BNA: “Employer Group Questions Provision of Insurance to Employees over Long Term”
Wanted to pass along this report from this morning’s BNA Daily Report for Executives (subscription required) featuring comments by the head of a key employer group questioning the long-term viability of group insurance coverage:
“There are huge administrative compliance and cost burdens on employer sponsors,” said Jim Klein, president of the American Benefits Council in Washington. Klein participated in a webcast sponsored by accounting firm Ernst & Young LLP titled Health Care Reform: It’s the Law. “The future of the employer-sponsored system as a result of a lot of that is very much sort of hanging in the balance, not in the short term, but clearly in the mid- to long term,” he said.
Over time employers may decide to stop offering coverage to employees because it will be cheaper to pay fines under the Patient Protection and Affordable Care Act (PPACA, Pub. L. No. 111-148) rather than pay for the cost of health insurance, Klein said.
“Just looking at the numbers, the penalty is less than what it costs you to provide coverage to your employees,” Klein said. On the other hand, he added, “How long do you think that those penalties are going to remain at the level that they are?”
He added that “Many employers can, with a good conscience say, maybe I don’t need to be a sponsor of coverage. There’s a good place, the exchange, where my employees can go” to obtain insurance. This decision may well be driven by competitors’ actions—meaning that once one firm facing financial difficulties drops coverage, most competing firms will be forced to follow suit in short order. Such a scenario would likely raise costs for federal premium subsidies on a scale not contemplated in the official Congressional Budget Office score of the law.
Mr. Klein observed there is “a great deal of skepticism” among employers that the health care law “is in any way going to reduce their costs,” that “I think it’s almost inevitable that virtually no one will have a grandfathered [insurance] plan,” and that changes in insurance rating requirements could mean that some younger employees decide to purchase coverage on Exchanges rather than through their employer—potentially raising premiums for those workers that remain in employer-sponsored insurance. Finally, he noted that American Benefits Council’s survey of member companies found their premiums will rise an average of two percent next year just for the new insurance mandate to cover young adults; the Administration has repeatedly claimed that the total impact of all mandates should be 1-2 percent.