Health Reform Fear Debunked: Companies Won’t Drop Plans

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NEW YORK (MainStreet) — Many employers expect their health care costs to increase significantly by 2014 thanks to provisions in the health care reform bill that take effect by then, but even so, the vast majority of employers claim to have no intention of terminating their coverage options to save costs, a study shows.

Roughly one quarter of businesses expect the health care reform laws to increase their coverage costs by 3% more than it would have risen by 2014, while 15% expect costs to increase by 5% or more, according to a survey of 894 employers by Mercer, a benefits consulting group. Much of this increase is expected to come from provisions in the year-old law that require companies to offer coverage to all employees who work 30 or more hours a week and automatically enroll new full-time hires.

In fact, 85% of businesses surveyed said their health care enrollment has already increased this year, with about one quarter saying it increased by at least 3%, due largely to a provision in the health care law that took effect requiring insurers to make children up to age 26 eligible for coverage on their parents’ plans.

“Employers have already been facing average increases in per-employee health benefit cost of about 6% annually for the past six years,” said Tracy Watts, a consultant in Mercer’s Washington, D.C., office. “Adding enrollment growth on top of that puts a real strain on their budgets.”

Ever since the health care law passed, some skeptics have argued that many businesses faced with these escalating costs would try to eliminate their medical plans in 2014 and force employees to seek coverage from the new insurance exchanges intended to provide affordable options for the uninsured. Mercer’s survey data paint a much different picture.

Just 8% of employers surveyed for the study said they were “very likely” or “likely” to get rid of their coverage plans in three years. Nearly half of those surveyed said they were “not at all likely” to do so. Of course, if health care costs increase by more than the companies expect, some may very well change their answer.

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