Actuarial Firm: Employers Will Save by Dropping Employee Coverage
Across all industry segments in Lockton’s group of clients, companies will have a significant financial incentive to terminate their group coverage once the Insurance Exchanges present employees with another subsidized health insurance option. The vast majority of our clients currently spend far more on health insurance per employee than the nondeductible penalty under the “Play or Pay” mandate. By 2014 this gap will be much larger still, the data shows.
As a result, were they to terminate their group coverage in 2014, companies would, on average, save 44 percent of their projected 2014 health insurance costs.
This is especially true for firms in high-cost regions that primarily employ older workers earning less than 400% of poverty.
This is a healdline I whish I hadn’t seen.
In physics, this is called the path of least resistance.
In politics, as well, perhaps.
This is what you guys at the NCPA have been saying all along.
This might be a good thing. Having everyone purchase insurance on the individual market might create incentives for more transparency in pricing and quality. On the other hand, the transition is probably going to be painful.
Agree with Ken: NCPA and others have projected this outcome. Nevertheless, I believe that the Lockton folks have pushed the boat out farther by modeling their clients’ actual future behavior. Lockton has information that the rest of us do not.
I also believe that Lockton’s conclusion that the “subsidies” that employers contribute to current benefit plans (which we know are not really subsidies but a reduction of employees’ money income) is higher than the tax credit in the forthcoming Health Benefits Exchanges will be, is new.
Dr. Goodman has previously noted that 2014 will be accompanied by corporate restructuring such that low-income workers will work for firms that take advantage of the exchanges, whereas high-income workers will continue to receive employer-based group benefits. Lockton’s conclusion appears to differ. I lean towards Dr. Goodman (if I understand both correctly): An employer who dumps unsibsidized high earners into a Health Benefits Exchange in 2014 will put himself at risk of losing talented employees.
Lockton also emphasizes individuals’ share of premiums for exchange-based policies will come out of after-tax income, which I don’t think PPACA’s opponents have adequately emphasized.
Lockton’s figure 2 is interesting: Of all employers, government employers will suffer the least increase in cost from PPACA – only 0.5 percent. I’m not sure why this is. I suppose Lockton’s public-sector clients are mostly local governments and agencies, but I don’t know.