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Survey: Health Care Reform Law Driving Employers' Group Health Costs Up

The survey indicated that only 27 percent of responding employers have determined what it has cost their company to comply with the health care reform law in the two years since its implementation.

March 8, 2012
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While most employers have not yet calculated the financial impact of compliance with the Patient Protection and Affordable Care Act, some estimate compliance with the law has driven their group health costs up by as much as 5 percent, according to a Willis Group Holdings P.L.C. survey released on March 8.

The survey, conducted in December by Willis' New York-based Human Capital Practice division, indicated that only 27 percent of responding employers have determined what it has cost their company to comply with the health care reform law in the two years since its implementation.

Among those employers, more than 55 percent said their total health care costs had risen at least 2 percent as a direct result of the reforms. More than 15 percent of those employers said their costs have risen in excess of 5 percent since 2010.

To offset those rising expenses, 62 percent of responding employers said they expect their peers to raise employee contributions for health care coverage. About 56 percent said they expect other employers to increase their plans' deductibles and copayments, while 51 percent said they think employers will shift more of the cost burden for dependent care to their workers.

"Now that the health care reform act has entered the implementation phase, the costs and benefits associated with the act are coming into greater focus for employers," Jay Kirschbaum, practice leader for Willis Human Capital Practice, said in a statement released March 8. "The survey suggests employers realize that costs of providing medical benefits will increase and that they will likely have to pass those costs on to their employees."

Among companies that had measured the cost of compliance with the health care reforms, a little more than half said the cost increases had been driven primarily by a provision of the health care reform law requiring employers to offer coverage to employees' adult children up to age 26. Almost 37 percent said the rule eliminating annual and lifetime coverage limits for "essential health benefits" was responsible for their increases.

Despite the increased costs, 57 percent of responding employers said they plan to expand their group health plans to comply with health care reform requirements.

About two-thirds said it was unlikely that they would reduce financial support for other employee benefits, such as dental, disability and life insurance, while just 27 percent said they would likely cut back on contributions to tax-qualified employee benefits like pensions and 401(k) accounts.

"Respondents also indicated the new requirements will force them to think about their benefits in a strategic manner and as part of the total rewards they use to attract, retain and motivate employees," Kirschbaum said.

More than 2,300 employers responded to the survey, with 69 percent reporting fewer than 500 full-time employees, Willis said.

Matt Dunning writes for Business Insurance, a sister publication of Workforce Management. To comment, email editors@workforce.com.

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