Friday, June 10, 2011

What will 2014 mean for employees if ACA is still around?

We’re all waiting for the Court of Appeals in Atlanta to make a decision about the constitutionality of the ACA, but, in the meantime, I can’t help wondering what the practical effect of the law will be on employees, if healthcare reform survives the assorted legal challenges it is facing across the country. Should workers be worried that their coverage, assuming they like it, will disappear?

Predictions certainly vary. For example, McKinsey & Company took a survey in early 2011 of a wide variety of 1,300 employers, and is anticipating that about 30% of them will definitely or probably stop offering employer-sponsored health insurance after 2014, when many of the ACA’s provisions become effective. Even more disturbing is their finding that, among employers with a high awareness of reform, more than 50% plan to stop offering coverage. McKinsey also reports that alternatives to traditional employee-sponsored health insurance, such as defined contribution health plans or insurance that is offered to only a select group of employees, is expected to be pursued by 45% to 50% of employers surveyed.

In contrast, a survey of 1,350 benefits and human resource professionals, general and financial managers, and other professionals, just released by the International Foundation of Employee Benefit Plans (IFEBP) shows that only 0.7% plan to stop providing employees with health care coverage in 2014, and only 0.9% will completely close off benefits to new hires.

Is there an explanation for this disparity? McKinsey posits that, the more employers are aware of healthcare reform, the more interested they are in pursuing alternatives to traditional coverage. McKinsey states that respondents to its survey were questioned about their rationale for providing employee healthcare benefits, and that this prompted a consideration on the part of those surveyed to consider all the factors that would influence their decision about healthcare in 2014. On a positive note for employees, McKinsey predicts that, of those employers that drop employee health coverage completely, most will provide employees with increased salaries, vacation time, or retirement benefits. That would be nice, although employees would be right to be skeptical of this speculation, since the whole point of dropping coverage is to save money, and employers may not want to pay for benefits that would truly compensate workers for a loss of healthcare coverage.
Many of the employers surveyed by IFEBP had also thought through the implications of healthcare reform, though. IFEBP reports that 60% of the employers it surveyed had already conducted an analysis of the cost impact of the ACA, and that few anticipated being able to retain grandfathered status for their plans. The employers in the IFEBP survey seem to anticipate dealing with healthcare increases, not by discontinuing coverage for their employees, but by increasing their employees' shares of the costs of premiums, raising in-network deductibles, and increasing employees' proportion of the coverage cost of dependents. The use of high deductible health plans were also seen as a good way to manage costs.
It's therefore hard to anticipate exactly how healthcare coverage and options are going to change, and American workers may have no choice but to simply adopt a wait and see approach, at least until the 11th Circuit and then probably the U.S. Supreme Court come to a decision. It seems, however, that employees of the companies surveyed by IFEBP may have less to worry about than the rest of us.
A comprehensive analysis of the Affordable Care Act, including the full text of the law and additional information on health reform implementation, and other recent developments in employee benefits, is available here.


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