Published on June 13, 2014

Survey: Most employers to continue health benefits, but cost-cutting looms

By Matt Dunning, Crain News Service

BROOKFIELD, Wis. (June 13, 2014) — While the vast majority of employers plan to continue providing healthcare benefits for their employees, many are also taking drastic action to mitigate the healthcare reform law’s financial effects on their benefit strategies, according to a new employer survey released June 11.

The ongoing implementation of the Patient Protection and Affordable Care Act (PPACA) resulted in an average 6.8-percent increase in the cost of providing group health benefits in 2014, according to a survey of more than 600 U.S.-based employers of varying sizes published by the Brookfield-based International Foundation of Employee Benefit Plans (IFEBP).

Fees associated with the healthcare reform law’s transitional reinsurance program and Patient-Centered Outcomes Research Institute, as well as increased administrative burdens, were among the PPACA-related cost drivers most commonly cited by employers surveyed in April.

“We are seeing first-hand how the Affordable Care Act has had major implications on employers and their employees,” foundation CEO Michael Wilson said in a statement accompanying the survey report. “Employers are taking a variety of actions to mitigate costs and in most cases are sharing the cost impact with their workforce.”

Employers indicated they do not expect the reform law’s financial impact on their health benefit programs to abate anytime soon. Forty-three percent of employers polled predicted that 2015 will bring the most significant reform-related cost increases, while 38 percent expect the worst of the law’s financial effects to hit in 2016 or later, according to the IFEBP report.

Continuing coverage, for now

Despite the anticipated cost increases resulting from the implementation of the healthcare reform law’s various provisions—including the coverage mandate for employers with at least 50 full-time employees, which takes effect next year for employers with 100 or more employees and in 2016 for employers with 50-99 workers—nearly three-quarters of employers polled by the IFEBP indicated they definitely will continue offering group health benefits to their full-time employees in the coming plan year.

Among those employers, talent attraction and retention and preservation of employee job satisfaction were the most frequently cited reasons for continuing coverage in the near term.

However, the percentage of employers determined to continue providing employee healthcare coverage fell all the way down to 22 percent when asked to predict their health benefit strategies for 2019.

To minimize the healthcare reform law’s financial effects, many employers are asking plan participants to shoulder a greater portion of the cost of their healthcare benefits, according to the IFEBP study.

About twice as many employers increased employees’ in-network deductibles, out-of-pocket limits and overall share of their insurance premium costs in 2014 as did in the prior year’s survey.

Workforce adjustments

A small minority of employers have also tried to shrink their exposure to PPACA-related cost increases by making adjustments to their employees’ work schedules or drawing down their hiring strategies.

The IFEBP report indicated that nearly 9 percent of employers have taken steps to reduce the number of coverage-eligible employees by shifting workers to part-time schedules totaling fewer than 30 hours, and another 7.5 percent are planning to do so by 2015.

Additionally, 10 percent of small employers reported that they have reduced hiring in order to get or remain below the PPACA employer coverage mandate’s 50-employee threshold, and another 2.8 percent said they plan to take similar steps by next year.

This report appeared on the website of Crain’s Business Insurance magazine, a Chicago-based sister publication of Tire Business.

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