Large employers see costs from Obamacare


(REUTERS/Jessica Rinaldi)

Large companies, including Fortune 500 firms, expect to face costs between $4,800 and $5,900 per worker over the next decade from provisions in President Barack Obama’s signature health care law, according to a new think tank that represents those corporations.

The survey aims to provide a glimpse into what costs the large employers expect if they don’t react to the Affordable Care Act. But the landscape of employer-sponsored insurance had been changing to reduce costs even before Obamacare, though the law has helped accelerate that shift.

The newly formed conservative-leaning American Health Policy Institute asked member firms with 10,000 or more employees to provide internal and consultant analyses on what they expect the ACA to cost their businesses over the next decade. The survey doesn’t account for other factors, like the rate of health care inflation, nor does it try to anticipate how employers may already be changing the way they provide insurance.

Think tank president Tevi Troy, a former deputy health secretary under President George W. Bush, said this was the first comprehensive effort to determine costs large employers are anticipating because of the health care law.

“The important thing is this is how these mostly Fortune 500 companies think the law will affect them,” said Troy. “The fact is it’s their internal analyses of what the cost will be, and this is what drives their actions.”

Critics of the survey, however, said it ignores how employers are already altering their health benefit strategies.

The survey, which will be released Wednesday, was provided ahead of time to the Washington Post. More than 350 company members of the HR Policy Association were asked to participate in the survey, and 103 employers representing 4.3 million covered lives responded.

Survey respondents identified the health care law’s tax on high-cost health plans starting in 2018 as their largest anticipated cost stemming from the ACA. Under the law, firms will face a 40 percent excise tax on amounts surpassing $10,200 for an individual health plan or $27,500 for family coverage. The so-called “Cadillac” tax on health plans was included in the health care law partially as a funding mechanism and as a way to make businesses and consumers more conscious about how they consume health care.

Bradley Herring, a health economist, previously estimated about 75 percent of firms would have to pay the tax by 2028 if they didn’t lower health plan costs. However, companies are already making efforts to avoid triggering the tax. A 2013 survey from Towers Watson, a professional services firm, found that more than 60 percent of businesses said they were thinking about the Cadillac tax as they structured health care benefits for this year and 2015.

“It is very unlikely employers will sit still and let the tax hit them,” said Bowen Garrett, a senior fellow at the left-leaning Urban Institute.

Companies identified other ACA costs, such as fees for a temporary reinsurance program and a new government-sponsored institute studying the effectiveness of care interventions. They also cited the law’s preventive benefit requirements and a provision allowing young adults to stay on their parents’ health plans until age 26 as adding costs. Those two provisions, which have been in effect since 2010, accounted for 1-2 percentage points of the 9 percent increase in employer-sponsored family coverage in 2011, according to a Kaiser Family Foundation analysis.

White House spokeswoman Jessica Santillo defended the health care law's impact on businesses.

"Since the ACA passed, health care cost growth has slowed to the lowest level on record, and Americans have gained critical protections and benefits, which is good for businesses and good for working families," she said in a statement.

Some major employers, like Target and Walgreens, have recently made major changes to employee benefits. Target dropped coverage for part-time workers, while Walgreen Co. moved employees onto a private exchange with a set contribution. Almost half of large employers, in a 2012 ADP survey, said they started to implement consumer-driven health plans and offer wellness incentives as a way to bring down costs.

The think tank’s study is being released as the House is set to vote this week on a bill that would alter the ACA’s employer mandate requiring mid-sized and large companies to provide insurance to full-time employees or pay fines. The bill would change the ACA’s definition of full-time employee from 30 hours per week to the more traditional 40 hours.

Jason Millman covers all things health policy, with a focus on Obamacare implementation. He previously covered health policy for Politico.
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