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Will Self-Insured Employers Drop Healthcare Coverage?

Employers offering healthcare benefits are finding it nearly impossible to predict -- or manage -- costs. They are beginning to rethink the notion of tying together employment with such benefits, experts say.

Monday, October 31, 2011
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Government intervention in the healthcare system may force self-insured employers to abandon offering healthcare coverage, according to managers with self-insured employers speaking at the annual convention of the Self-Insurance Institute of America Inc in Phoenix earlier this month.

In cases where employers decided to refrain from offering health benefits, employees would be left to seek coverage under healthcare exchanges, scheduled to take effect in 2014 as part of the Obama administration's healthcare reform signed into law last year.

For more than 50 years, employers have offered health benefits to attract and retain skilled workers and top managers. Many employers, however, are beginning to rethink that notion of employer-sponsored benefits as employees have the opportunity to shop for health plans independently of their employer's coverage.

Thousands of small businesses around the country offer minimal health benefits or none at all because it's too expensive.

Self-insured employers offering a health-coverage benefit is made all the more difficult because it has become almost impossible for employers to predict, much less manage healthcare costs, experts say.

One California-based manufacturer of commercial and residential flooring, for example, estimated its healthcare costs in 2011 at $3.8 million. The company is projecting its healthcare costs in 2012 to climb to $5 million. By 2014, when exchanges are launched, healthcare costs to the company are projected to come in at $16.3 million.

Stephen Rasnick, president of Self-Insured Plans, a Naples, Fla.-based company which designs benefits plans and manages claims on behalf of self-insured employers, said healthcare reform has left many companies facing "too many unknowns."

For years, employers have tried to corral costs by using the levers at their disposal such as raising deductibles and changing coinsurance rates. Employers have also implemented health-savings accounts and flexible-spending accounts, but many employees have avoided participating in those because they don't exactly understand how they work.

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The changes and the tinkering with ways to lower cost increases have left employers "exhausted," said one benefits consultant.

Health-benefits costs are expected to go up yet again in 2012. A Towers Watson survey of 368 mid-sized to large companies released in August found that employer healthcare costs will rise 5.9 percent, on average, by 2012. The increase is down slightly from a 7.6 percent increase in 2011, over the previous year.

The survey also found that 66 percent of companies will increase employees' share of premiums for single-only coverage in 2012, and 73 percent of companies will increase the share of premiums for dependent coverage.

The Obama administration signed health reform into law in March of 2010, and the changes will insure 21 million people by 2014, according to Congressional Budget Office estimates. Healthcare reform proponents have argued that long-term healthcare costs will be kept in check as more people are covered and as the coverage is spread among more people.

Critics say that, while reforms have addressed accessibility, the reforms have done nothing to address costs.

Federal courts have sided for and against the reforms and the Obama administration has asked the U.S. Supreme Court to rule on the constitutionality of the law, known as the Patient Protection and Affordable Care Act.

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