A new health care survey by the Mercer consulting firm reports that the level of those employers who claim they will drop health coverage as a result of the new mandates imposed by the Affordable Care Act has remained steady since last year. Specifically, the survey of 894 employers conducted in June 2011 found that only 2% of respondents said that the odds are “very likely” that they will cease providing health coverage, while 6% stated they will “likely” do so. According to Beth Umland, director of research for health and benefits for Mercer, “Employers have spent the past year studying the new law and developing strategies to deal with the increased costs and administrative burdens . . . but they don’t seem to have changed their minds about the value of continuing to offer their employees health coverage.”

Among other findings, the survey also determined that as a result of the Affordable Care Act, employers have experienced a 2% increase in health insurance enrollment, largely due to the Act’s extension of dependent coverage to employees’ children up to age 26. This figure is expected to rise by another 2% by the year 2014 when many of the health care law’s provisions, particularly the requirement that large employers automatically enroll newly hired or eligible full-time employees in a health plan, will take effect.

There is still a level of concern over some of the major provisions of the Affordable Care Act including the 40% excise tax on high-cost “Cadillac” insurance plans set to take effect in 2018; extension of coverage to all employees working on average 30 or more hours per week; auto-enrollment of new full-time employees; requirement that plans pay for at least 60% of covered services. The concerns, however, varied by industry and size of employer. Overall, of the new requirements imposed by the health care law, the excise tax on Cadillac plans was the most concerning for the largest number of surveyed employers. Twenty-two percent of surveyed employers claimed that the excise tax poses a “very significant concern,” while 23% of respondents claimed it is a “significant concern” for them.

For the largest employers responding (those with at least 5,000 employees), the automatic enrollment requirement is the most concerning provision. While 21% of surveyed employers claimed that the auto-enrollment mandate is a “very significant” or “significant” concern, 28% of the very large employers found this provision to be the most problematic. According to the survey, most employers that currently offer only one plan option will use their current plan as the default plan for auto-enrolling new full-time employees, while 10% reported that they will add a new, lower-cost plan to use as the default plan. The majority (65%) of those who offer multiple plans will use their lower-cost version as the default; 29% claimed they would use their standard plan; and 7% stated they would add a new plan as a default for auto-enrollment.

As expected, employers in the retail and wholesale industries are most concerned about providing coverage to part-time employees, as the Act requires that employers provide “affordable” coverage to all employees working an average of 30 hours per week or pay a penalty. A large percentage (37%) of employers in the wholesale/retail industry – a sector that heavily relies on part-time workers – responded that this requirement presents a very significant or significant concern to their business. Among the responding employers that do not currently offer coverage to part-time employees, half said that they will likely change their workforce strategy to ensure that the employees work fewer than 30 hours per week to avoid the health care coverage penalty. A quarter said that they are most likely to make all employees eligible for the health benefits offered to full-time employees; 17% responded that they would offer them a lower-cost plan; 7% said they would consider doing nothing and incur any resulting penalty; while no respondents claimed they would eliminate the coverage they already provide.

The majority (53%) of surveyed employers believed that their health care costs will increase as a result of the new law, although there was no consensus as to how much. In general, employers said the most likely strategy to combat the anticipated rise in health care costs was to add or strengthen programs or policies to encourage more health conscious behavior. Other options in descending order of likelihood include reducing spending on dependent coverage in relation to employee-only coverage, an option that was more popular among very large employers; making some non-medical, employer-paid benefits such as dental and vision care voluntary; eliminating coverage for early retirees; moving to salary-based employee contributions; and outsourcing benefits administration. Among those options, 15% of respondents already outsource their benefits administration; 10% have moved to salary –based employee contributions; and 4% have eliminated overage for early retirees.

For employers considering implementing a defined contribution-type approach to managing costs, 26% percent said they are considering keeping the employer contribution the same for all plans offered so that more expensive plans cost employees more. Nine percent of respondents claimed they would consider providing employees with a fixed dollar subsidy to purchase their own coverage, while 8% said they would consider raising the employer contribution by a set amount each year regardless of the actual increase in cost.

Photo credit: MBPHOTO, INC.