Employers eye health care cuts

INDIANAPOLIS – Nearly one of every 10 midsize or big employers expects to stop offering health coverage to workers after insurance exchanges begin operating in 2014 as part of President Barack Obama’s health care overhaul, according to a survey by a major benefits consultant.

Towers Watson also found in its July survey that another one in five companies are unsure about what they will do after 2014. Another big benefits consultant, Mercer, found in a June survey of large and smaller employers that 8 percent are either “likely” or “very likely” to end health benefits after the exchanges start.

The surveys, which involved more than 1,200 companies, suggest that some businesses feel they will be better off dropping health insurance coverage once the exchanges start, even though they could face fines and tax headaches. The percentage of companies that are already saying they expect to do this surprised some experts, and if they follow through, it could start a trend that chips away at employer-sponsored health coverage, a long-standing pillar of the nation’s health system.

“If one employer does it, others likely will follow,” said Paul Fronstin of the Employee Benefit Research Institute. “You would see this playing out over the course of years, not months.”

A large majority of employers in both studies said they expect to continue offering benefits after these exchanges start. But former insurance executive Bob Laszewski said he was surprised that as many as 8 or 9 percent of companies already expect to drop coverage.

Such a move could lead to more taxes for both companies and employees, since health benefits are not taxed, and companies could be fined for dropping coverage. It also would give their employees a steep compensation cut if they don’t receive a pay raise, too.

Towers Watson’s Randall Abbott said the survey results should be seen as a snapshot of how companies are thinking now, not as a final decision, because there still are many unresolved variables.