From the February 2011 issue of Benefits Selling Magazine •Subscribe!

Employers consider dropping benefits

Shortly after midterm elections last year, employers, responding to a survey by MBGH and co-sponsored by the National Business Coalition on Health, say they're re-evaluating how they'll offer benefits in light of heavy reform mandates. While more than half say they won't cut out health benefits any time soon, roughly 20 percent believe it's a possibility they might consider dropping benefits altogether.

Health reform is a major factor in benefits agendas, and many employers - while mostly uncertain of the impact - are wary of reform, and believe it will inevitably drive up benefits costs. In fact, according to the survey, 60 percent of all employers and 50 percent of large employers believe the intention of health reform is to eliminate the employer-based system and move to a single-payer system.

More employers are moving toward wellness initiatives to offset rising health costs. Sixty percent of all employers say they'll expand wellness programs in light of increased incentives allowed by reform. Those incentives include small employer grants, technical assistance, and employee rewards in the form of premium discounts, waivers of cost-sharing requirements.

Other survey findings:

  • Of those who say they'll drop coverage to avoid the penalty, only about 20 percent will raise worker salaries to help pay for individual coverage.
  • About a third of all employers noted that they have assumed all costs of extending coverage to adult children up to age 26; with one-third responding that the cost of extending coverage has been shared with employees. This reflects a change from April when employers were split 50/50 as to whether they were likely to charge more for dependents as a result of the provision.
  • Fewer employers noted they plan to drop retiree benefits than in April. Of those employers who offer retiree benefits, about a third of large and 12 percent of small employers will continue to offer benefits, 4 percent noted they will drop benefits, and 4 percent will provide some supplemental plan or contributions to help retirees get coverage.
  • The survey indicates 65 percent of all employers and more than 80 percent of large employers have done some modeling on how health reform will impact their benefit costs, and 25 percent of all employers are showing increases of 2 percent to 5 percent, with 15 percent showing increases of 6 percent to 10 percent.
  • Eighty-six percent of all employers indicated it's unlikely current provisions will reduce the rate of health care cost increase, and 74 percent of all employers believe it's likely health reform will boost costs even more than if the legislation were not passed.

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