Survey Finds Large Number of Employers Plan to Discontinue Health Coverage in 2014

health insurance2.JPGA new survey by the McKinsey consulting group of more than 1,300 employers suggests that more than 30 percent of employers are inclined to drop their employee health benefit plans in 2014 when many of the Affordable Care Act’s provisions take effect. Other key findings of the survey published in the June 2011 edition of the McKinsey Quarterly include the following:

  • Employers that had greater knowledge of the health care law’s provisions said they were more likely to abandon their employer-sponsored insurance (ESI) or seek alternatives. According to the survey, 50 percent of this educated employer pool reported that they would stop providing ESI, while 60 percent claimed they would pursue alternatives.
  • Approximately 30 percent of employers said they would financially benefit by dropping coverage, even if these companies compensated for the dropped ESI by increasing salaries or offering alternative benefits.
  • According to a separate consumer research study carried out by McKinsey, the vast majority of employees (more than 85%) would stay with their employers even if these employers dropped their health insurance coverage. According to the results published in the study, on the whole, employees place much greater value on cash compensation than on their health coverage. These findings are particularly apt for younger employees who, according to McKinsey, tend to favor career-development opportunities and work–life balance over health insurance.
  • The majority (60%) of those employees who would no longer receive health benefits through their employer would anticipate a commensurate increase in their compensation. According to McKinsey, however, the employer’s need to make employees whole would decrease over time.

The McKinsey study lies in stark contrast to a Congressional Budget Office (CBO) estimate that by 2014 only about 7 percent of employees would switch from employer-provided coverage to that provided via a health insurance exchange. In addition, as emphasized by a spokesman for the Obama Administration, the findings of the McKinsey study also deviate from the results of similar surveys by the Rand Corporation, the Urban Institute, and Mercer. According to Nancy-Ann DeParle, Assistant to the President and Deputy Chief of Staff, “this one discordant study should be taken with a grain of salt.”

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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.