Health care costs for most employers projected to rise under reform

A tax on high-cost health plans tops the list of employer concerns, according to a survey.

By Doug Trapp — Posted June 22, 2010

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One in four employers believes the health reform law will increase his or her company's health care costs by at least 3% in 2011, according to a survey released in May by the consultant Mercer.

Two of the health reform law's provisions -- guaranteed coverage for dependent children until age 26 and a ban on lifetime benefit dollar limits -- take effect in 2011. Fifty-three percent of employers estimate that their health care costs will increase by at least 1% in 2011 because of these provisions.

Other firms are unsure about the reform effect. Thirty percent of respondents could not estimate the law's impact in 2011. Ten percent estimated their costs will rise by 5% or more; 13% estimated an increase of less than 1%, according to the Mercer report, which surveyed 791 employers in a variety of industries.

Many young adults might go without access to their parents' coverage until next year. Although many health plans already have extended dependent coverage to age 26, only 24% of employers said they are likely to do the same before the 2011 deadline. Among firms with 5,000 or more employees, just 17% expected to offer the expanded coverage ahead of the requirement.

The survey also asked employers for their opinions about six provisions in the health reform law. Twenty-nine percent of respondents were concerned about the excise tax on high-cost health plans that will take effect in 2018. The 40% so-called Cadillac tax will apply to the value of plans that exceed $10,200 for an individual and $27,500 for families.

"Employers who rely on generous medical benefits to help attract and retain top employees are concerned about the excise tax," said Tracy Watts, a consultant in Mercer's Washington, D.C., office.

Twenty-one percent of respondents named the ending of lifetime benefit limits as a significant issue, while 20% said the dependent coverage provision was a concern.

The survey is available online (link).

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