Survey: Employers consider ending health coverage

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INDIANAPOLIS (AP) — Nearly one of every 10 midsized or big

employers expects to stop offering health coverage to workers once

federal insurance exchanges start in 2014, according to a new

survey from a large benefits consultant.

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Towers Watson also found in a survey completed last month that an

additional 20 percent of the companies are unsure about what they

will do.

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Another big benefits consultant, Mercer, found in a June survey of

large and smaller employers that 8 percent are either “likely” or

“very likely” to end health benefits once the exchanges

start.

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Employer-sponsored health insurance has long been the backbone of

the nation’s health insurance system. But the studies suggest that

some employers, especially retailers or those offering low wages,

feel they will be better off paying fines and taxes than continuing

to provide benefits that eat up a growing portion of their budget

every year.

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The exchanges, which were devised under the health care overhaul,

may offer an alternative for their workers. These exchanges aim to

provide a marketplace for people to buy insurance that can be

subsidized by the government based on income levels.

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A large majority of employers in both studies said they expect to

continue offering benefits once the exchanges start. But former

insurance executive Bob Laszewski said he was surprised that as

many as 8 or 9 percent of companies already expect to drop coverage

a couple of years before the exchanges start.

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Such a move comes with potential payroll-tax headaches and could

subject firms to fines. It also would give their employees a steep

compensation cut if companies don’t raise pay in exchange for

ending coverage.

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“Dropping coverage is going to be very difficult for these

(companies) to do,” said Laszewski, a consultant who was not

involved with the studies.

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Towers Watson’s Randall Abbott said the survey results should be

seen as a snapshot of how companies are thinking now. They can’t be

viewed as a final decision because there are still many unresolved

variables. No one knows what the exchanges will be like or whether

consumers will accept them, and companies may change their thinking

once they learn more about the overhaul.

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The health care overhaul also faces court challenges, and President

Obama is up for re-election next year, two more variables that

could shape what happens in 2014.

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