Benefits Industry News

Survey: Employers say health care reform will not control costs

By Lydell C. Bridgeford

March 1, 2010

While health care reform enters a cooling-off period, employers insist that reform must make cost-containment a central theme in order to lower health care costs, reports the National Business Group on Health and Towers Watson.

From November 2009 through January 2010, the HR consulting firm and the business advocacy group conducted a survey of 507 employers with 1,000 or more workers.

The survey results show that 71% of employers claim that health reform will increase the overall cost of health care services, while 69% report it will boost the cost of their benefit programs. In addition, 35% of respondents felt that health reform will lead to fewer companies providing subsidized benefits.

It also appears that workers agree with their companies on the cost effects of health care reform. In a November 2009 survey of 1,000 workers, Towers Watson found that 67% of workers acknowledge that health care reform would result in higher benefit costs, while 54% report it would reduce their available benefits, and 53% declare it would lower the quality of health care.

“These survey data confirm quantitatively what many people – employers, employees and policy pundits – have been talking about for the past four months. That is, whatever else a health care reform plan might do, it is unlikely to control health care costs, which has everyone worried,” says Helen Darling, president of the NBGH.

Steve Raetzman, senior consultant for Towers Watson, explains that while “[a]ll eyes remain on Congress, there will likely be trade-offs in whatever final legislation emerges from their negotiation process.” Still, “with or without health care reform, employers will continue to look for ways to control rising health care costs and provide high-quality health care for their workers and families,” he adds.

Other findings from the employer survey include:

* About 35% of employers believe health care reform will increase transparency of provider prices, and 30% say it will increase the transparency of provider quality.

* Thirty-four percent of respondents report health care reform will increase adoption of consumer-driven health plans by large employers, while only 9% believe adoption will decrease, and 27% believe there will be no change.

* Nearly half (46%) of employers believe health care reform will decrease employer-sponsored offering of retiree medical benefits, while 5% say it will increase, and 27% of employers say it will cause no change.

Reform redux

Thought health care reform was on the back burner? A cross-chamber effort by two Republican lawmakers may get things boiling again. Some members of Congress seem to be warming up the Patients’ Choice Act, introduced last summer by Senator Tom Coburn (R-Okla.) and Rep. Paul Ryan (R-Wis.). However, some experts warn the bill would burn out the employer-based system.

Most significantly, the bill would eliminate the cherished income tax exclusion for employer-sponsored insurance and replace it with a refundable tax credit ($2,290 for individuals and $5,710 for families) that people could use to purchase coverage.

Thus, without the tax advantage to offering coverage, industry watchers largely believe employers would drop coverage.

Even employers who wished to continue offering coverage might be unable to do so, since the young and healthy workers that help tamp down prices for older and sicker plan members likely would opt out of employer plans. Thus, premiums – already unsustainable for many companies – would skyrocket at an even faster rate than they already are.

This article was used by permission from Employee Benefit News.