President Obama and Democrats in Congress promised that nothing would change for the majority of Americans who currently have health coverage.i But a series of developments since the enactment of the health care reform" law demonstrates how rising costs new taxes and additional federal requirements will leave many employers with little choice but to drop their insurance offerings.
Scant news coverage the past few weeks has mentioned individual companys conerns based upon initial-blush analyses that have been undertaken since passage of the Health Care Reform bill.
However given the current economic environment the weekly release of Congressional Budget Office or other government entity update releases regarding true costs of the bill ... not to mention tax increases rising health costs and new regulations included in the health law ... it is quickly becoming clear that the nations largest employers have in fact strong incentives to drop their current coverage.
Every sign indicates that businesses large and small may do just that:
- A recent survey of large employers conducted by the consulting firm Towers Watson found that the overwhelming majority (90 percent) of employers believe health care reform will increase their organizations health benefit costs."ii
- The vast majority of the businesses surveyed by Towers Watson will force their employees to bear the brunt of higher health benefit costs imposed by the new law. Nearly nine in ten (88 percent) of firms plan to pass on increased costs through the form of higher premiums and nearly three in four (74 percent) plan to change plan options restrict eligibility or increase deductibles and co-pays.iii
- According to the Towers Watson survey more than one in ten employers plan to reduce employmentlaying off existing workers or failing to hire new onesas a result of the laws increased costs.iv
- Similarly a survey of several hundred chief financial officers in small and large businesses found that an overwhelming majoritynearly three in fourbelieve the health care law will have a negative impact on their companies.
v These financial officers also believe that the new law will raise not lower their firms health care costs by an average of more than eight percent.vi - Findings from the business surveys comport with decisions being made by individual companies as a result of the laws enactment. Documents subpoenaed by the House Energy and Commerce Committee suggest companies are considering dropping their health plans. For instance an AT&T document compared the companys $4.7 billion cost of providing coverage currently to potential tax penalties under the health care law of $600 million for dropping its plan.vii
- Likewise Caterpillar executives discussed the need to give serious consideration" to dropping coverage outrightviii and noted that the laws enactment would require the company to figure out what this will cost us and collect that in increased premiums which we will attribute to the legislation."ix
- Even retirees will not be immune from losing their existing coverage as a result of the health care law. A study found that a single provision in the health care laweliminating a tax subsidy for employers who cover their retirees pharmaceutical expensescould result in as many as two million retirees losing their drug coverage.x
i See for instance President Obamas September 2009 address to Congress http://www.whitehouse.gov/the_press_office/Remarks-by-the-President-to-a-Joint-Session-of-Congress-on-Health-Care ii Towers Watson survey on health care reform May 2010 http://www.towerswatson.com/united-states/research/1935 p. 1 iii Ibid. p. 4 iv Ibid. v Financial Executives International CFO Quarterly Outlook Survey" April 2010 http://www.financialexecutives.org/ferf/download/201020final/2010-011.pdf p. 15 vi Ibid. p. 16 vii Health Care Bill Legislation" AT&T Presentation subpoenaed by House Energy and Commerce Committee available at http://money.cnn.com/2010/05/05/news/companies/dropping_benefits.fortune/index.htm viii Caterpillar internal e-mail subpoenaed by House Energy and Commerce Committee November 19 2009 CAT_WAXMAN_000361 ix Caterpillar internal e-mail subpoenaed by House Energy and Commerce Committee March 23 2010 CAT_WAXMAN_000300 available at http://dailycaller.com/2010/04/28/why-waxman-really-canceled-his-health-care-E28098show-trialE28099/ x Assessing the Coverage and Budgetary Implications of Legislation Modifying the Deductibility of Retiree Drug Spending Eligible for Subsidies" American Benefits Council report by The Moran Company March 16 2010 http://www.americanbenefitscouncil.org/documents/hcr_rds-report_031610.pdf p. 5
