Risk & Compliance

Is Health-Care Reform Really Hurting Companies’ Performance?

No, say their human-resources leaders. Not even the individual mandate is having an impact.
David McCannMarch 13, 2014
Is Health-Care Reform Really Hurting Companies’ Performance?

Was all the griping by finance executives over added costs imposed by the Affordable Care Act just a bunch of hot air? Apparently their human-resources leaders think so.

Among 723 respondents (mostly HR leaders) to a January survey by Mercer, results of which were revealed in a Wednesday webcast, 55 percent said the Affordable Care Act had no effect on business operations or performance, other than benefits and human-resources activities. And 31 percent said there was only a “slight negative” effect.

“The answers to this question no doubt related to the impact on companies’ bottom lines,” suggests Tracy Watts, a Mercer senior partner who leads the firm’s health-care reform practice.

Many ACA-related costs are fairly niggling and aren’t cumulatively great enough to move the needle on profit for most companies. But there were some potentially legitimate concerns. For one, some employers had fretted that the ACA’s newly effective individual mandate would drive many workers who previously hadn’t signed up for coverage to reverse course.

As things turned out, they had little to fear. The average percentage of employees enrolled in employer-sponsored plans for 2014 plan years was 69.3 percent, a statistically insignificant nudge from 69.1 percent in 2013, according to the Mercer research.

Only 25 percent of survey respondents said they believed that even “some” employees enrolled because of the individual mandate. The 2014 tax penalty for not having health insurance is the highest of 1 percent of household income, or $95 (for an individual) or up to $285 (for a family).

Employers did what they could to hold down the impact of other ACA-related costs. For example, 60 percent of respondents are requiring employees to pay a share of two new fees: the Transitional Reinsurance Fee, which for 2014 is $63 per covered life (employee and dependents); and the Patient-Centered Outcomes Research Institute Fee of $2 per covered life.

In most cases employees’ share of those costs will be the same as the percentage of premiums or medical costs they are responsible for, says Watts. But 8 percent of companies are making employees pay for all of those new costs.

Large employers were more likely to have employees share in such costs: 66 percent of respondents with 5,000 or more employees are doing so, compared to 53 percent of those with fewer than 500 workers. (About a quarter of the surveyed companies were in each of those size tiers, and half had 500 to 4,999 workers.)

Another ACA provision that kicked in this year was increased maximum monetary rewards or penalties related to outcomes-based wellness programs (as opposed to those in which a reward is given for just participating in the program). Now the rewards or penalties can be as much as 30 percent of the cost of health-care coverage (up from 20 percent previously), or 50 percent for tobacco-use programs.

In response, 9 percent of surveyed companies, and 14 percent of the largest ones, added or increased a wellness-program reward or penalty. They did so despite an ongoing debate over how effectively such programs help companies control health-care costs. “Employers are convinced this is a way to bring down the cost of their health plans,” says Beth Umland, Mercer’s director of research for health and benefits, yet, she notes, “It’s hard to prove.” Only a relative handful of the largest companies have expended the necessary resources for a formal, thorough wellness-program ROI study, Umland says, although a majority of those have concluded that there is a positive impact.

Meanwhile, Mercer reported more evidence that smaller companies are giving strong consideration to terminating their health-benefits plans. In separate research conducted in 2013, 34 percent of employers with fewer than 50 workers said they were “likely” or “very likely” to do so within five years. That was a vivid change from 2012, when only 23 percent of such employers were mulling a plan termination. At companies with 50 to 199 employees, the proportion considering the move rose from 20 percent to 23 percent.

On the other hand, where there were 500 or more employees, the likely-termination count declined from 7 percent to 6 percent.

Terminating a health-benefits plan would be a brash thing to do. According to a Mercer workplace survey in 2013, 93 percent of employees strongly or somewhat agreed with the statement, “Getting health benefits through work is just as important to me as getting a salary.”