Survey: Employers won't absorb additional healthcare reform costs

Employers say they won't absorb additional costs that result from reform and plan to take actions to avoid doing so, including reducing benefits, raising prices for customers and/or reducing their head count, according to a survey conducted by Towers Perrin.

The survey of 433 human resources and benefit executives from mid-sized and large organizations indicates many employers plan to adjust their benefit strategies based on how final legislation affects their costs.

"With employer healthcare costs rising more than 150 percent over the last decade, it's no surprise that 90 percent of employers list cost containment as the most important healthcare reform goal," said Dave Guilmette, managing director of the Towers Perrin Health and Welfare practice. "Many large employers, however, feel that current reform proposals are focused on other healthcare issues – such as expanding coverage and reforming certain insurance practices – and they feel they have already addressed these issues within their own workforces."

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Also, employers don't expect that the reform proposals will address some of the fundamental drivers of healthcare costs. For example, 65 percent believe healthcare reform will have little or no impact on consumer behaviors, an area many employers have begun to target as a key cost-containment opportunity.

Among healthcare proposals currently on the table, 53 percent of employers believe that research on effectiveness of alternative treatments will have a positive impact on their business by influencing the quality of care, and 44 percent believe that reforming the health insurance market to ensure guaranteed access to coverage regardless of health status will have a positive impact. However, 47 percent believe that an employer "pay or play" mandate would have a negative impact on businesses.

"With companies struggling to manage rapidly escalating healthcare costs and reclaim profits, only 11 percent of companies would agree to absorb increased healthcare costs by reducing their profits," said Guilmette. "The overwhelming majority of companies would respond to higher costs by reducing the benefits their employees receive."

The survey also examined the experience of employers based in Massachusetts, which has imposed a pay-or-play mandate on employers and a coverage mandate on individuals similar to those currently proposed in Congress. Among those employers, most are not sure what, if any, impact the three-year-old Massachusetts mandates have had. Most respondents have seen little or no change in employee or employer healthcare costs or access to or quality of care. However, more than two-thirds of these employers report that their administrative burdens have increased.

Employers expect they would respond to a pay-or-play mandate in the following ways:

* 37 percent would provide company-sponsored health coverage that substantially exceeds the standard.
* 29 percent would discontinue company-sponsored health coverage and pay the assessment if the per-employee costs of payments to the federal government were substantially lower than their current costs.
* 26 percent would provide company-sponsored health coverage at the level of the minimum standard required.