Health Benefits Rules Force Drop in Employer Health Coverage

health benefitsPhoto: rocketboom

A number of U.S. companies plan to drop employer-sponsored health insurance over the next couple years due to rules that will take effect under the health care reform law, according to a study released on Tuesday. The new guidelines requiring companies to offer a set level of health benefits are encouraging many to eliminate coverage options for their employees.

Fewer Companies to Offer Employer Health Benefits

Roughly 9 percent of U.S. companies intend to stop offering health benefits by 2014, while another 10 percent are considering this option in the years to follow, according to a new study from consulting company, Deloitte.

The primary reason companies are considering the option is due to a penalty coming from the health care reform law, which allows companies to save money.

Currently, most companies offer employees coverage voluntarily because doing so helps recruit and retain workers. However, companies that don’t provide benefits to workers after 2014 will face penalties of $2,000 per worker, if they employ 50 or more full-time employees.

Some employers have said they would rather pay the penalties than spend thousands more to cover each worker. This is prompting them to drop insurance plans for their workers altogether.

Health Care Reform Guidelines Drop Employer-Based Coverage

A majority of Americans under the age of 65 acquire health benefits from their employer. However, the new health care reform law will provide more options for purchasing coverage without employer assistance. Knowing their employees will have alternate options for health insurance coverage has encouraged some employers to drop employee coverage.

Some respondents in the survey, however, said their decision to continue or drop health benefits stems from additional health care reform requirements scheduled to take effect.

The new law is expected to tax high-cost plans by 2018 and many employers are not interested in paying it. Also, employers will be required to provide more generous benefits than they do at the moment, which for many imposes too much oversight.

Deloitte’s findings differ a bit from estimates offered by the Congressional Budget Office (CBO) and the firm’s rival, McKinsey & Co.

The CBO revealed that an estimated 7 percent of workers could lose coverage under the law by 2019, while McKinsey & Co. revealed last year that around 30 percent of employers would “definitely or probably” stop offering health benefits after 2014.