Zero out of 512 employers plan to drop health insurance, survey says

August 28, 2012

Employers are getting closer and closer to making a very big decision: whether to continue providing health insurance to workers after the Affordable Care Act's coverage subsidies come online.

Health insurance is expensive, costing employers $15,073 on average to cover one worker and the employee's family. If companies with more than 50 workers stopped offering coverage, they would face a fine that is significantly smaller than that cost, at $2,000 per employee.

Which makes this Towers-Watson survey all the more surprising: The consulting firm polled 512 companies that employed more than 1,000 workers each. These are companies that spend at least $5 million in health benefits annually. They were asked how likely it was that they would drop coverage in 2014 and send employers to the new health care exchanges being created to accommodate the law.

Not a single employer said that scenario was "very likely." A mere 3 percent ranked it "somewhat likely." The vast majority -- 77 percent said -- it was "not likely" that they would stop offering health insurance.

The majority plan to keep doing what they've been doing: offering employer-sponsored insurance in order to "minimize penalties" from the new law.

If it's hard to understand why employers would spend more than $15,000 on employee health benefits when they have the option of only spending $2,000 to skip health care, it might help to think in a different way. Right now, employers spend $15,000 on an employee's health benefits when they could be spending...absolutely nothing. They offer benefits not because any law requires them to but because it serves their interests: They can remain competitive when recruiting employees and keep their workforce healthier and more productive.

The Affordable Care Act changes the equation a little: It gives people with preexisting conditions, who might not be able to purchase a plan right now, mandatory access to coverage. There would be federal subsidies, too. In short, it should be a lot easier for a worker to access coverage when the law is fully implemented than it is right now.

Also, the federal subsidies are not nearly as generous as the subsidies that employers currently offer. Health benefits consulting firm Lockton estimates that employees' health insurance costs would rise by 79 to 125 percent if they got dumped into the insurance exchange. That's tough news for a company to break to its workers, perhaps bad enough to prompt them to start hunting for jobs with health coverage -- and reason enough, for companies, to continue offering benefits.

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Brad Plumer | August 28, 2012