Survey Draws Renewed Attention to Impact of PPACA on Employer-Provided Benefits as The Law’s Future Remains Unclear
www.hrpolicy.org June 10, 2011
A survey released this week by McKinsey and Co. found that 30 percent of employers will “definitely” or “probably” stop offering employer-provided health insurance after 2014, when employer penalties and health insurance exchanges take effect under the health care reform law. In addition, the survey found that at least 30 percent of employers would benefit financially from dropping coverage even if they completely compensate employees through other benefits or higher salaries. In a White House blog post responding to McKinsey’s findings, Nancy-Ann DeParle, Assistant to the President and Deputy Chief of Staff, called the study “an outlier” in contrast to findings from The Urban Institute, Mercer, and the Rand Corporation. However, HR Policy’s recent surveys of CHROs suggest McKinsey may not be as far off as the White House suggests depending on how and whether the law is fully implemented. In March 2011, when Association members were asked about their company’s strategy relating to health benefits over the next ten years, 46 percent said they planned to continue offering employer-based coverage; 38 percent would consider switching to a defined contribution strategy; 12 percent were unsure; and 6 percent were considering discontinuing offering health benefits. This variability in survey results likely demonstrates that no employer can be sure what it will do in the long term because of uncertainty about the law and its cost implications. Much of the uncertainty is driven by the following factors:
■Constitutional Challenges. This week, the 11th Circuit heard oral arguments in the most prominent lawsuit brought by 26 states challenging the individual mandate. Questioning by the judges to attorneys on both sides shed little light on which direction the court would go, but they are clearly considering whether invalidating the mandate would render the entire statute unconstitutional. Final resolution of legal challenges will not occur until 2012, at the earliest, and if the issue of severability is unresolved, litigation could extend for years beyond then.
■Political Uncertainty. Regardless of the legal outcome, PPACA continues to face relentless attacks from Republicans in Congress hoping to repeal it in a piecemeal fashion. Their latest efforts are taking place during the debt ceiling negotiations as amendments are being considered to either roll back PPACA’s Medicaid expansions or to defund certain provisions. The debt ceiling vote will take place later this summer. Meanwhile, looking beyond the 2012 elections, all Republican presidential candidates have said they would repeal PPACA. However, most have been vague about how and whether they would replace it.
■Unfinished Regulations. Regulations that have yet to be issued or finalized for key components of the health reform law are another factor complicating long-term planning. For example, health insurance exchanges are supposed to be operational by late 2013, but proposed rules on exchanges are not expected until later this month. Even then, HHS has indicated that determination of an “essential benefits” package that health plans will be required to cover, which will have major implications for the cost of exchange coverage, will not be made until later this year. These critical questions are important considerations for states considering whether and how they will operate exchanges, as well as employers, health insurers, and consumers.
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