U.S. healthcare reform means that employers south of the border will be seeing increased benefits costs—and those costs are likely to be passed onto employees, according to a survey by insurance broker Willis Group Holdings.
Only a quarter of responding employers said they’ve quantified the costs of compliance with the U.S. Patient Protection and Affordable Care Act and planned healthcare reform measures. However, of those, 56% said the cumulative cost amounted to an increase in cost: over 15% noted the cost increase was between 2% and 5%, and over 15% said the cost increase was more than 5%.
Employers report that their most significant cost drivers are the provision of adult child coverage up to age 26 and the removal of the annual/lifetime limits for “essential health benefits.”
In addition to measuring cost expectations, the survey also asked what actions employers believe other employers will take in response to healthcare reform. The majority of respondents said they expect employers will pass increased healthcare costs onto employees.
As well, one-third of respondents thought other employers would reduce coverage to the lowest-cost package to avoid the “pay-or-play” penalty, and a majority thought that wellness programs would be expanded in scope.
Nearly two-thirds of the employers expected that employee contributions would be increased.
“Now that the healthcare reform act has entered the implementation phase, the costs and benefits associated with the act are coming into greater focus for employers,” said Jay Kirschbaum, practice leader, national legal and research group, Willis Human Capital Practice. “The survey suggests employers realize that costs of providing medical benefits will increase and that they will likely have to pass those costs on to their employees.”
Only one-third of employers have maintained grandfathered status despite a desire to remain grandfathered, and the rate at which respondent employers have lost grandfathered status has far outpaced the Department of Health & Human Services’ expectations for 2012.
The accelerated loss of grandfathered status suggests that employers have had to make plan changes to offset cost increases, and perhaps employers have been more willing to give up grandfathered status in order to take other steps to control costs.