By Kathleen Koster
May 27, 2010
Employers have long-term concerns about health care reform, as the law’s excise tax provision, not set to take effect until 2018, topped employers’ list of preoccupations in one recent survey.
Still, immediate worries were also top of mind, as one in four employer respondents to the Mercer study expect health reform’s 2011 requirements to add an additional 3% or more to next year’s cost increase.
One in ten of the 791 employers polled predict cost increases of an additional 5% or more, 41% expect an increase of 2% or less, 3% said they were already in compliance and expect no cost increase and the remaining 30% could not estimate the impact.
The additional projected cost increases are directly linked to the elimination of benefit maximums and the increase in the age of covered dependents to 26, both of which are of significant concern for about a fifth of employers.
For those looking ahead to 2018, the excise tax poses a significant or very significant concern for 29% of the survey respondents. An additional 29% say it is “a concern” while 42% say it is either not an issue or only a very slight concern.
Auto-enrollment for new hires into a health plan is a significant concern for 16% of plan sponsors as 88% currently do not automatically enroll new hires in a plan and many think that this change could result in more employees joining the plan.
In order to manage the costs of this new feature, about 43% of the survey respondents say they will strongly consider using their lowest-cost plan as the default (another 23% only offer one plan). About a fifth of the employers say they are strongly considering imposing the maximum allowable waiting period of 90 days before enrolling new hires.
Retailers, in particular, are worried about covering the cost of more part-time workers who may need to be added to their plans if they work an average of 30 hours or more a week in a month, or face a penalty. This is a significant concern for 24% of respondents in the retail industry, who typically rely more on part-time workers, as compared to the 11% of those concerned in the survey overall.
By the time this rule goes into effect in 2014, one-fifth of the 26% of respondents not currently in compliance will strongly consider changing their workforce strategy so that fewer employees work 30 hours or more a week.
Some employers (16%) report that they will strongly consider adding a lower-cost plan for these newly eligible employees rather than adding them to an existing plan for full-time employees. A mere 8% say they would seriously consider making no or minimal changes to increase the number of eligible employees and instead pay the required penalty.
While some insurers have announced that they will voluntarily provide dependent coverage to the adult children without waiting for the requirement to take effect in, for most plans, January 2011, only about one-fourth of employers that don’t already cover children to age 26 say they will likely begin to cover them before their next renewal.
Large, self-insured employers are even less likely to act before they are required to, with 16% of those with 5,000 or more employees reporting that they are likely to implement the rule early.
Therefore, the survey suggests that most employers intend to wait and will remove themselves during the insurance companies’ 30 day opt out period for those carriers that are extending the dependent eligibility immediately.
In order to mute costs associated with age expansion, about half of plan sponsors surveyed would seriously consider requiring proof that dependents do not have coverage available to them through their own employers. A fifth would seriously consider changing contribution rate tiers.
For example, they would shift the additional cost to employees covering the most family members by augmenting just two rates for employee-only and family coverage to four or more rates based on the number of dependents covered. Sixteen percent of employers say they are likely simply to require higher contributions for all dependent coverage.
From the survey, one can take away that employers plan to cost shift or otherwise get creative with their health plan benefit management and strategy rather than ditching health plans altogether.
“While each of these new rules that adds administrative burden has the potential to increase cost, employers have certainly had to cope with compliance challenges in the past,” says Beth Umland, Mercer’s research director for health and benefits. “Nothing in our survey results suggests that they’re about to scrap their health plans and head for the hills.”
Source: © Employee Benefit News Article used by permission
