ObamaCare Update: It Won’t Cut Costs, but Few Plan to Drop Coverage

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May 27, 2010

Controlling health care costs may be a big goal for employers, but few really believe that the recently passed government health care legislation will actually help do so, according to a survey this month of 661 large employers conducted by the global consulting firm Towers Watson.

But the survey—“The Impact of Health Care of Employers” — also found that despite their lack of faith that the recently passed Patient Protection and Affordable Care Act (the PPACA, known more popularly as ObamaCare) will actually help control health care costs, some 74 percent of employers plan to continue to offer subsidized health care coverage for their workers.

“Employers are currently weighing the short-term challenges and long-term opportunities of the new law,” said Mark Maselli, North American Health and Benefits Group Leader for Towers Watson. “While many employers have not yet assessed the full impact that reform will have on their businesses, they do realize the responsibility to hold down costs will fall primarily on their shoulders.”

Controlling health care costs seems to be THE key issue for large employers, with 96 percent of those surveyed saying it was an essential or high priority. However, 94 percent said that the recently enacted health care reform will raise their organization’s costs, while 73 percent say that ObamaCare will have negative or no impact on the overall quality of care.

How will employers cope with the increased costs they believe they’ll see as a result of the new federal health care mandates? Some 88 percent said they will pass on the increased costs to employees, while 74 percent said they will reduce health benefits and programs. A third of those surveyed (33 percent) will absorb the costs in their business, while just 20 percent said they plan to pass on the increase to customers.

The Towers Watson survey also asked about two other areas of ObamaCare that concern employers, business leaders and HR professionals – the excise tax on high-cost health plans, and the extension of coverage to dependents up to the age of 26.

A significant number of large employers (43 percent) say they will be subject to the excise tax, and Towers Watson estimates that some 60 percent of employers will be affected by the tax in 2018, the first year of implementation, “with many more soon to follow.”

“To avoid significant penalties in 2018 and beyond, all employers will need to make structural program changes in the near term to moderate cost increases,” Maselli said. “While the excise tax is potentially the most expensive provision, there are others that will drive up employer costs.”

One of those is the provision under the PPACA that employers extend health care coverage to children of their employees up to age 26. Only 16 percent of the respondents to the Towers Watson survey said they would implement this coverage extension before the mandatory deadline, and 78 percent said they would wait until 2011.

If you didn’t understand this before, it’s even clearer from this Towers Watson survey: employers everywhere feel that the federal health care mandates will increase their cost of doing business and offering health care to workers. Yes, ObamaCare will certainly extend health care coverage to more Americans, but it will also increase costs to more businesses – and companies everywhere are struggling.

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