[IMGCAP(1)]

WASHINGTON Wed., Aug. 24, 2011 (Reuters) — Almost three-quarters of medium to big companies will keep offering health care benefits to employees once state-based insurance exchanges kick off in 2014, according to a survey by Towers Watson.

The study adds to a growing body of research tracking the effect of President Barack Obama's health care overhaul on employers, where most working-age Americans get their health coverage.

Less than a third of the surveyed employers felt confident that the exchanges would offer a viable alternative to coverage sponsored by the company, according to the voluntary survey conducted in July by Towers Watson and released last week.

Only 9% of mid- to large-sized companies plan to end their health care benefits after state-based insurance exchanges launch in 2014, and 6% may do so without fully compensating their employees.

Twenty percent are unsure what they will do, according to the survey.

The U.S. health care overhaul passed last year requires all states by 2014 to have insurance exchanges, open marketplaces of competing insurance plans. In the first few years, the exchanges will only be open to individuals and small businesses — those with at most 50 or 100 employees.

For employers, the exchanges could offer a chance to do away with hefty health care benefits costs as individual employees get a new venue to receive presumably attractive coverage.

To prevent an exodus, the health care reform law includes penalties that would hit bigger employers that offer no coverage if their workers end up receiving federal premium tax credits.

"The penalty in pretty much all cases is going to be a lesser amount than what they'd have to pay to subsidize employees' premiums," says Sabrina Corlette, who studies exchanges as a research professor at the Georgetown Health Policy Institute.

"But you're going to find out that these kinds of decisions, they're not just pure dollars-and-cents decisions for employers."

The Towers Watson findings align with Congressional Budget Office estimates but contradict a controversial study from consulting firm McKinsey, which found at least 30% of employers are like to stop offering health insurance in 2014.

Various industries and sectors will react differently when the exchanges do roll out, depending on factors such as corporate culture, employee demographics or how much money they have on hand, says Ron Fontanetta, senior health care consulting leader at Towers Watson.

"The penalty in and of itself is not likely to drive the decision; it's a combination of looking at that and the alternatives that their employees will have available through the exchanges," he says.

Fontanetta says more employers are likely to eliminate their plans for retired employees than for active ones.

The survey found most companies were actively preparing for the rollout of the health care reform — even though almost half say they were not confident it would happen in the planned timeline — as well as planning for steadily rising health care costs.

As part of that preparation, Fontanetta says companies are increasingly looking at ways to encourage their workers to stay healthy.

In a big increase from the current 8%, 57% of employers say that in the coming years they would consider rewarding or penalizing workers based on health measures such as blood pressure or cholesterol.

The annual Towers Watson Health Care Trend Survey collected voluntary responses from 368 U.S. employers. Almost 40% of the respondents had more than 10,000 employees. A quarter were in the manufacturing industry and about a third were from the Midwest.

(Reporting by Alina Selyukh; Editing by Tim Dobbyn)

© 2010 Thomson Reuters. Click for Restrictions.

Register or login for access to this item and much more

All Employee Benefit Adviser content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access