Monday, June 20, 2011

Another Survey, Same Results: Obamacare’s Costs Could Force Firms to Drop Coverage

Yet another survey has come out in recent days highlighting the problems employers are facing – rising premiums, increased paperwork – thanks to Obamacare, and indicating that a sizable percentage of firms will drop their health plan offerings as a result.  Among the findings from a survey by benefits consultants at Lockton:

  • 80 percent of employers are concerned or very concerned about new administrative burdens; one respondent said the law “created a lot of administrative burdens…confused employees and increased cost substantially;”
  • More than half of employers (56%) believe the law will significantly increase their paperwork burdens;
  • Firms said that each new regulatory notice will cost $1-3 per employee to send to their workers, potentially raising costs by tens of thousands of dollars or more for some firms;
  • Among firms’ perceived four top “benefits” of the law were the ability to drop coverage for their retirees (23%) and drop coverage for their current workers (16%);
  • Nearly one in five (18.8%) firms are considering terminating coverage outright thanks to the law;
  • Nearly half (45%) of firms are more concerned about Obamacare than they were last year, compared to only 14% who are less concerned.

Among the reactions by employers to Obamacare quoted in the survey:

  • “I do not believe that they [Congress] considered the cost of this plan to the employer in the short term.  I think their only consideration was to the employees that do NOT currently have health coverage.  Our rates went up an additional seven to nine percent in 2011 because of health reform.”
  • Forcing these mandates on employers will lead to many employers currently offering coverage to their employees to terminate coverage offerings due to financial hardship.”
  • “It will increase our costs that we have to pass on to our employees with little increase in benefit.  The mandates will add costs that we cannot control.”
  • “The current healthcare reform act will do nothing but add cost and add administrative requirements.”

A paper previously released by Lockton in April also discussed the costs for businesses, and confirmed the financial incentives for employers to drop coverage.  The April report noted that “employers are burdened and frustrated by aspects of the health reform law that add costs to their health plans,” and that “some employers WILL eliminate group health insurance and full-time jobs in 2014 because of the law.”  The analysis found that across all industries, the mandates instituted in the past year will raise employer premiums by an average of 2.5%, and that other mandates taking effect in 2014 – such as auto-enrollment provisions and shorter waiting periods – could raise premiums in some industries by up to 40%.  On the other hand, employers could save an average 44% of their health insurance costs by dropping coverage and placing their employees in government-run Exchanges; some industries could save more than 80% of premium costs by “dumping” their employees.

As a reminder, the Congressional Budget Office previously estimated that only about 9 million individuals would lose their employer-sponsored health coverage under Obamacare.  If in reality one in five employers drops due to the crushing burdens Obamacare places on business, that could more than double the federal spending on insurance subsidies – further exacerbating the 2700-page law’s reputation as a budget-busting entitlement.