Passage of the Affordable Care Act nearly six years ago and the advent of public health insurance exchanges raised an ominous specter: Would the employer-based coverage Americans have come to expect disappear?
By most accounts, the workplace benefit market appears to be strong, if not thriving.
According to a recent Kaiser Family Foundation survey, employer-based health plans continued to cover more than half of the working age population, or 147 million people, in 2016 — virtually unchanged from the previous year. Any drawback, which was small, came among firms with 50 or fewer full-time workers. There, 4% switched some employees to part time, 10% switched part-timers to full time, 5% hired fewer full-time employees and 2% increased the waiting period in response to the employer shared responsibility provision that took effect last year.
In addition, 53% of firms with 200 or more workers reported having made some changes to their benefits packages in anticipation of the so-called Cadillac tax for high-cost plans. That was due to come into effect in 2018, but has been delayed until 2020.
“Employers are very hesitant to drop health benefits,” said Paul Fronstin, director of the health research and education program at the Employee Benefits Research Institute. “They don’t want to be the employer that did so in a tight labor market.”
When the next recession hits, and it will at some point, he added, then all bets are off. “It will be the first time we had a recession when there was an alternative to employer-based coverage for workers.”
As of Jan. 1, large employers — those with 50 or more employees — must offer coverage to 70% of full-time employees, up from 70% in firms with 100 or more employees in 2016. Those that don’t face a penalty of $2,000 per employee, after the first 30 employees. Moreover, firms offering plans that are deemed too weak or too expensive could be fined $3,000 for each worker who purchases a subsidized plan through one of the state insurance exchanges. That could force some companies to offer more affordable or better coverage, or to expand who is eligible, experts say.
But a recent poll by the New Jersey Chamber of Commerce found employer concerns the ACA would harm businesses were much less than thought. According to Linda Schwimmer, president and CEO of the New Jersey Health Care Quality Initiative, much of that had to do with anticipation about the initial rollout of the law and the new requirements and taxes that were being put in place, including the controversial Cadillac tax.
However, delays in implementing some of those changes combined with, until last year, a slower growth in healthcare costs, have allayed some of those fears and quieted any thoughts of ending employee benefits plans, Schwimmer said. “A lot of these changes were [set to take place] at a time when there were high rates of employment and pressure on companies. As the economy has gotten better for a lot of sectors, it’s taken the pressure off.”
In 2015, healthcare costs exceeded the rate of growth in the rest of the economy for the first tie in several years, in large part because of charges by specialty pharmacies. Despite that, there have not been the same double-digit increases in premium rates among employer-based plans that had been seen in recent years, Schwimmer said. Rather, employers are shifting more of the overall costs their employees.
But perhaps more important than complying with new regulations is a genuine concern on the part of employers about their workers’ health status, said Fronstin. “They want them to come to work healthy and to be productive, and they may have their doubts about the public exchanges’ ability to give the kind of care that they think their employees need to get.”
One problem with the public exchanges is that many of them have very narrow provider networks, he said. If there’s only one oncologist or psychiatrist in the network, it’s tough to get treatment. They’re not completely convinced that the public exchanges are a good substitute for what they are offering, as well as a concern that any scale back in benefits could result in a $2,000 penalty.
The big thing on the horizon is implementation of the Cadillac tax,” said Gary Claxton, vice president and director of the Health Care Marketplace Project and co-director of the Program for the Study of Health Reform and Private Insurance at the Kaiser Family Foundation. “Some employers are worried their plans would be too generous and they’re taking action to reduce the generosity, through higher cost-sharing, primarily."
Overall, the climate hasn’t been one of really high cost pressures for employers, Claxton said. More firms are offering wellness programs, but there’s not a lot of information on how those are impacting costs. Some companies are also narrowing their networks — negotiating harder with fewer providers to bring down costs. But that is not a majority.
And in a further sign that employer coverage is not on the demise, 20 of the nation’s largest employers formed an alliance this month to revamp the way health benefits are purchased and improve patient outcomes. The companies, which include Caterpillar, Coca-Cola and International Paper, collectively spend more than $14 billion annually on health benefits for four million employees, dependents and retirees.
The nonprofit Health Transformation Alliance will focus on four areas of reform:
- Increasing marketplace efficiencies;
- Improving data analysis;
- Educating employees about company benefits; and
- Getting rid of costly and inefficient procurement and contracting practices that drive up costs without improving results.
“The American healthcare delivery system is a patchwork of complicate, expensive and wasteful systems, Marc Reed, chief administrative officer of Verizon, said in a statement. “We’ve done what we can as individual companies. … We need to stop applying bandages to the system and address what’s fundamentally wrong.”
Fronstin sees the alliance as a positive sign for the market. Notwithstanding some wild card that changes the current healthcare reimbursement landscape, employers are fully invested in providing benefits for their employees, he said.
“These jumbo employers are teaming up because they feel they’ve cost shifted to employees too much and they’re committed to continuing offering benefits, he said. “Right now, they’re in it and they see benefits for staying in.”
As for small firms, Fronstin believes many will continue to offer benefits, particularly if they compete with larger firms for workers with specific skill sets.