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Health coverage termination not an option for most employers


The overwhelming majority of employers say they will or are likely to offer health coverage to their employees in 2014 when key provisions of the health care reform law go into effect, according to a survey of more than 900 benefit professionals

Meanwhile, several major insurers said last week that even if the Supreme Court overturns the Patient Protection and Affordable Care Act, they will continue to provide certain coverage that the law mandates.

As for employer sentiment, an International Foundation of Employee Benefit Plans survey found that 86% of employers will or plan to offer employee coverage in 2014. Ten percent said they are somewhat likely to continue coverage.

Just 1% said they definitely will not offer coverage, while nearly 4% said they are somewhat or very unlikely to offer coverage in 2014.

Employers cited retaining and attracting employees as the top reasons for continuing to offer health insurance to employees, even though federal premium subsidies would be available to their lower-and middle-income employees to buy coverage in state insurance exchanges should employers drop their health plans.

About 55% of respondents said retaining current employees and attracting future talent were the top reasons they will keep their plans and about 53% said maintaining and/or increasing employee satisfaction and loyalty was the top reason for retaining coverage in 2014.


“Employers will have a continuing need to attract and retain talent,” said Michael Wilson, CEO of the Brookfield, Wis.-based International Foundation.

“Employers still believe that offering a health care plan provides an important competitive advantage,” said Helen Darling, president of the National Business Group on Health in Washington.

Others note that few employers would reap significant savings by terminating their health plans.

“It is hard to make the math work for most employers,” said Michael Thompson, a principal with PricewaterhouseCoopers L.L.P. in New York.

Costs faced by employers that terminate coverage include a $2,000 penalty per full-time employee imposed by PPACA that cannot be deducted on the company's taxes, as well as grossing up employees' salaries to offset at least some of the premiums employees would have to pay for coverage in state insurance exchanges.

Any amounts added to employees' salaries to help pay for coverage would result in an increase in their taxable incomes, which in turn would boost payroll taxes paid by their employers.


In addition, employers, at least initially, would be reluctant to drop coverage because of the many unknowns related to the exchanges, Ms. Darling said. Those unknowns include the rates insurers writing coverage in the exchanges would charge and whether, due to higher-than-expected costs, the government might cut back on subsidies to lower-income individuals purchasing coverage through an exchange, Ms. Darling said.

“There are so many unknowns it would be almost irresponsible to think of getting out (of offering coverage) right now,” Ms. Darling said.

Meanwhile, UnitedHealthcare and Humana Inc. were among major insurers that said last week that they will continue offering certain health coverage no matter how the Supreme Court rules on the health care reform law.

For example, Humana and UnitedHealthcare said they will not impose lifetime dollar limits, will offer preventive services without copayments as well as coverage to employees' adult children up to age 26.

The continuation of those health care reform law-mandated requirements, though, would not apply to self-funded employers. Humana said it would work with self-insured clients to “emphasize the importance of the continuity of policies and coverage.”


However, absent a change in tax law, the coverage for some adult children would become taxable to the employee. Prior to the passage of PPACA, coverage could be provided tax-free for employees' children up to age 19 and to age 24 for full-time students.

Because of the popularity and relative low cost of the adult child coverage, lawmakers might pass legislation to keep its tax-free status if the reform law were overturned, some say.

If congressional Democrats and Republicans agree on anything, continuing the tax-free status of adult child coverage is one health care reform law provision on which there could be an agreement, said Rich Stover, a principal with Buck Consultants L.L.C. in Secaucus, N.J.