Why Your Boss Isn't Dropping Your Health Plan (Yet)
Q: I've heard that some firms may drop their health plans and have workers purchase a plan on the government exchanges. Will that happen to me?
A: Nine months after the launch of the controversial health insurance exchanges, confusion hasn’t died down over what exactly health reform means for the average American. A new poll found that 65% of workers are very or somewhat worried that their firms will drop health coverage and have employees go it alone on the new federal and state insurance exchanges.
Such a move would hurt, at least in workers' minds, according to the survey of 1,240 likely voters by Morning Consult, a digital media company. Half said that if their employer exited the benefits business, they would be negatively affected; only 16% expected to benefit from such a switch.
Even though Obamacare requires firms with 50 or more workers to offer insurance or owe a fine starting in 2015, the concern is that some will opt to pay the fine, since individual coverage can cost two to three times as much—and substantially more for a family plan. What's more, employers with fewer than 50 workers that already offer health benefits—even though they are not required to—may decide to get out of the business now that all workers have the alternative of buying coverage on an exchange.
Are workers right to worry about getting dumped? As long as you work for a large firm, you shouldn’t lose sleep over the issue, at least not yet, says Beth Umland, director of research for health and benefits at consultant Mercer. Earlier this year—well after the exchanges went live—an overwhelming 94% of big firms reported that they will keep offering health coverage for the next five years, Umland says. That percentage has remained consistent since Mercer first asked the question in 2008.
Separate research from the National Business Group on Health, which represents large employers, also found about 95% of those firms plan to stick with the status quo, says CEO Brian Marcotte.
A wait-and-see approach
Big business remains committed for lots of reasons, experts say. For one, good benefits are crucial to attracting talent. More than 90% of workers say health-care benefits are as important as pay, according to Mercer. In the Morning Consult poll, more than half of respondents say they would consider looking for a new job if they had to shop for coverage.
Company leaders are also uncertain about how premiums and plan features on the individual market will evolve after last year's shaky launch. Until the exchange offerings become more predictable, executives are unlikely to send their employees there, with or without a subsidy to buy coverage, says Tracy Watts, who leads the health care reform group at Mercer.
Even then, large firms may not go that route. “The math doesn’t work for most firms,” says Watts. Today your boss pays its share of your health premium with pre-tax dollars. If the firm decides to offer you a subsidy to buy your own plan instead, the loss of that tax benefit means it would likely have to dole out more for you to get the same plan—or risk facing worker backlash.
Smaller firm, bigger risks
You’re more likely to be moved to an exchange if you're at a firm with fewer than 50 workers. About one-third of small businesses that offer coverage today say they are considering getting out of the game, up from only 23% a year ago, says Mercer's Umland.
You also face a higher likelihood if you work at a firm with a large low-wage or part-time workforce, such as a store or hotel, says Marcotte. Many firms in those industries do not offer health insurance to all their workers today. Rather than add them to the plan, companies may decide workers are better off on the exchanges, where they can qualify for government subsidies only if their boss fails to offer an affordable plan.
Keep in mind that while most firms say they'll remain in the game for the foreseeable future, they're not nearly as confident over the long haul. “Health care is changing pretty rapidly right now,” says Marcotte. “So they’ve got to look at it every year.” By then, though, you too should have a better sense of how you'd fare on your own too.