Employers Brace for Healthcare Cost Increase

A recent survey by the Mercer consulting firm has confirmed what many already suspected: employers are anticipating an increase in the cost of health benefits due to the Affordable Care Act.

A recent survey by the Mercer consulting firm has confirmed what many already suspected: employers are anticipating an increase in the cost of health benefits due to the Affordable Care Act (ACA). Here are some of the findings from the survey:

  • 61% of the 1203 employers surveyed expect a cost increase due to ACA
  • 20% of those businesses believe that there will be a cost increase of 5% or more
  • 46% of employers in the retail and hospitality industries and 40% of employers in the healthcare services industry expect healthcare cost increases of at least 3% due to healthcare reform law requirements
  • 6% of employers surveyed said they were likely to stop providing health benefits after government-run insurance exchanges open in 2014
  • 11% of employers are waiting until after the November elections to prepare for the healthcare law’s implementation

The survey also asked participants to predict the costs of various parts of the new healthcare law. Approximately 20% of respondents mentioned that they currently employ workers that would be eligible for coverage under the Medicaid expansion; however, since the expansion was ruled optional by the Supreme Court, it’s still uncertain what this will mean for these employers. “Because state Medicaid eligibility already varies greatly, it’s difficult to predict what states will do about expanding their programs to more individuals, and the impact of their decisions on employers,” said Branch McNeal, leader of Mercer’s government consulting business.

As seen above, employers in the retail and pharmacy industries stand to endure the highest cost increases due to the ACA based on the financial penalties that will be imposed on employers that do not offer qualified coverage by 2014. (The penalty faced is $2000 per full time employee.) Some of these employers will face stiff cost increases as they attempt to extend coverage to employees that are not currently eligible. In other cases, according to Modern Healthcare, the coverage they provide, such as through what are known as mini-med plans, will not meet 2014 standards, and this includes a ban on annual dollar limits on essential benefits as outlined by the Patient Protection and Affordable Care Act.

Additional Resources

Businesses brace for health care cost increase, report says [Politico]

Retailers and hospitality industry employers face big healthcare reform cost increases: Mercer [Modern Healthcare]

Companies with Part-Time Workforces Gird for Health Cost Increases [WSJ]

Survey: 61% of employers expect cost increase from healthcare law [LA Times]