The health care benefits provided by large employers for over 170 million Americans may be in jeopardy because of costs related to the Affordable Care Act.
Large employers with 10,000 or more employees who provide health care insurance to the majority of Americans including employees, retirees and dependents, will see their total costs over ten years increase from $151 billion to $186 billion, or 5.9 percent more than what they would otherwise be spending. Put another way, the ACA will cost large U.S. employers between $4,800 and $5,900 per employee.
The new study was released today by the bipartisan American Health Policy Institute, which conducted the first internal study of more than 100 large employers to determine how those companies are accounting for the increased costs of the ACA.
The study said the following:
“The ACA is directly and indirectly increasing the cost of employer provided health care through a number of its provisions. Direct costs in the ACA include but are not limited to the following:”
- Patient Centered Outcomes Research Institute fee;
- Temporary Reinsurance Fee;
- General ACA implementation and administrative costs;
- Excise tax on high-cost plans;
- Mandate to cover adult-children up to age 26 as dependents; and
- Other benefit mandates including covering 100 percent of preventive care services.
The indirect costs of the ACA include but are not limited to the following:
- New supply-chain taxes passed onto employers (e.g., medical device tax).
- Increased take-up rates of employer offered coverage resulting from the individual mandate; and increased cost shifting from the expanded Medicaid coverage.
- In 2010, the Joint Committee on Taxation estimated the excise tax on high-cost plans would cost employers $32 billion from 2018 to 2019
- Eliminating the employer deduction for the Medicare Part D subsidy would cost employers $4.5 billion from 2013 to 2019.
- In 2012, an Urban Institute study estimated the ACA would increase large employer health care costs by 4.3 percent or $11.8 billion in 2012 alone.
- Another survey by the International Foundation of Employee Benefit Plans found the ACA increased actual large employer health care costs by an average of 3.5 percent in 2013.
- A recent survey from Mercer found the two biggest concerns employers have with the ACA are increased administrative burdens and the excise tax on high-cost plans, and they are taking a number of steps to address those concerns and mitigate the costs.
- Seventy-eight percent of surveyed companies said they are significantly or very significantly concerned about the administrative burden the new ACA regulations create and 62 percent say they are similarly concerned about the excise tax that begins in 2018.
- According to the survey, 42 percent of employers would be subject to the tax in 2018 if they made no changes to their current plans, and many are not waiting to make changes.
- The tax provision was crafted by Congress to encourage employers to offer lower-cost health plans.
Specifically, the Mercer survey found:
- 80 percent of employers have or are considering raising deductibles.
- 68 percent have or are considering consumer-directed health plans, with health saving accounts.
- 44 percent have already taken steps to unbundle dental and medical coverage.
- 34 percent are moving to high-performance networks.
- 33 percent are considering dropping high-cost plans, and 20 percent have already done so.
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