Results of a new survey of employers by benefits consulting firm Mercer show that most employers plan to continue offering health insurance coverage to their employees after all the provisions of the Affordable Care Act become effective in 2014.
The survey results are in stark contrast to a widely criticized report issued in June by McKinsey & Company that predicted as many as one-third of employers were planning to drop coverage once health reform laws take effect in 2014.
While employers who participated in the survey with Mercer still indicated they are worried about what additional costs they might pay to provide insurance coverage under health reform, only 2 percent of respondents say they are "very likely" to terminate medical plans after the insurance exchanges are operational, with another 6 percent "likely" to do so – essentially unchanged from a year ago.
"Employers have spent the past year studying the new law and developing strategies to deal with the increased costs and administrative burdens," said Beth Umland, director of research for health and benefits for Mercer in a press release announcing the results. "But they don't seem to have changed their minds about the value of continuing to offer their employees health coverage."
The results from Mercer, which were based on answers to a survey by 894 employers, should serve as more fodder to those who harshly criticized the June McKinsey report that stated that more than four times the number of employers were likely to drop coverage under health reform.
The virtual firestorm of protests to the report reached all the way to the White House. Nancy-Ann DeParle, an assistant to President Obama and deputy chief of staff, in June opined in a blog that "it's become clear that this one flawed study from McKinsey is truly an outlier." Critics pointed to studies from a number of other organizations – including the Congressional Budget Office – that predicted low single digit percentages of employers would dump their insurance plans and instead rely on the health insurance exchanges for employee insurance.
The new report from Mercer also examined questions of cost employers expect to bear in order to continue providing insurance coverage
It found that the new provision in the law to allow adult children up to the age of 26 to enroll in a parent's health plan has already made an impact. Employers reported a 2 percent increase in enrollment on average as a result of extending their coverage to adult dependents.
"Employers have already been facing average increases in per-employee health benefit cost of about 6 percent annually for the past six years," said Tracy Watts, a consultant in Mercer's Washington office. "Adding enrollment growth on top of that puts a real strain on their budgets."
According to the Mercer survey, the biggest single concern among employers is a provision for an excise tax on high-cost plans scheduled to take effect in 2018. The excise tax poses a "very significant concern" for 22 percent of the survey respondents and a "significant concern" for an additional 23 percent. About one-quarter (28 percent) say it's only a "slight concern" and a similar number (27 percent) say it's "not an issue" for their organizations.
The excise tax provides employers with a strong incentive to keep health plan cost down. Their top long-term cost management strategy is to add or strengthen programs or policies to encourage more health-conscious behavior – 54 percent say they are very likely to pursue this strategy while another 38 percent say they are likely to do so.
"There are reasons other than richness of benefits that drive up cost, such as having an older population or being located in a high-cost metropolitan area – both factors that are not under an employer's control," said Watts. "And employers that rely on generous medical benefits to help attract and retain top employees are also going to be concerned about an excise tax."