Employers have been trying to get health-benefits costs under control for years, but those efforts are accelerating and getting more urgent as the implementation of the Patient Protection and Affordable Care Act continues, according to CFO Magazine.That’s so even though growth in the average total health benefit cost per employee, which had reached 6.9% last year, slowed to 6.1% in 2011, according to an annual survey by the consulting firm Mercer. The study forecasted another drop in the growth rate for 2012, to 5.7%. The survey included 2,844 organizations, roughly half with less than 500 employees and half with 500 or more.
Still, employers are concerned about increases costs due to higher rates and increasing enrollment.
One provision of the Patient Protection and Affordable Care Act (PPACA) that went into effect in 2011 was a requirement that employers extend dependent-coverage eligibility to employees’ children up to age 26. Health-plan enrollment grew by an average of 2% in 2011 as a result.
Provisions going into effect in 2014 include requiring employers to extend coverage eligibility to all employees working at least 30 hours per week on average and auto-enrolling newly eligible employees. Employers expect that these provisions – along with the new mandate that all individuals obtain health insurance coverage – will result in another increase in enrollment.
Still, the provision that concerns the most employers is the stiff 40% excise tax on high-cost plans, slated to take effect in 2018, for health-benefit coverage that costs more than $10,200 for an individual employee or $27,500 for dependent coverage. Nearly half of respondents say that’s a “significant” or “very significant” concern.
While some employers offer high-cost plans because generous benefits are part of their attraction and retention strategy, others have high-cost plans simply because they have an older or less healthy workforce or are located in a high-cost area. Only 39% of employers with 50 or more employees believe their current plans won’t hit the excise tax cost threshold, which will be tied to the consumer price index and is virtually certain to increase each year.
Nearly all the rest are determined to avoid the tax if they can: 21% say they “will do whatever is necessary to bring cost below the threshold amounts,” and 36% say they will attempt to bring the cost below the threshold amounts, while acknowledging that “it may not be possible.” Only 4% will take no action to avoid the tax. Read More