine under the new law. An additional 15.3 percent somewhat disagreed with the notion of dropping coverage and paying the fine. Eighteen percent somewhat agreed with the idea of dropping coverage; only 14.1 percent strongly believe their organizations would be better off in dropping benefits.

Under the health care reform, beginning in 2014, employers with 50 or more full-time workers must offer health care coverage or pay a fine of $2,000 per worker per year.

Among the largest employers—those with 25,000 or more workers—64.9 percent strongly disagreed with the statement that their organizations would be better off dropping health care benefits. An additional 12.4 percent somewhat disagreed, while 14.2 percent somewhat agreed and 8.4 percent strongly agreed.

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   The survey also found executives overall have a mixed level of understanding of the reform legislation.

When asked whether they understand the impact the law will have on their benefit programs, only 17.7 percent strongly agreed that they understand the impact; 43.9 percent somewhat agreed. More than 38 percent either somewhat or strongly disagreed that they understand the impact.

An indicator of the law’s complexity is the fact that 61.3 percent of the survey respondents identified themselves as responsible for the purchase and/or administration of health care benefits.

Respondents with benefits decision-making responsibility—including C-suite executives—reported similar levels of understanding as the overall survey group. About 18 percent strongly agreed they understood the impact of the law, while 44.9 percent somewhat agreed and 37.3 percent somewhat or strongly disagreed.

In that same group of benefits decision-makers, 51.3 percent indicated they strongly disagreed that it would be better for their organizations to drop benefits, while 15.4 percent somewhat disagreed. About 18.5 percent somewhat agreed it would be better, and 14.8 percent strongly agreed.

Need for information
Larry Boress, president and CEO of the Midwest Business Group on Health in Chicago, which represents midsize and large employers, says the main issue for his group’s members right now is the uncertainty created by the health care reform law.

“The reaction to the health care reform legislation is, ‘What do I have to do now? Does this impact my employee population and my benefit programs?’ ” he says. “People are grasping for information that will apply to them, and they’re really focused on what they need to do next.”

As for opting to stop offering health care benefits, Boress says that is unlikely among larger employers but could happen at smaller companies.

“No one’s going to make a big move to drop benefits unless they see an industry leader, a big company, make a move,” Boress says. “Smaller companies may be a different story. They have to decide, ‘Is it going to be cheaper for me to pay the fine?’ ”

When asked whether they would continue offering health care benefits because they are critical to employee recruiting and retention, 65.7 percent of survey respondents strongly agreed that they would. An additional 25.6 percent somewhat agreed, while 5.2 percent somewhat disagreed and only 3.5 percent strongly disagreed that they would continue to offers those benefits.

Regardless of whether employers decide to stop offering health care benefits, Boress says employers must communicate their intentions.

“Employers historically have not communicated well on benefits. People are stressed out enough because of the economy, and now the health care reform legislation is causing them to run around asking, ‘Am I going to have benefits?’ Employers need to give basic information and start communicating that to employees,” Boress says.

“We’re not seeing a jump-for-joy reaction that the legislation will help address the cost of health care,” says Tom Hutchinson, president of MidAmerican Group, an insurance brokerage and employee benefits consulting firm based in Westmont, Illinois. “If anything, employers are concerned that it will increase their costs in the short term.”

As an employer with 25 full-time workers, MidAmerican Group is in the same boat as many of its clients, Hutchinson says.

“We ourselves are still absorbing the details of the legislation. An initial response is, ‘If lifetime maximums are removed, what’s that going to do to our rates?’ It’s still too early to tell. We hope that health care cost increases will abate,” he says.

MidAmerican Group, however, does not plan to stop offering benefits, Hutchinson says.

“We do not charge our employees anything for benefits. Employees have the ability to buy up” certain benefits, but health care and other basic benefit programs are provided at no charge, which MidAmerican Group views as an important recruiting tool, he says. “We’re hoping we can continue to have that differentiator for us.”

Next steps
An important next step is for regulations to be written, providing guidance to implement the new health care reforms, Boress notes.

“None of this will function without regulation. Building a law is like saying, ‘We’re going to build a bridge from Chicago to Michigan City, Indiana.’ The law just says you’re going to build the bridge. The regulation tells you what materials to use, when to build, and so on,” Boress says.

“The administration needs to have a sit-down with leading business organizations, with the people who are going to be responsible for implementing the law, and identify the issues and problems they’re facing,” he says. “We don’t need legislators to do anything else” on health care reform; “we need them to sit down and clarify the provisions. They’re not going to repeal this law, but they can make it easier to implement.”

Workforce Management Online, April 2010 -- Register Now!

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