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Member, Beacon International Group, Ltd.
WASHINGTON—Most employers have yet to decide whether they will continue to offer health care coverage in 2014 when the “play-or-pay” provision of the health care reform law goes into effect, the head of a benefits brokerage and consulting firm said Thursday.
At the moment, clients are sitting on the fence, J. Michael Brewer, president of Kansas City, Mo.-based Lockton Benefit Group, told a House Health, Employment, Labor and Pensions subcommittee hearing.
“The majority of our clients tell us they will wait and see. What they will do in 2014 depends on their health insurance costs and budget in 2014, and their perceived need to use a health plan to gain a competitive advantage for labor,” Mr. Brewer said.
Clients are saying, “We won't be the first to drop coverage, but we won't wait to be third either,” he said.
Starting in 2014, employers with at least 50 employees who drop coverage will pay an annual assessment of $2,000 per full-time employee, excluding the first 30 employees. Individuals who make as much as 400% of the federal poverty level will be eligible for federal premium subsidies for policies they purchase from insurers offering coverage through exchanges that states are required to set up by 2014.
That $2,000 penalty is a fraction of what employers pay for coverage. Lockton calculates if employers were to terminate group coverage, they would save an amount equal to 44% of their projected 2014 health insurance costs on average. But that percentage excludes any extra money employers decide to provide to employees to help offset the cost of coverage they would purchase through state exchanges.
Mr. Brewer predicted that smaller employers will be the first to abandon coverage. At a recent Lockton presentation to about 200 employers with workforces ranging from 50 to 150 employees, half said they intend to exit the group health care market in 2014, he said.
The hearing was called to examine how the health care law has affected costs.