According to most experts, the number is small and keeps getting smaller. We speak, of course, of the number of companies with 50 or more employees that will drop employer-sponsored insurance in 2014 - opting to send employees to state-run insurance exchanges and pay per-employee fines levied by the Patient Protection and Affordable Care Act. After a McKinsey & Company study in 2011 famously concluded that 30% of employers would "pay" rather than "play," survey after survey has revealed that fewer than 5% of employers plan to eliminate employee health benefits. Even the Government Accountability Office, which originally reported as much as 20% of employers would drop coverage, now has backed off that estimate to around 2%.
"I think this may be a tale of two markets, if you will," says Tom Billet, senior consultant and practice leader of health and group benefits at Towers Watson. "In the large market, I would be surprised if we see many, if any, employers dropping coverage in 2014. It could be a different story in the small employer market."
'Exit fantasy'
Borrowing a phrase from Mark Twain, Dr. Robert Galvin, CEO of Equity Healthcare, says reports of the death of employer-sponsored insurance have been greatly exaggerated. "I don't think employer-sponsored insurance will die. I don't see it," Galvin says, noting that while PPACA offered employers an "exit option" from providing health coverage, for many employers it's more of an "exit fantasy." Most wouldn't be able to even if they wanted.
"Turns out," Galvin says, "the government wrote a pretty smart bill," because "the government doesn't want employer-sponsored insurance to go away. ... Someone's got to pay for this."
He adds that even for employers who are tempted to pay per-employee penalties rather than provide health insurance, "the math really doesn't work out. They [employers] found out that you can't split the workforce. That's a discrimination issue."
He remembers talking to one company's executives who were very excited to shed their health care costs by dropping employee coverage and sending workers to purchase care in state exchanges. "You know," Galvin recalled telling them, "you can do this, but you'd have to go to the exchange, too. You can't split the workforce."
The CFO blanched and said to Galvin, "Me? On a public exchange?"
In addition to not wanting to wade through the discrimination issues, Billet says: "Clearly there are some employers who would likely retain coverage indefinitely ... and those would be [ones that see health benefits as] critical to attract the right type of person and [ones that] have a high-performing health plan - their costs are low, their trend lines are reasonable, they can stay under the 40% Cadillac tax that starts in 2018. If you put those two factors together, there will be some employers that fit that profile."
Galvin largely agrees, adding that employers most likely to keep offering health care benefits are in the health care industry.
There has been a glut of surveys on the topic. In one of the most recent, conducted after the November election by the International Foundation of Employee Benefit Plans, 84% of U.S. employers report they are very likely to or definitely will continue to provide health insurance for full-time employees. Only 1% say they definitely will not.
A similar survey, conducted by IFEBP after the Supreme Court's PPACA upholding ruling in June, also revealed a majority committed to continuing employer-sponsored health plans. But nearly three-fourths at that time said they were in "wait and see" mode in terms of health care planning until after the elections. By December, 59% said they are confident in being more definitive about maintaining coverage.
"With President Obama's re-election confirming that PPACA will survive, we saw a 7% increase in organizations planning on providing health care benefits from when we asked our members following the Supreme Court's ruling in June," says IFEBP CEO Michael Wilson.
Seventy-seven percent of respondents state they are well along in keeping up with PPACA provisions, and 60% say they are either very or extremely far along in preparing for future ones.
The biggest reasons IFEBP members cite for maintaining coverage in 2014 are:
* To maintain/increase employee satisfaction and loyalty (40%);
* To retain current employees (24%);
* To keep in line with a collective bargaining agreement (21%).
Among employers' other PPACA-related plans, IFEBP finds most companies aren't dramatically adjusting hiring plans for the next two years, as 48% report they have no plans to add or reduce workforce. A much smaller percentage will reduce staff due to PPACA costs (11%), reduce hiring to stay under the 50-employee PPACA threshold (5%), or add staff to help keep compliant with PPACA (4%).
Galvin advises against a shift to full defined-contribution health care. "The argument, of course, is [that's] what we did with retirement," he says. "I think those are very different. You don't feel the consequences of [retirement benefits] until the person [isn't] working for you anymore. What's going to happen with health care is going to impact your employees today. It's not only going to be labor competitiveness; it's going to be awful stories about people in your workforce not being able to afford health care, kids being sick, etc. Saying that 'we did it in retirement' ... is a shaky argument."
HOW BROKERS CAN VIEW 2014 AND BEYOND
The role of brokers in the new world of health care come 2014 is changing, and while it's tough, there are five key marching orders for making the most of it. This sentiment opened the Workplace Benefits Renaissance in Atlantic City, N.J., on February 11 with a keynote from Andrew Webber, the president and CEO of the National Business Coalition on Health, based in Washington.
In reference to the brokers' role in state exchanges, Webber said there's a role, "but fundamentally it's changing when it comes to the state exchange program - and that was by design, as I understand it."Meanwhile, Webber laid out five ways that the employer community can think about PPACA moving forward:
1. Politics aside, there's a cost issue: "Every Democratic president since Truman has tried to get major health care reform through Congress, and finally, politically, that job has been done, we have the PPACA," Webber said. He notes that regardless of one's politics, the Supreme Court decision last summer and the re-election of President Barack Obama have decided that PPACA is here to stay. "Now we have to think," he said, "'How are we going to make this delivery system possible?' Now the conversation can finally turn toward cost containment." He notes that the average household is spending 18%, upwards of 20%, on health care, based on recent data, and thus, "I for one am glad that all eyes are now on cost containment and not on expansion. We've needed this," he said. "We have a broken and wasteful system and people are angry, this is where we need to be. Fixing cost is next."
2. Eye on the prize: Webber noted that the distraction of PPACA and the politics that have surrounded its potential repeal, but eventual acceptance, have been understandably distracting, but now is the time to refocus on the goals for clients. They are: 1) improving workforce health and productivity and 2) getting health care at the best value possible.
3. The golden age is over: "Let's not kid ourselves," Webber said. "ERISA and the wonderful framework of flexibility it created is over." He continued: "It's been almost a gift to employers for the last 20 years, but with health reform, those days are over." Webber said that PPACA is a whole new set of granular regulations, especially impacting the employer community, and keeping the legal one in business. He emphasized that it's important to understand that the flexibility of ERISA is no longer; the law of the land is now nuanced. Brokers need to embrace it to move on.
4. Every employer is different: Webber noted that he's heard from employers that they're rethinking "whether or not they're in this business [of health insurance] at all." Most employers have the mentality that all strategic options are "on the table now" and that what is right for one might not be for the other. For a few examples, he said, small employers are different than large, and lower wage employers are different that high-tech, knowledge-industry workforces. The popularity of health benefits needs to be considered by each individual company, in addition to their location, competition, overall culture and more. Some smaller employers may at least check out the state and federal exchanges, while other large but low-wage employers like retail giants may venture to private exchanges. The key is to think strategically, Webber said, and tailor that strategy.
5. Message is to the provider: This is broad, but simple, Webber said: "The message of health care reform is to the provider, that the incentives and payment structure are changing." He noted that this will not happen overnight, but slowly over the next 10 years and providers need to brace for this, and brokers need to reinforce this message that things are going to change. Costs will soon reflect back on the provider, in a world where the provider was never at risk before. This way, employers will have more incentive to coach employees on costs, if their costs are more impacted.
- Gillian Roberts
