Wednesday, May 26, 2010

Christmas Comes Early! 88% Of Employers Will Pass Obamacare Costs Onto Employees

Cross-posted from Critical Condition on National Review Online.

Towers Watson, a leading human resources consulting firm, has conducted a survey of 661 human resource and benefit specialists across America. While benefit professionals are still digesting the new law, the survey shows that they are even more skeptical of Obamacare than the public is.

These benefit specialists represent a broad range of industries, and are responsible for choosing health insurance plans for almost 4 million Americans. If their fears come true, the future of American health care is bleak. Among the survey’s highlights:
  • 90% believe that Obamacare “will increase their organization’s health care benefit costs”;
  • 88% intend to pass the increases onto employees by increasing employee premium contributions or other cost-sharing measures;
  • 74% intend to “reduce health benefits and programs” by using stingier health plans, restricting eligibility for health coverage, and using spousal waivers or surcharges.
By a wide margin, employers’ three top priorities for health care policy are containing health care costs (96% saying it is a high priority); encouraging healthier lifestyles (88%); and improving the quality of care (75%). Only 25% of those surveyed believe that the law will actually encourage healthier lifestyles, and only 20% believe it will improve the quality of care.

Another group that will be affected by Obamacare, according to the survey, are retirees, especially early retirees (i.e., those under the age of 65). 77% of employers believe that large companies will reduce or eliminate their retiree health benefits, now that the law prevents insurers from shunning those with pre-existing conditions. “Just as many baby boomers are deciding whether to delay retirement, employers will be determining if it makes financial sense for them to remain in the retiree medical business,” said Dave Osterndorf, a senior consulting actuary at Towers Watson. The pre-existing condition mandate “will likely accelerate employers exiting sponsorship of retiree health programs.“ Naturally, the more that employers opt out of sponsoring their retirees’ health benefits, the more that the government will end up picking up the tab.

On the bright side, 58% of employers said that the rising cost of health insurance would lead them to replace their existing health benefits with consumer-driven health plans (assuming that Obamacare doesn’t outlaw them). 74% said that they do not plan to discontinue health coverage for their active employees, though “it’s something you want to monitor over time,” said Mark Maselli, head of the Towers Watson group that conducted the study.


  1. inchoate but earnestJune 2, 2010 at 4:38 PM

    consumer-directed plans appeal to financial analysts like Mr. Roy because, well, they're so darn rational & stuff.

    Too bad so few of the rest of us act, y'know, rational often enough to make them work well.

    Ardent belief in rational man isn't good enough to change behavior in ways that make CDHPs work well, Mr. Roy. If you don't believe me, take a look at good data on what happens with people who have such accounts - data that controls for things like income & earnings. It will show you, for instance, that people with manageable chronic conditions don't do it - though rationally they ought to.

    No, you have to amend benefit designs to enable - to encourage - people to get care they need when they need it (or to imply that they will 'lose' some level of benefits they already have if they do not).

    Dr. John Goodman is an intelligent & persuasive fellow, but you have to look beyond financial and even economic orthodoxy for solutions in this realm.

  2. Hi Inchoate,

    I agree with your point about the importance of intelligent benefit designs. And benefit designs would be much more intelligent if insurers got to realize the gains from patients' healthy practices. That, in turn, requires people to stay on one plan for a long period of time (i.e., even if they change jobs) -- something that can only happen if we end the employer-sponsored insurance system.

    I'd also make two points about rationality:

    (1) Yes, consumers can be irrational. But if you put the government in charge, things become a lot less rational, because they are driven by vote-seeking politicians, special interests, and unintelligent bureaucrats. The question is not are consumers rational, but rather who is more rational than they are?

    (2) The market only needs a small percentage of consumers to be rational to function well. Most consumers don't know the ins and outs of various laptops in terms of performance and features, and yet the manufacturers who make the best computers get rewarded for doing so. This is because the small proportion of knowledgeable, sophisticated consumers drive decisions for everyone else.