The overwhelming majority of employers say they will continue to offer health care plans after core provisions of the health care reform law take effect in 2014, but most say they will need to make plan changes later to avoid a new excise tax on the most costly plans, according to a new survey.
Eighty-eight percent of employers surveyed by Towers Watson & Co. said they have no plans to terminate coverage in 2014 or after for full-time employees, while 11% were not sure. Just 1% said they planned to terminate coverage for some employees.
Under the Patient Protection and Affordable Care Act, starting in 2014, employers with at least 50 employees are liable for a fee of $2,000 per full-time employee if they do not offer qualified coverage to employees working at least 30 hours a week.
The Towers Watson survey results mirror numerous other surveys also reporting that most employers intend to continue to provide coverage. Benefit experts say there are several reasons for that continued employer commitment to offering coverage, including the penalty imposed by the law for not offering coverage, the costs employers would face in grossing up employees’ salaries to enable them to buy coverage on their own and the need for employers to stay competitive.
On other hand, 83% of employers say they are planning to take steps to control costs to avoid a health reform law-imposed excise tax that takes effect in 2018. Under that provision, a 40% excise tax will be imposed on premium costs that exceed $10,200 for single coverage and $27,500 for family coverage. Insurers will pay the tax on plans they insure, while third-party administrators will pay the tax for self-funded plans. Insurers and TPAs are expected to recover the taxes they paid from employer plans.
Other findings include:
• Employers expect health care plan costs to rise—after plan changes—by an average of 5.3% in 2013, boosting total costs to an average of $11,507 per employee. That compares with an expected 2012 average cost increase of 5.9%.
• Employer interest in offering account-based health care plans, such as plans linked to health savings accounts and health reimbursement arrangements—continues to grow. While nearly 60% of respondents now offer account-based plans, by 2018, 80% expect to be offering them.
The survey is based on the responses of 440 employers.