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Health Law Or No, Most Businesses Likely To Keep Offering Insurance

One of the most fundamental ideas in the new health law is that employers should offer health insurance to their workers, or else they would have to pay a penalty, beginning in 2014. The fear has been that many businesses would opt for “or else,” leaving their workers searching for coverage.

But a new survey of more than 2,800 employers, conducted by the benefits consulting firm Mercer, found no big reason to worry. Medium and large companies project that, for the most part, they will hold onto their health plans. Just six percent of survey respondents with 500 or more employees said they are likely to drop their plans.

The picture is different for small businesses (10-499 employees). Twenty percent – one-fifth – told Mercer they are “likely” to stop offering health plans once people have the option of buying insurance from state-run exchanges, virtual marketplaces.

“Small employers typically struggle more with the cost, they are more vulnerable,” said Beth Umland, who directed the study for Mercer, adding that they are less likely to offer coverage in the first place. The smaller the firm, the less likely it is to offer coverage.

But even that one-fifth figure might be overly pessimistic, according to Umland. She pointed to Massachusetts, with its insurance mandates, noting that the state saw no significant drops in employer coverage after the state exchange opened. Many small businesses, she said, are fearful of rising costs but “haven’t sat down and done the numbers yet.”

“The cost tradeoff may not wind up working in their favor” once small businesses consider upping employee salaries to offset the lack of coverage and the loss of tax advantages, she said. Dropping coverage may seem to make more sense for employers with lower-paid employees who would be newly eligible for subsidized coverage beginning in 2014.

In another sticky area, where there have been political claims and counter-claims, Mercer asked employers with more than 50 workers to estimate how much their health insurance premiums would go up in 2011 as a direct result of the new law. Most – 54 percent – said either not at all or not much – up to 2 percentage points. Only 16 percent thought it could be 5 percent or more.

The survey also looked at the so-called Cadillac tax on high-cost plans, beginning in 2018, and found that 39 percent of employers would face a 40 percent tax on the plans unless they made changes to lower costs for their employees. The vast majority – 97 percent – said their plans were already below the thresholds or they would at least try to bring costs below them.

The full findings of the Mercer 2010 National Survey of Employer-Sponsored Health Plans will be released later this month.

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Cost and Quality Insurance The Health Law