Employers Expecting Cost Increases From Health Reform

Jan. 24, 2011
However, very few employers are dropping health care coverage.

A new study reports that employers are likely to pass along any health benefit cost increases to workers -- and workers are expecting such cost increases.

Specifically, more than 40% of employers say they are likely to pass along cost increases to workers, and about half of workers expect their health benefit costs to go up whether directly or indirectly related to the Patient Protection and Affordable Care Act of 2010 (PPACA), the Employee Benefit Research Institute (EBRI) report finds.

"This new legislation brings a degree of uncertainty to both employers and workers about their health plans," said Paul Fronstin, director of EBRI's Health Research and Education Program. "For employers, it is how their plans will be administered; for workers, it is how much of the costs will be passed on to them."

Key findings from the CEHCS:

Low Knowledge of Health Reform
Most report that they are somewhat knowledgeable (35%) or not very knowledgeable (3%). Nearly 1 in 5 (18%) report that they are not at all knowledgeable about the health reform law. When employers were asked if they were comfortable with what they knew about the law, 45% agreed that they were comfortable, 41% disagreed, and 11% strongly disagreed.

Impact on Health Care Costs
About one-half of individuals expect their health care costs to increase as a result of the health reform law. Slightly more than 40% of employers report that they are likely to pass along cost increases, and another 23% are highly likely to pass the cost increases along to workers. Few are unlikely (10%) or highly unlikely (2%) to pass along cost increases. Almost one-quarter (23%) were unsure at the time of the survey whether cost increases would be passed along to workers.

Cost Decreases
The CEHCS also found that employers are more likely to pass along cost increases than cost decreases. While 41% were likely to pass along cost increases, only 30% were likely to pass along any cost decreases that were directly or indirectly related to health reform. And while 23% were highly likely to pass along cost increases, only 10% were highly likely to pass along cost decreases.

Continuation of Health Benefits
The report also found that 31% workers with private insurance expect their health care coverage to decline and 34% expect their benefits to be unchanged. And as for the future of employment-based health coverage, 32% of workers think their employer is likely to continue offering health benefits after 2014, and another 23% think their employer is very likely to continue offering employment-based health plans.

However, very few employers have decided to drop health care coverage: Less than 1% have conducted an analysis and decided to drop coverage, and less than 1% have decided to drop coverage without conducting an analysis, according to the report.

To view the full report click here.

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