Survey: Employers anticipate higher costs due to health reform

According to a new survey, employers believe the new healthcare law will increase their benefit costs, and they say changes are needed to improve quality, reduce expenses and reward health system performance.

The Midwest Business Group on Health released results of its national employer survey, gauging the reactions and concerns related to health reform after the mid-term November elections. It was co-sponsored by the National Business Coalition on Health and Business Insurance and Workforce Management.

The online survey, conducted from late November to mid-December 2010, follows a survey conducted with Business Insurance in April 2010 to gain an understanding of areas of most concern to employers on health reform.

"There remains a great deal of uncertainty among employers about how health reform will ultimately impact their efforts to provide health benefits for their employees," said Larry Boress, the MBGH's president and CEO. "However, it's clear that keeping workers healthy is a key focus. In fact, employers are already implementing strategic health management approaches and these are quickly evolving into viable cost reduction strategies."

According to the survey:

• 53 percent of all employers and 67 percent of large employers say they don't plan to drop health benefits. However, based on the potential penalties and recent modeling of potential impact, 22 percent of all employers said it's likely that they would consider dropping benefits altogether.
• Of those who say they will drop coverage to avoid the penalty, only about 20 percent will raise worker salaries to help pay for individual coverage.
• Almost 60 percent of all employers stated that they would expand wellness programs in light of increased incentives allowed.
• 60 percent of all employers and 50 percent of large employers believe the intention of health reform is to eliminate the employer-based system and move to a single-payer system.
• About a third of all employers noted that they have assumed all costs of extending coverage to adult children up to age 26, with one-third responding that the cost of extending coverage has been shared with employees. This reflects a change from April, when employers were split 50/50 as to whether they were likely to charge more for dependents as a result of the provision.
• Fewer employers plan to drop retiree benefits than in April's survey. Of those employers who offer retiree benefits, about one third of large and 12 percent of small employers will continue to offer benefits, 4 percent noted that they will drop benefits, and 4 percent will provide some supplemental plan or contributions to help retirees get coverage.
• 65 percent of all employers and more than 80 percent of large employers have done some modeling on how health reform will impact their benefit costs, and 25 percent of all employers are showing increases of 2 percent to 5 percent, with 15 percent showing increases of 6 percent to 10 percent.
• 86 percent of all employers say it's unlikely that current provisions will reduce the rate of healthcare cost increases and 74 percent of all employers believe it's likely health reform will boost costs even more than if the legislation had not passed.

According to the survey, almost 60 percent want to replace fee-for-service payments with bundled payments; more than 45 percent of all and 52 percent of large employers want to develop accountable care organizations; more than half want to continue to develop the medical home concept; 55 percent of all and 70 percent of large employers want to see development of quality- and performance-based provider payments; and 62 percent of all and 74 percent of large employers want the law to promote the use of value-based designs and incentives to motivate change.

"The survey results reflect employer frustration that cost containment, as their priority goal for healthcare reform legislation is not, at present, being realized," said Andrew Webber, president and CEO of the NBCH. "While there appears to be strong support for the legislative provisions related to payment reform, value-based insurance design, medical homes and accountable care organizations, I think employers are signaling the Obama administration that these delivery reform and value-based purchasing strategies need to be fast-tracked. Cost containment cannot wait."