Archive for Monday, October 25, 2010

Health reform making companies rethink insurance benefits

October 25, 2010


— The new health care law wasn’t supposed to undercut employer plans that have provided most people in the U.S. with coverage for generations.

But last week a leading manufacturer told workers their costs will jump partly because of the law. Also, a Democratic governor laid out a scheme for employers to get out of health care by shifting workers into taxpayer-subsidized insurance markets that open in 2014.

While it’s too early to proclaim the demise of job-based coverage, corporate number crunchers are looking at options that could lead to major changes. Gov. Phil Bredesen, D-Tenn., said the economics of dropping coverage are “about to become very attractive to many employers, both public and private.”

That’s just not going to happen, White House officials say.

“The absolute certainty about the Affordable Care Act is that for many, many employers who cover millions of people, it increases the incentives for them to offer coverage,” said Jason Furman, an economic adviser to President Barack Obama.

Dropping benefits

Yet at least one major employer has shifted a greater share of plan costs to workers, and others are weighing the pros and cons of eventually forcing employees to strike out on their own.

“I don’t think you are going to hear anybody publicly say ‘We’ve made a decision to drop insurance,’” said Paul Keckley, executive director of the Deloitte Center for Health Solutions. “What we are hearing in our meetings is, ‘We don’t want to be the first one to drop benefits, but we would be the fast second.’ We are hearing that a lot.” Deloitte is a major accounting and consulting firm.

“My conclusion on all of this is that it is a huge roll of the dice,” said James Klein, president of the American Benefits Council, which represents big company benefits administrators. “It could work out well and build on the employer-based system, or it could begin to dismantle the employer-based system.”

Employer health benefits have been a middle-class mainstay since World War II, when companies were encouraged to offer health insurance instead of pay raises. About 150 million workers and family members are now covered.

When lawmakers debated the legislation, the nonpartisan Congressional Budget Office projected it would only have minimal impact on employer plans. About 3 million fewer people would be covered through the job, but they’d be able to get insurance elsewhere.

Two provisions in the new law are leading companies to look at their plans in a different light.

One is a hefty tax on high-cost health insurance aimed at the most generous coverage. Although the “Cadillac tax” doesn’t hit until 2018, companies may have to disclose their exposure to investors well before that. Karen Forte, a Boeing spokeswoman, said concerns about the tax were partly behind a 50 percent increase in insurance deductibles the company just announced.

The tax is 40 percent of the value of a plan above $10,200 for individual coverage and $27,500 for a family plan. Family coverage now averages about $13,800.

White House adviser Furman said blaming a cost increase next year on a tax that won’t take effect for eight years “stretches credibility very far past the breaking point.”

Bigger questions loom over the new insurance markets that will be set up under the law.

They’re called exchanges, and every state will have one in a few years. Consumers will be able to shop for coverage among a range of plans in the exchange, with a guarantee they can’t be turned down because of an existing medical problem. To help make premiums affordable, the law provides tax credits for households making up to four times the federal poverty level, about $88,000 for a family of four.

Cutting costs

Bredesen said last week that employers could save big money by dropping their health plans and sending workers to buy coverage in the exchange. They’d face a fine of $2,000 per worker, but that’s still way less than the cost of providing health insurance. Employers could even afford to give workers a raise and still come out ahead, Bredesen wrote in a Wall Street Journal opinion piece.

Employers are actively looking at that. “I don’t know if the intent was to find an exit strategy for providing benefits, but the bill as written provides the mechanism,” said Deloitte’s Keckley, the consultant.

Erin Shields, a spokeswoman for the senators who wrote that part of the law, says she’s confident that when companies do the math, they’ll decide to keep offering coverage.

That’s because employers get to deduct the cost of workers’ health care from the company’s taxes. Take away the health plan and two things happen: Employers lose the deduction and they’ll probably have to pay workers more to get them to accept the benefit cut. Not only will the company’s income taxes go up, but the employer will also face a bigger bill for Social Security and Medicare payroll taxes. So it’s not as simple as paying $2,000 and walking away.

“It is clearly cheaper for employers to continue providing coverage,” Shields said.

Another wrinkle: the health insurance tax credits available through the law are keyed to relatively Spartan insurance plans, not as generous as most big employers provide. Send your workers into the insurance exchange, and valuable employees might jump to a competitor that still offers health care.


Carol Bowen 7 years, 5 months ago

Companies started dumping insurance benefits before the legislation was a glimmer. Increased costs will be a problem with or without the health care reform. the reform has weaknesses that will have to be addressed. This legislation is just a beginning.

Richard Heckler 7 years, 5 months ago

Obamacare IS NOT necessarily responsible for the significant increases in medcial insurance premiums

Think excessive spending taking place supporting the corrupt special interest financing of political campaigns - prior to Obamacare insurance giants spent $1.4 million a day to keep single payer off the table.

Now medical insurance giants want to return to the old ways of cancelling consumers whenever they please or simply denying coverage for existing conditions.

If my memory serves me well substantial increases have been taking place as a matter of routine over the years.

All of the above is why they want republicans running the show. The repub party is so much more corrupt it brings on disbelief.

The bottom line goes like this.... we can live without the medical insurance giants!

Richard Heckler 7 years, 5 months ago

Remember the medical insurance industry has never provided health care..... never.

What do YOUR health insurance dollars support?

Flap Doodle 7 years, 5 months ago

How many times have you posted this one, merrill?

Richard Heckler 7 years, 5 months ago

Cancel your medical insurance today. The industry is simply corrupt.

Healthy humans seldom spend what they pay out to the insurance industry!

If healthy insured dropped their policies not only would they save thousands of dollars annually the insurance industry would faint in disbelief that this many people actually are awake and give a damn.

Paying out of pocket will save thousands of dollars a year. Do medical insurance companies provide health care? NO!

Invest smart instead of supporting high rollin executives and shareholders.

Set up a health care investment account or annuity that makes YOU money instead of wealthy CEO's. Your health care annuity will NOT cancel out on when the poop hits fan.

AGAIN Healthy humans seldom spend what they pay out to the insurance industry!

Why support high rollin executives and shareholders because of your misfortune aka becoming ill or needing surgery? Instead create YOUR OWN money making medical care annuity or whatever.

Most consumers are under-insured = candidate for bankruptcy. Most coverage WILL NOT stick with consumers when the going gets tough = fraud.

What could be done with that high profit middle man money that which DOES NOT provide health care? First off set aside each month what medical insurance premiums cost in a money making account. Applying $5000 - $12,000 a year in a money making account will begin to make money. Some never use the money they pay out to insurance giants because of a $5000 deductible = it’s a scam.

Liberty275 7 years, 5 months ago

"Cancel your medical insurance today. The industry is simply corrupt."

Yeah cancel it real fast before the federal government makes you buy it again. LOL.

Richard Heckler 7 years, 5 months ago

IMPROVED Medicare Insurance for All will surface one day. Think about switching at that point. It will be fiscally responsible coverage. How you say?

All of this will be eliminated!

support high dollar reckless spending on:

Liberty275 7 years, 5 months ago

"improved Medicare Insurance for All"

Medicare is garbage. You need to buy a second policy to cover the deductibles and coinsurance. Besides the lousy dental, hearing and nursing home coverage. Worst of all, you pay for it for 40 years to get a decade or so of coverage if you are lucky.

On the bright side, they'll pay for all the morphine it takes to keep you halfway dead just before you die.

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