Wednesday, August 10, 2011

ACA requirements do not weaken most employers' commitment to health care benefits

Enrollment in group health plans rose by 2% as a result of the dependent coverage extension for adult children up to age 26 required by the Patient Protection and Affordable Care Act, a survey by Mercer has found. Group health plan enrollment is expected to rise by another 2%, on average in 2014, when the ACA requires employers to automatically enroll new hires or newly eligible full-time employees. The Mercer June 2011 survey of employer strategy in response to the ACA provisions obtained responses from 894 private and public employers that participated in Mercer's National Survey of Employer-Sponsored Health Plans.

More than one-quarter (28%) of the respondents predict that the ACA provisions requiring automatic enrollment of new full-time employees, providing coverage for part-time employees that work at least 30 hours per week, and paying for at least 60% of covered services, will add at least 3% more to their health care costs. Another 27% of respondents anticipate that their costs will rise by at most 2%, while 15% did not anticipate much of an increase.

Employers don't plan to drop coverage. Few employers (2%) say they are "very likely" to drop their health insurance benefits when the health insurance exchanges become operational, and another 6% said they are "likely" to do so.

Employers have spent the past year studying the new law and developing strategies to deal with the increased costs and administrative burdens," said Beth Umland, director of research for health and benefits for Mercer. "But they don't seem to have changed their minds about the value of continuing to offer their employees health coverage."

Excise tax is big concern. The excise tax on high-cost plans that is scheduled to take effect in 2018 continues to concern to employers—for 22% it is of "very significant" concern and for 23% it is of "significant" concern. The excise tax is only a slight concern or altogether not an issue for the majority of responsdents (55%).

The top long-term cost management strategy for the great majority of Mercer respondents (92%) is to add or strengthen programs to encourage more health conscious behavior—54% are very likely to adopt this strategy, while 38% are likely to do so. More than one-quarter (29%) are likely to carve out and offer other benefits such as dental and vision coverage and offer them as voluntary benefits. Some two-fifths (38%) of all employer respondents said they are likely or very likely to reduce employer contributions for dependent coverage; most likely to do so are the largest employers (45%) with at least 5,000 workers. Only 30% of employers with fewer than 500 workers indicated having that strategy. One-quarter (26%) of respondents will consider keeping the employer contribution toward coverage the same for all health plans so that employees must pay more for the more expensive plans.

Employers worried about auto-enrollment. Auto-enrollment beginning in 2014 is of "very significant" or "significant" concern for 21% of all respondents, and for 28% of respondents with at least 5,000 employees, Mercer found. Of employers offering a choice of plans, 65% will use the lowest-cost plan as the default option and 29% will use the plan with the highest enrollment. About one-tenth (11%) of the largest employers said they were likely to add a new plan.

Providing coverage for part-time employees who work 30 or more hours per week poses a "very significant" or "significant" concern to wholesale/retail employers who are most likely to rely on such a workforce. More than one-quarter (28%) of the employer respondents with part-time employees currently do not offer health insurance to their part-time employees who work at least 30 hours per week and one-half of this group said that they will change their work policy to reduce the number of such part-time workers. On the other hand, all employees already are eligible for coverage at 72% of the respondents.

For a comprehensive analysis of the Patient Protection and Affordable Care Act, and additional information on health reform and other developments in employee benefits, just click here.


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