Concerns that the Affordable Care Act may be driving some employers to drop health insurance coverage for their workforce may be overblown.

A new survey released last week indicates that nearly all larger employers are committed to providing medical benefits for at least the next two years.

The survey of 420 mid-to-large size companies by global professional services company Towers Watson projects that overall health care costs will rise 5.2 percent in 2014, compared with last year’s 5.9 percent increase. But despite the rising costs, and the risk of triggering the Affordable Care Act’s excise tax in 2018, 82% of the employers surveyed continue to view health care benefits as a key element of their employee’s compensation in 2014.

However, fear of the ACA’s excise tax—commonly known as the Cadillac tax because it will be imposed on premium health plans valued in excess of $10,200 for individuals and $27,500 for families—is driving as many as 40 percent of the survey respondents to modify their plan designs this year, with the number steadily rising in 2015 and 2016.

“Employers are balancing many competing factors as they revisit their financial commitment to health benefits and their ability to maintain a sustainable plan in the face of annual cost increases and the excise tax. They see health care benefits as an important part of their total rewards mix. And as they weigh new options, they will be looking to keep their plans affordable and viable for the long term,” said Ron Fontanetta, a Towers Watson senior health care consultant.

Retiree medical benefits are a different story. In 2014, 25 percent of the employers surveyed are likely to discontinue coverage of retirees over the age of 65, expecting that various Medicare options, as made available by the new, ACA-sponsored public health insurance exchanges, will pick up the slack. By 2015, according to the survey, that percentage is likely to swell to 44 percent.

The percentage of employers who think the public exchanges will be a viable alternative to employer-sponsored coverage by 2015 is much lower, at only 30 percent of respondents. But nearly 58 percent are considering private exchanges as a way to control cost increases, reduce administrative burdens and provide greater value.

Kass writes for Health Insurance Exchange,, a SourceMedia publication.

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