Health reform’s financial impact of health reform on employers less than expected, survey finds

Despite employer fears, the financial impact of the Patient Protection and Affordable Care Act (ACA) has not been as great as expected for most businesses, according to a survey from the Midwest Business Group on Health (MBGH). In contrast to prior surveys, many of this year’s respondents found complying with the ACA provisions cost them less than anticipated. Further, fewer employers indicated that they plan to drop coverage due to the law’s insurance mandate than was the case in the survey conducted two years ago, the MBGH found.

“While employers uniformly expressed concern with the administrative costs and reporting burdens in the law, there was surprising support for many of the coverage and system reform provisions,” said Larry Boress, MBGH president and CEO. “It’s clear that what some call ‘Obamacare’ is actually a compilation of insurance, health system and coverage reforms that are perceived by many employers as having some good, as well as having some costly, impacts. In addition, as employers have evaluated their options, the vast majority have determined there is value in continuing to offer health coverage in order to retain and recruit talent, as well as to ensure a productive workforce. Small employers fear the potential financial impact of future ACA changes, while larger organizations see the potential of improved cost and quality improvements as enabled through many of the requirements of the ACA.”

Employers’ views on ACA lawsuits. Not surprisingly, the survey also showed divergent views among employers on whether the Supreme Court will or should strike down the ACA’s individual mandate or the entire law. Employers, particularly larger ones, expect the Supreme Court to uphold the ACA but strike down the individual mandate. Of all employers, 42 percent hope the ACA is struck down in its entirety.

Cost impact of ACA. In contrast to what employers indicated in the 2010 survey, many of this year’s respondents found complying with the ACA provisions cost them less than anticipated. Although large employers found the cost impact of the ACA last year, including extending coverage to adult children up to age 26, was less than 2 percent, most small- and mid-sized employers responded that their increases were up to 5 percent. Many small employers anticipate increases in their health benefit costs over 10% in the future due to the ACA.

Portions of law employers do and don’t like. According to the MBGH, many surveyed employers indicated that they support ACA provisions that enable changes in provider payment, medical care coordination, and providing medical cost and quality information for consumers.

According to the MBGH survey, employers favor repeal of the following PPACA provisions:

• the excise tax on high cost plans;
• capping flexible spending account (FSA) contributions;
• prohibiting using FSA amounts for over the counter drugs with prescriptions; and
• reporting cash value of benefits on W-2 forms.

The MBGH survey finds that employers favor retaining the following ACA provisions:

• removal of co-pays for preventive care;
• mandating coverage of preventive services;
• creation of Health Insurance Exchanges;
• elimination of annual and lifetime limits on essential benefits; and
• extending coverage to adult children.

Finally, the survey found that employers are split on the value of some provisions. Provisions with mixed results include:
 

• requiring employers who drop coverage to offer vouchers to help people buy insurance;
• imposing penalties on employers who do not provide health benefits;
• mandating individuals obtain health insurance; and
• defining minimum essential benefits.

Views on maintaining insurance for employees. According to the MBGH survey, only 6 percent of all employers said they were likely to pay the penalty fee and drop health benefits coverage for employees in order to save money. This is down by more than half from the 2010 survey results. Also, less than 30 percent of employers that are likely to drop coverage will raise salaries to enable individuals to buy health coverage on their own.