Panelists Discuss Rising Costs of Employer-Provided Health Coverage at Congressional Hearing

United_States_Capitol_dome_daylight.jpgOn Thursday, the House Subcommittee on Health, Education, Labor and Pensions held a hearing to discuss the pressures of rising costs on employer-provided health care, which Subcommittee Chairman Phil Roe (R-TN) considered a topic of “pressing” national concern. In his opening statement, Rep. Roe claimed that nearly 170 million individuals receive health coverage through employer-provided plans, but that certain provisions of the Affordable Care Act will increase the costs of that coverage. According to Roe, businesses are better suited than the federal government to decide the types of health coverage to offer to their employees. Among other suggestions, Roe and several panelists favored allowing individuals and businesses to shop for insurance plans across state lines, and called for medical liability reform.

The majority of hearing witnesses was particularly critical of the Affordable Care Act’s employer “pay or play” mandate, which will require businesses with 50 or more employees to provide minimal essential health coverage to their full-time employees or pay a penalty. According to Brett Parker, Vice Chairman and Chief Financial Officer of Bowlmor Lanes, the mandate – which takes effect in 2014 – will result in a $2,000 per employee cost increase for his business. In addition, Parker, who spoke on behalf of the U.S. Chamber of Commerce, claimed that several of the Act’s provisions serve as a deterrent for expansion, and will cause his business to convert many employees to part-time status to avoid coverage requirements.

J. Michael Brewer, President of the business consulting firm Lockton Benefit Group, cited his organization’s findings that on average, immediate benefit mandates, such as the obligation to cover adult children to age 26, the elimination of lifetime dollar maximums, and restrictions and ultimate elimination of annual dollar limits, add 2.5% to large employer costs, and the automatic enrollment provision will add 3.8%. As a result, he claimed that across most industry segments, the Act will create an incentive for employers to opt out of providing coverage, and simply pay the penalty. He testified that by terminating group coverage, many large employers will save 44% of their projected health costs by 2014. For his organization’s clients whose health plans are more expensive, these savings will be even larger. According to his estimates, savings would equate to 84% for his firm’s governmental clients, and 60% for his firm’s hospital clients. Brewer also explained that once the insurance exchanges are implemented, “the more highly paid the employer’s workforce, the more significant the expense borne by the employee in the Insurance Exchange.” He acknowledged, however, that few of his clients say they will definitely terminate health coverage for their employees in 2014. Brewer estimated that a large number of employers will restructure their positions by moving employees to part-time work, particularly in the retail and hospitality industries.

Echoing these sentiments, Tom Miller, Resident Fellow with the American Enterprise Institute, testified that the Act has resulted in only modest immediate cost savings, but will do more harm when many of the provisions take effect in 2014. He stated that the various and evolving regulations to implement the Affordable Care Act have caused many businesses to be “frozen in uncertainty” regarding their health benefits planning, and cautioned that such problems will escalate after 2014.

Not all panelists were critical of the law, however. Small business owner Jim Houser touted the benefits that his company has received as result of the law, including the expansion of dependent care coverage to age 26, and the small business tax credit to purchase insurance. Similarly, ranking minority member Rep. Dennis Kucinich (D-OH) claimed that the Affordable Care Act has dramatically expanded access to affordable coverage, and that it has imposed much-needed regulations on insurers, which, he stated, have been able to operate largely unchecked. During the hearing Kucinich cited a handful of studies finding that repealing the law would actually harm employers.

A full list of the panelists and links to their testimony can be found here.

This entry was written by Ilyse Schuman.

Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.