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Employers are upping their estimates of how much the health care reform law will increase costs, according to a Mercer L.L.C. survey released Wednesday.
Two years ago, 25% of employers thought that complying with the Patient Protection and Affordable Care Act would increase their health care plan costs by less than 1%. But now, just 9% of nearly 900 employers surveyed by Mercer expect a cost increase that small.
Similarly, 15% of employers in 2011 expected the health care reform law to increase costs by at least 5%. Now, 19% of employers expect cost increases of at least 5%. In addition, 21% are projecting 2014 health care reform law related cost increases of 1% to 2%, while 18% expect cost increases of 3% to 4%; 32% of respondents said they didn't know the cost impact.
Mercer executives said there are several reasons why more employers are increasing their cost estimates.
“As employers get closer to implementation, they have a better idea of how many additional employees will become eligible for coverage. Some that thought they would cut hours have changed their position on that,” Beth Umland, Mercer's director of research for health and benefits in New York, said in an email.
Under PPACA, employers will be liable for a $2,000-per-employee penalty if they do not provide coverage starting next year to full-time employees, or those working an average of 30 hours a week.
In addition, Ms. Umland said, some employers in 2011 didn't know about the various fees that the health care reform law imposes. For example, employers will have to pay a fee of $63 per health care plan participant in 2014 to fund a program that will partially reimburse health insurers for providing coverage to high-cost individuals. While there was some awareness of the Transitional Reinsurance Program, it wasn't until last year that regulators announced the size of the fee employers would have to pay.
Even as employers' health plan costs increase, especially due to covering more employees, 55% of employers do not expect to boost employees' premium contributions.
However, 28% say they will increase employee contributions for dependent coverage, and 13% said they will increase premium contributions for employee-only coverage.
On a related topic, 22% of respondents said they are considering offering coverage within the next two years to employees through a private insurance exchange, while 41% say they are considering such a switch within five years.