Most US Companies Not Ready for Health Care Reform

It seems that the fate of health care reform now rests squarely on the shoulders of the newly convened 112th Congress.

And, as you would expect, businesses are watching carefully.

Interestingly, however, recent research by Ernst & Young LLP found that even though most US employers (84 percent) see managing the changes resulting from health care reform as a very important or critical business issue, many (more than 40 percent) report that they have not undertaken what they consider to be a full analysis of the financial impact of the law passed last year.

The Ernst & Young report, entitled "Moving forward: companies speak out on health care reform," analyzes the issues of greatest concern to executives and their perceived level of readiness to comply with the Patient Protection and Affordable Care Act (PPACA). The findings, based on a survey of 381 executives, representing 347 companies, revealed that:

Rising costs associated with health care in general as well as costs which stem from compliance with the new health care reform law are key concerns for employers. Thirty-four percent of respondents said their company's biggest challenge or risk arising from the law will be the impact of health care costs on profitability, while 31 percent cited the impact of added expenses associated with complying with the law.

Only 39 percent of respondents reported their companies have evaluated what the full effect of the health care law will be on the cost of employee health benefits. Of this group, 43 percent said they anticipate significant cost increases as a result of the law and only 1 percent said that they expect it to decrease costs.

At the time of the survey, 92 percent of respondents said they intend to continue offering health care benefits to employees, while 8 percent said they were considering discontinuing employee health care benefits.

More than three-quarters (76 percent) of respondents said their companies are at least somewhat likely to increase the amount employees pay for their health care coverage as part of their cost-reduction strategies.

"The health care reform law brings with it some of the most significant changes seen in decades for employers and the benefits they offer to employees," said Lynne Parrott, an Advisory Services Partner at Ernst & Young LLP. "Companies likely to be successful in addressing these changes will be those that can quickly adapt their business models to ensure they are in compliance with the law, have the ability to offset the impact of rising health care costs on profitability and are able to engage and collaborate with payors, providers and other third-parties in ways they have not previously done before."

TAGS: Finance
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