Standard & Poor's 500 index companies could realize nearly $700 billion in savings through 2025 thanks to the ACA, argues a recent report (PDF) from S&P Capital IQ.
“By shifting insurance responsibility to the employee, the ACA presents an opportunity for U.S. companies to radically redefine the role they play in the healthcare system,” the report states. “For U.S. companies with 50 or more employees, total savings to businesses could amount to $3.25 trillion through 2025.”
What's about to happen with health insurance is akin to what happened during the last 40 years with retirement plans, which shifted from a company benefit to a funding concern for employees.
The healthcare law provides an opportunity for companies to shift not only employee but also retiree health costs to exchanges, the report outlines.
“Over the long run, the ACA may eventually come to be historically recognized as the starting point of the reconstruction of the U.S. healthcare benefit industry, and a catalyst for how companies provide healthcare insurance for their employees. In this regard, the ACA is akin to the creation of the Individual Retirement Account (IRA) as a byproduct of Congress first passing the Employee Retirement Income Security Act (ERISA) in 1974,” the report states.
True, the ACA currently requires companies to provide health coverage for employees. But already, some are discussing ways to fulfill that requirement by providing employees with fixed dollar amounts to buy their own coverage on private exchanges.
“The idea that employers might decide to drop their health plans and replace them with a 'defined contribution' for employees has been around for years … Now that the health law has created new online marketplaces where people can shop for coverage, and made the individual market more accessible and affordable, the idea is gaining traction,” wrote Kaiser Health News in a recent article.
That article does outline obstacles companies could face in pulling off such a shift, but if the savings discussed in the S&P report are possible, expect employers to find ways to realize them.
In 10 or 20 years, American workers may find themselves reminiscing about the days when their employers provided them with health insurance, just as today's retiring baby boomers wax nostalgic about how their parents had guaranteed retirement payments.
Follow John N. Frank on Twitter: @MHJFrank