Wednesday, August 15, 2012

Mercer: ACA challenges acute for firms with part-time, low-wage workers

Companies with the greatest number of part-time and low-paid employees will face the greatest challenges from the reforms provided in the Affordable Care Act, a new Mercer survey has determined. Although 60 percent of the 1,203 employers Mercer surveyed expected some increase in cost as a result of the key ACA provisions effective in 2014, nearly half (46 percent) of retail and hospitality industry firms and two-fifths (40 percent) of health care industry employers anticipated cost increases of at least 3 percent. These industries have large part-time employee populations. Only 31 percent of service industry employers expected such an increase.

"With health benefit cost already rising at twice the rate of general inflation, an additional increase of 3 percent or more will be very tough for employers to absorb," said Sharon Cunninghis, leader of Mercer’s U.S. Employee Health & Benefits business.

Also, in companies where pay is low, employees who are eligible for coverage are more likely to opt out of enrolling, Mercer noted. For example, among large wholesale/retail and health care employers, opt-out rates average 19 percent and 18 percent, respectively, compared to just 8 percent among transportation, communication, and utility companies, where pay is higher. Once the individual mandate requiring all individuals who can afford coverage to obtain it (or pay a penalty) goes into effect, employers with high opt-out rates could experience a significant increase in enrollment.

Beginning in 2014, employers with at least 50 full-time employees working at least 30 hours weekly must extend health care coverage to these employees or pay a penalty. One-fourth of the respondents to Mercer’s survey said they will have to act to avoid penalties—ranging from 16 percent of financial services employers to 46 percent of retail and hospitality industry employers. Firms with low populations of part-time employees likely will make those employees eligible for the full-time employee plans or add new, low-cost plans (68 percent). However, employers with large part-time employee populations that do not currently offer coverage to these workers are more inclined to change their workforce strategy so that fewer employees would be eligible (67 percent of these employers, compared with 41 percent of manufacturing industry firms).

Employers counting on the ACA-provided Medicaid expansion for some of their low-paid employees may be foiled by the Supreme court decision that allows states to opt out of this expansion. One-fifth of survey respondents, but half of companies with large part-time employee populations, have employees that could qualify for coverage under the Medicaid expansion.

"Because state Medicaid eligibility already varies greatly, it’s difficult to predict what states will do about expanding their programs to more individuals, and the impact of their decisions on employers," said Branch McNeal, leader of Mercer’s Government Consulting business.

Source: Press release,


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