Since Congress passed the federal health care reform package,
debate has buzzed over whether employers will stop offering
benefits in 2014, pushing their workers into the new health
insurance exchanges. (See the timeline for
health care reform
Should you be worried about losing your group health plan at
work? Probably not, human resource consultants say, although the
picture remains a bit fuzzy.
A recent study by the Urban Institute on employer-sponsored
coverage under health reform concludes "reports of its demise are
premature." Using a "health insurance policy simulation model,"
researchers found that overall employer-sponsored coverage under
the Affordable Care Act would not be much different from what it
would have been without reform.
Projecting a 10 percent decrease in group health plans
But a survey by Market Strategies International, a global market
research firm, showed there could be a net 10 percent decrease in
access to employer-sponsored health insurance in 2014. The study
surveyed 1,000 employee benefits managers at companies with at
least two workers.
Among employers offering health care benefits:
• 76 percent said they would continue to offer a health plan in
• 15 percent said they would offer coverage to some full-time
• 9 percent said they would stop offering health insurance
benefits all together.
Among companies not offering health insurance:
• 28 percent said they would start offering it in 2014.
• 19 percent said they would begin offering it to some full-time
Gains and losses
These companies represent only 8 percent of workers, so the
expected gains aren't enough to offset the loss of
health insurance coverage
by large employers. Susan McIntyre, senior vice president of Market
Strategies' health care division, says with the opening of the
exchanges in 2014, many small and large firms see an opportunity to
walk away from providing coverage without depriving employees of
The exchanges will serve as marketplaces where individuals and
small groups can buy insurance. In 2014, health reform regulations
will prohibit insurers from denying coverage or charging higher
premiums for people who have pre-existing conditions. The federal
government also will provide subsidies for purchasing coverage
through health insurance exchanges to people who meet low-income
Motivation to offer health insurance
Health reform uses a carrot-and-stick approach to encourage
employers to offer health insurance. Small businesses with fewer
than 25 workers already can earn tax credits for offering coverage.
And in 2014 the government will penalize employers with at least 50
full-time workers if they don't offer
affordable health insurance
benefits and at least one of their employees qualifies for a
premium subsidy. But the penalties are far less than the cost of
providing health insurance, fueling concern that many employers
will decide to pay instead of play. Even so, the equation isn't so
"For employers, it's really not a decision about whether to
offer health insurance benefits," says Tracy Watts, a partner at
Mercer, a global consulting firm, in its Washington, D.C., office.
"Of all the benefits, employees rate health insurance No. 1 most of
Benefits are critical for attracting and retaining workers, she
says, and employees likely would expect to be compensated for
buying individual plans if their companies stopped providing health
"My business runs on my employees," says Valerie Clark,
president of Clark & Associates Inc. of Nevada, a
benefits-management company based in Reno. "I offer a full benefits
package to keep up with demand for high-quality people. If I
didn't, most likely my employees would go to my competitors."
Focusing on retirement benefits
Although most employers don't plan to drop health insurance
coverage for workers, many are considering ending their sponsorship
of retiree benefits, if they haven't already.
Last year, just 25 percent of large employers offered health
plans to retirees under age 65, down from 28 percent in 2009,
according to a national survey by Mercer. Even among the largest
employers, just 46 percent provided coverage to retirees under 65
and 38 percent provided coverage to those 65 and older.
A 2011 survey of large employers by Towers Watson found 26
percent of employers plan to stop sponsoring health insurance
coverage for retirees. That's because the federal government cut
the employer tax break to provide retiree drug plans and health
reform promises to improve Medicare drug coverage.
In addition, the health insurance exchanges will give retirees
under age 65 access to insurance, says Julie Stone, a Towers Watson
consultant based in the firm's New Jersey office. Plans sold
through the exchanges cannot deny or charge higher premiums for
people with pre-existing conditions. Some employers may consider
providing subsidies for retirees to use in the exchanges.