The Supreme Court is expected to issue its ruling on the constitutionality of President Obama’s health-care overhaul by the end of the month--forcing many corporations to stay in a holding pattern as they wait the fate of their health plans.
However, according to a new study by the International Foundation of Employee Benefit Plans, the majority of employers do not plan to change their health-care plans by 2014--even though they are bracing for added costs. According to the 2012 Employer Action Survey, 86.4% of employers do not anticipate making any changes in their employee’s health insurance offerings.
“Even though we’re expecting the big health-care decision this June, most companies are in wait-and-see mode, and they aren’t going to spend a lot of time making adjustments for 2014,” says John Herath, director of human resources of Orion ICS, a human resources outplacement company. “Most likely, even once the regulation is passed, it’s going to have a few problems, and employers aren’t going to be forced to adhere to the new rules overnight.”
Many employers expect to pay more in order to adhere to new health care provisions. For example, the Patient Protection and Affordable Care Act requires that employers offer insurance to adult children up to age 26, and 38.7% of employers say that alone is going to increase costs.
“Most plans right now cover children up to age 21, and 26 wasn’t even on the horizon. So now companies have to cover all children up to age 26 regardless of whether or not they are a full time student,” says Herath. “It’s going to keep more people on each family’s plan for a longer period of time.”
The survey also found that 15.3% of employers cite the new national standard of a 30-hour work week being defined as full time as another financial burden. “Previously, individual employers were allowed to decide what their definition of ‘full time’ was. Some companies said it was 35 hours per week, other said it was 40. But now with the regulation they’ve drawn a hard line and are saying that 30 hours per week is it. Basically, they’ve made a national standard for what full time really means,” says Herath.
Timothy Tolan, senior partner at human resources consultancy Sanford Rose Associates, says even if the reform is ruled unconstitutional, he doesn’t see employers eliminating benefits.
“The last thing an employer will do is reduce benefits because when you do that you lose your current employees as well as your ability to attract and retain people,” he says. “Think about trying to recruit talent and then you get down to that final interview and you say, ‘Oh, by the way, you have to pay your own way with health care.’ It’s not going to happen.”
With or without the new health care law, insurance rates are expected to rise, and that cost will be passed onto employees. According to the survey, 23.1% of companies plan to increase participants’ shares of premium costs as a “cost containment measure.” A further 15.9% of employees also plan to increase the cost for employees’ dependents coverage, including spouses and children.
“There will always be a portion that the employee has to pay, and I see that going up,” Tolan says.
However, if the reform is upheld, employers will be limited to the amount of cost they can push onto employees. “The new regulations say that an employee’s contribution to their health-care plan can’t be more than 8% of their wages,” says Herath. “That’s going to involve a lot of calculation as to how much each employee makes and how much each employee is spending, but it’s definitely going to help individuals manage their costs.”
In order to minimize the blow of having to pay more in health costs, Tolan expects employers to offer additional benefits like better 401(k) options, office perks like massages and free coffee and wellness programs.
“It’s to the company’s advantage—keeping obesity rates down can save an employer hundreds of thousands of dollars in the long run,” he says. “We’re going to see more companies getting a lot more insistent on better health from everyone they employ, from the CEOs to the interns.”