Life Insurance Blog News: Will Employers Offer Health Care In Future?

Employers’ inability to control health care costs and uncertainty about the effects of federal health reform have many rethinking their commitment to providing health care benefits, a survey concludes.

Forty-three percent of employers responding to the National Business Group on Health and Towers Watson & Co. survey released last week say they have lost confidence in their ability to provide affordable health benefits to their employees 10 years from now, up from 38% in 2009 and 27% in 2008 (see box).

There is a correlation between where health care cost trends have been historically and the level of confidence of employers in their ability to continue to provide health benefits, said Ron Fontanetta, a principal in the New York office of Towers Watson and one of the survey’s authors.

In the last couple of years, (the health care cost increase) trend has been running around 6% a year. The cumulative effect of these cost increases and uncertainty about what’s likely to come out of Washington, both its direct and indirect impact, has employers concerned that their costs could grow even further, Mr. Fontanetta said (see box, page 23).

For example, if reform legislation includes a tax on employer-provided health care benefits with a value that exceeds a certain threshold, employers would have the added expense of performing financial calculations, Mr. Fontanetta said.

In addition, if there’s a mandate, they may have to account for employees who don’t enroll in employer plans but instead choose to buy coverage through an (insurance) exchange, he said.

There also likely will be additional communication explaining to employees what their options are, which will add to employers’ administration costs, he added.

A separate NBGH/Towers Watson survey of employers found that a significant majority believe health care reform, if enacted, would lead to higher costs for employer-sponsored benefit programs and health care services overall. In addition, a Towers Watson survey of U.S. employees found that a majority of workers think health care reform will lead not only to higher costs but decrease the quality of care and reduce benefits available to them.

Helen Darling, president of the Washington-based NBGH, said employers’ waning confidence in their ability to continue providing affordable health benefits to employees in the future is partly a reflection of the uncertainty of the world we live in. These are very difficult and uncertain times.

Sharing his interpretations of the survey’s findings via e-mail, Ray Brusca, vp of benefits at Black & Decker Corp. in Towson, Md., said he believes most employers still will provide health benefits 10 years from now, regardless of cost increases or health reform.

While I can understand that fewer employers are feeling confident that there will be employer-based health insurance system 10 years from now, the drop is not significant and likely can be attributed to a small number of employers feeling overwhelmed by the cost of coverage as well as some employers favoring a government-run system where employers do not play the same role as today, Mr. Brusca said in the e-mail.

A majority of employers, 57%, are still confident that today’s system will survive and be the cornerstone of private health insurance in the United States. I am in agreement with the majority that believes today’s system will continue, Mr. Brusca added.

But Michael Vittoria, director of human resources at Sperian Protection USA Inc. in Smithfield, R.I., and president of the Rhode Island Business Group on Health, a coalition representing approximately 75 employers, said, The deterioration in employer confidence levels reported by the survey mirrors a trend that we are seeing in the Rhode Island market. Over the past year, there has been some reduction in the number of employers offering health insurance in the private market, as well as a reduction in the number of employees choosing to enroll in coverage when it is offered by their employer.

Mr. Vittoria attributed this to two factors: Smaller employers are finding it more difficult to absorb double-digit increases in annual insurance premiums and are more likely to drop coverage entirely, and larger employers are passing more of these cost increases along to their employees, who are finding it harder to absorb that cost in their own family budgets.

While we still expect that the private employer-funded health insurance system will continue to be the primary way that most working Americans obtain health insurance in the future, the current health care system needs to undergo significant reform in order to stay affordable. To me, that is what the employers in the survey are really trying to tell us, Mr. Vittoria said.

The NBGH/Towers Watson Employer Survey on Purchasing Value in Health Care, conducted between November and January, included responses from 507 employers that collectively employ 11.5 million workers.

The full report will be released at the NBGH’s annual Business Health Agenda meeting, which begins March 10 in Washington.

Copyright 2010 Crain Communications Inc. All Rights Reserved.

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