While many expect the link between job and health insurance to disappear over time, most employers say they don’t plan to stop offering health care in the short term.
“We have yet to see a client that wants to stop offering health insurance,” says John Lacy, vice president of group benefits for Bouchard Insurance, a Clearwater brokerage — noteworthy since it is cheaper for most large employers not to offer health insurance and instead pay a per-employee penalty of $2,000. “We have demonstrated that some of the costs for benefits coverage will be equal or greater to what they are paying today, and in some cases far greater, than the penalty.”
Employers say health care benefits are still a valuable tool in recruiting and retaining employees ["Bealls"]. “We are not expecting, at least in the near term, any dramatic shift in the way employers are currently offering coverage,” says Caroline Pearson, vice president at health care consulting firm Avalere Health.
Employers benefit from health insurance costs being paid with pre-tax dollars, she says. “It doesn’t make good financial sense for most companies to drop coverage, pay the penalty and then increase the salary of workers to keep them whole on what it will cost them to buy insurance” on the open market, Pearson says.
That’s why some employers are exploring other ways to offset the cost of meeting the requirements of the law by reducing worker hours or laying off employees.
Businesses such as restaurants and retailers that hire many low-wage and part-time workers are most at risk for higher costs. That’s because the new health care law penalizes large employers who don’t offer comprehensive health care plans to full-time employees. Rick Van Warner, president of consulting firm Parquet Group, says restaurants run on extremely thin profit margins of about $3,000 per employee. “There is not room left to absorb costs,” Van Warner says.
Jason Altmire, Florida Blue’s senior vice president of public policy, government and community affairs, says in the short run, many employers will keep coverage. In part, this is because of uncertainty with how the law works. Employers don’t want to make rash decisions about implementing the law without seeing what it means for them.
“As we move toward the future, I don’t think there is any question that the model that the employers are the leading source of health insurance for all employees and individuals and families — that will probably start to change,” Altmire says.