More than half of U.S. employers believe that theAffordable Care Act (ACA) has had a negative effect on their company, according to a new report from the International Foundation of Employee Benefit Plans (IFEBP). Nearly 90 percent of employers expect the ACA to increase their company’s health care costs in 2014, resulting in many workers seeing higher out-of-pocket costs and increased premiums and deductibles.
“Employers are taking a variety of actions to mitigate costs and in most cases are sharing the cost impact with their workforce,” said Michael Wilson, CEO of the IFEBP, a nonprofit membership association for benefit plan professionals.
On a positive note, employers’ actions to increase awareness and communicate with their employees about the ACA “has resulted in greater participant engagement with their health care benefits,” added Julie Stich, IFEBP's director of research.
The report, 2014 Employer-Sponsored Health Care: ACA’s Impact,isbased on an April 2014 International Foundation survey, with responses from 691 HR professionals, benefits professionals and industry experts. Surveyed organizations represented U.S. employers from nearly 20 industries.
Coverage and Cost Changes
Notable changes related to health insurance plans for employees and expected cost adjustments from employers include the following:
•Cost-sharing. Nearly one-third of employers have increased out-of-pocket limits, increased participants’ share of premium costs and/or increased in-network deductibles.
•Dependent coverage. More than 1 in 5 have increased co-payments or co-insurance for primary care and/or increased employee proportions of dependent coverage costs.
•Next year's costs. More than 2 in 5 employers expect to see the greatest cost increases due to the ACA in 2015.
•Taxes and fees. Costs associated with the excise tax on high-cost group health plans (also known as the “Cadillac tax”), general ACA administrative costs and transitional reinsurance fee costs are predicted to be the top three ACA cost drivers beyond 2014.
Small Employers Adjusting Workforce
The report finds that the majority of large employers have not made broad workforce adjustments due to the ACA, but many smaller employers—those with 50 or fewer full-time workers—have made changes to their workforce due to the increasing costs associated with the ACA. According to the report, these changes include the following:
•Reduced their workforce (nearly 1 in 6 small employers).
•Reduced hours so fewer employees work full time (more than 1 in 10).
•Frozen or reduced pay raises and compensation (more than 1 in 10).
•Cut back on hiring in order to stay under 50 employees (1 in 10).
Looking ahead, one-quarter of employers have already started to redesign their health plan to avoid triggering the “Cadillac tax,” which becomes effective in 2018. More than one-third of employers are considering this action.
Larger employers are particularly likely to be redesigning their health plan, with nearly 40 percent of employers with more than 10,000 employees taking action to avoid the excise tax.
Stephen Miller, CEBS, is an online editor/manager for SHRM. Follow him on Twitter @SHRMsmiller.