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Healthcare Business News

Retailers and hospitality industry employers face big healthcare reform cost increases: Mercer

By Jerry Geisel, Crain's Business Insurance
Posted: August 8, 2012 - 6:00 pm ET

Employers in the retail and hospitality industries face the greatest cost increases when provisions of the healthcare reform law imposing financial penalties on employers that do not offer qualified coverage go into effect in 2014, according to a survey released Wednesday.

Forty-six percent of employers in the retail and hospitality industries and 40% of employers in the health care services industry expect health care cost increases of at least 3% due to health care reform law requirements, according to the Mercer L.L.C. survey of 1,203 employers.

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By contrast, just 24% of government employers anticipate cost increases of 3% or more.

Many retail and hospitality industry employers face a “double whammy” due to the upcoming health care reform law requirements, said Beth Umland, Mercer's director of research for health and benefits in New York, in an interview.

Some will face stiff cost increases as they must extend coverage to employees who are not eligible for coverage currently. In other cases, the coverage they provide, such as through what are known as mini-med plans, will not meet 2014 standards. That includes a ban on annual dollar limits on essential benefits as laid down by the Patient Protection and Affordable Care Act.

Employers that do not offer qualified coverage face a $2,000 assessment per full-time employee—those working at least 30 hours a week—starting in 2014.

Health plan changes needed

Forty-six percent of retail and hospitality industry employers said they will need to change their health care plans to comply with the requirement that coverage be extended to those working at least 30 hours a week.

“Extending coverage to more employees will be a significant new expense for these employers,” Tracy Watts, Mercer U.S. health care reform leader in Washington, said in a statement.

On the other hand, only 6% of all survey respondents and 9% of retail and hospitality industry employers said it is likely they will drop coverage in 2014.

The cost-savings may not be that significant and fears of losing their competitive edge are the key reasons why the overwhelming majority of employers intend to continue coverage, Ms. Umland said.

In addition, some employers are concerned about the challenges employees would face if they had to buy coverage through public insurance exchanges that are to be set up by 2014, Ms. Umland said.

The survey also found that nearly 75% of employers are on schedule or have completed 2013 health care reform law requirements that impose a $2,500 cap on flexible spending account contributions as well as reporting health care plan cost information on employees' W-2 wage and income statements.

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