Research models the impact of Supreme Court decision on employer health costs
Ann Arbor, MI – July 3, 2012 – There is no short- or long-term advantage for employers to eliminate group health benefits in favor of Patient Protection and Affordable Care Act (PPACA) penalties, according to a white paper published today by Truven Health Analytics, formerly the Healthcare business of Thomson Reuters.
The new report, Modeling the Impact of “Pay or Play” Strategies on Employer Health Costs, examines the real-world healthcare experiences of large American employers and their employees to determine how various post-reform healthcare benefit designs will affect bottom-line operating costs.
Using insurance claims and wage data from 33 large employers with 933,000 employees, the research examines the direct benefit and tax cost of eliminating group health benefits. It also projects costs for 2014-2020 under four different scenarios in which: 1) employers subsidize the full cost of obtaining coverage through an exchange, 2) employers subsidize exchange coverage without spending more per employee than their current group plan, 3) employers provide subsidy, but reduce overall costs by 20 percent, and 4) employers remove group health with no additional subsidy to employees to purchase their own healthcare.
Following were the key findings:
- Federal Insurance Exchanges Twice as Expensive as Group Health Plans: Employers will bear a burden of as much as $17,269 per employee (roughly $9,000 more than they currently spend) to shift their benefits to federally-subsidized coverage obtained through a federal exchange in 2014 rather than continuing existing group health plans.
- Cost Shift to Employees Would Create Significant Reduction in Compensation: Should employers choose to eliminate group health without providing a subsidy to employees to obtain coverage through an exchange, employer costs would fall to $2,000 per employee (the cost of fines imposed by the PPACA for not providing coverage to employees), but each employee would be responsible for paying an average of $16,551 per year for health coverage in 2014. Because employers must provide market value to retain skilled workers, this cost differential should encourage most companies to continue offering group health benefits.
“There has been so much conjecture and uncertainty around the impact of healthcare reform on employer health costs over the last two years; we felt it was important to establish concrete benchmarks for the real bottom-line impact of the law,” said Christopher Justice, director of practice leadership, Truven Health Analytics and lead author of the paper. “This paper provides employers with clarity: there is no cost advantage, short- or long-term, that would come from dropping health coverage for their employees.”
“This research proves once again that when employers invest in the health and wellness of their employee populations, they end up spending less on healthcare,” said Raymond Fabius, M.D., chief medical officer at Truven Health Analytics. “Not only is eliminating group health coverage not cost efficient, it would have an enormous negative impact on an employer’s competitive market position and – eventually – on the wellbeing of its people.”’
A copy of the full report, Modeling the Impact of “Pay or Play” Strategies on Employer Health Costs, can be accessed here.
About Truven Health Analytics:
Truven Health Analytics, formerly the Healthcare business of Thomson Reuters, delivers unbiased information, analytic tools, benchmarks, and services to the healthcare industry. Hospitals, government agencies, employers, health plans, clinicians, and pharmaceutical companies have relied on its solutions for over 30 years. Truven Health Analytics combines deep clinical, financial, and healthcare management expertise with innovative technology platforms and information assets to make healthcare better, collaborating with customers to uncover and realize opportunities for improving quality, efficiency, and outcomes. Truven Health Analytics employs approximately 2,200 people worldwide and has its principal offices in Ann Arbor, Chicago, and Denver. For more information, please visit truvenhealth.com