Will employers drop health care coverage in 2014?
As America inches closer to the opening of federally-mandated insurance exchanges, executives at big companies are weighing their options
Employer-sponsored health insurance is a long-standing pillar of the U.S. health system, but its role appears likely to evolve soon. A new survey by Towers Watson, a consulting firm, finds that many mid-sized and large companies plan to stop offering coverage once federal insurance exchanges, a central element in President Obama's health care reform law, open in 2014. The exchanges are designed to provide a marketplace where people will be able to buy government-subsidized insurance. Here's what you need to know:
How many companies plan to stop offering health benefits?
Nearly 1 in 10 plan to drop coverage once their employees have the insurance exchange option, according to the July survey. And that number could rise, as another 20 percent say they still aren't sure what they'll do. Another big benefits consultant, Mercer, got similar feedback in June, when 8 percent of the employers it asked said they were either "likely" or "very likely" to end health benefits once the exchanges are up and running. Together, the surveys covered more than 1,200 companies.
Subscribe to The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.
Sign up for The Week's Free Newsletters
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
What does this mean for employees?
That's not entirely clear yet. Most, of course, will see no changes, as the majority of companies say they'll continue offering health benefits. Some speculate that companies will boost workers' salaries to make up for the loss of benefits, which would permit employees to simply buy coverage on their own. But others fear employees will be unable to afford the coverage they once had. The Obama administration says such fears are overblown.
How much money could companies save by dropping coverage?
The average annual premium for employer-sponsored family health coverage was $13,770 per worker last year, and companies paid most of it, according to the Kaiser Family Foundation and Health Research and Educational Trust. Of course, if companies stop offering coverage, they can't just pocket that cash. Under the Affordable Care Act, businesses with more than 50 employees will face penalties of up to $3,000 per worker if they don't offer health benefits.
Sign up for Today's Best Articles in your inbox
A free daily email with the biggest news stories of the day – and the best features from TheWeek.com
Is this the beginning of the end for employer-sponsored insurance?
Some experts do predict a dramatic domino effect. "If one employer does it, others likely will follow," said Paul Fronstin, director with the Employee Benefit Research Institute, as quoted by the Associated Press. But threatening to drop coverage and doing so are two different things, says former insurance executive Bob Laszewski. Companies might reconsider when they factor in the fines and tax headaches they'll incur, plus the extra pay they'll have to offer to prevent employees from walking out the door en masse. "Dropping coverage is going to be very difficult for these (companies) to do," says Laszewski.
Sources: Associated Press, Medical News Today, Journal-Sentinel
Create an account with the same email registered to your subscription to unlock access.
-
What's wrong with Pakistan's cricket team?
Under the Radar Dramatic downfall of previous powerhouse blamed on poor management and appointments of regime favourites at governing body PCB
By Harriet Marsden, The Week UK Published
-
All about Zealandia, the Earth's potential 8th continent
The Explainer The secret continent went undiscovered for over 300 years
By Devika Rao, The Week US Published
-
JK Rowling's transphobia controversy: a complete timeline
feature How did we get to this point, and what, exactly, has the author said?
By Brendan Morrow Published
-
How could J.D. Vance impact the special relationship?
Today's Big Question Trump's hawkish pick for VP said UK is the first 'truly Islamist country' with a nuclear weapon
By Harriet Marsden, The Week UK Published
-
Biden, Trump urge calm after assassination attempt
Speed Reads A 20-year-old gunman grazed Trump's ear and fatally shot a rally attendee on Saturday
By Peter Weber, The Week US Published
-
Supreme Court rejects challenge to CFPB
Speed Read The court rejected a conservative-backed challenge to the way the Consumer Financial Protection Bureau is funded
By Peter Weber, The Week US Published
-
Arizona court reinstates 1864 abortion ban
Speed Read The law makes all abortions illegal in the state except to save the mother's life
By Rafi Schwartz, The Week US Published
-
Trump, billions richer, is selling Bibles
Speed Read The former president is hawking a $60 "God Bless the USA Bible"
By Peter Weber, The Week US Published
-
The debate about Biden's age and mental fitness
In Depth Some critics argue Biden is too old to run again. Does the argument have merit?
By Grayson Quay Published
-
How would a second Trump presidency affect Britain?
Today's Big Question Re-election of Republican frontrunner could threaten UK security, warns former head of secret service
By Harriet Marsden, The Week UK Published
-
Trump’s rhetoric: a shift to 'straight-up Nazi talk'
Why everyone's talking about Would-be president's sinister language is backed by an incendiary policy agenda, say commentators
By The Week UK Published