Few Employers Planning to Drop Health Plans after Reform is in Place, Mercer Survey Finds

  • Just 6% of large employers (at least 500 employees) say they are likely to drop their health plans after the insurance exchanges come online in 2014.
  • More small employers say they’re likely to drop (20% of those with 10-499 employees), but if Massachusetts’ three-year experience with exchanges is a guide, few will actually do so
  • Cost impact of PPACA in 2011 is estimated at 1-2% overall, but it ranges from no impact to 5% or more for individual employers

NEW YORK--(BUSINESS WIRE)-- While employers are encouraged to offer coverage under the new health care reform rules, they can choose not to and (starting in 2014) pay a penalty that may be less than what they currently spend on health benefits.

In a survey released today by consulting firm Mercer, employers were asked how likely they are to get out of the business of providing health care once state-run insurance exchanges become operational in 2014 and make it easier for individuals to buy coverage. For the great majority, the answer was “not likely.”

The survey results, a preview of findings from Mercer’s 2010 National Survey of Employer-Sponsored Health Plans to be announced later this month, will be released today at Mercer’s inaugural Innovation Conversation webcast, which begins at 3 p.m. EST (click on the following link to register: “True Health Care Reform through Innovation” or http://tiny.cc/cvl4x). More than 2,800 employers participated in the annual survey, now in its 25th year.

Survey responses vary by employer size. Large employers remain committed to their role of health plan sponsor. Just 6% of all employers with 500 or more employees – and just 3% of those with 10,000 or more – say they are likely to terminate their health plans and have employees seek coverage in the individual market after 2014.

Employers have never been required to offer coverage. They do so to promote a healthy, productive workforce and to attract and retain employees, who place a high value on health coverage because it can be expensive to purchase as an individual and, especially for those with health problems, difficult to obtain.

“Employers are reluctant to lose control over a key employee benefit,” said Tracy Watts, a Partner in Mercer’s Washington, DC, office. “But beyond that, once you consider the penalty, the loss of tax savings and grossing up employee income so they can purchase comparable coverage through an exchange, for many employers dropping coverage may not equate to savings.”

On the other hand, a fifth of small employers (those with 10–499 employees) say they are likely to terminate their health plans, especially those with low-paid workers and high turnover, like retailers. These small employers generally offer fully insured health plans and, with small risk pools and little purchasing power, are vulnerable to large rate increases.

“You can see why the idea of dropping employee health plans would be attractive to small employers,” said Beth Umland, who directed the study for Mercer. “On the other hand, when you look at the experience in Massachusetts, where insurance exchanges have been operating under state-based health reform for over three years, it hasn’t happened.”

The complete analysis is available at http://www.mercer.com/press-releases/1399495.

About Mercer

Mercer is a leading global provider of consulting, outsourcing and investment services. Mercer works with clients to solve their most complex benefit and human capital issues, designing and helping manage health, retirement and other benefits. It is a leader in benefit outsourcing. Mercer’s investment services include investment consulting and multi-manager investment management. Mercer’s 18,000 employees are based in more than 40 countries. The company is a wholly owned subsidiary of Marsh & McLennan Companies, Inc., which lists its stock (ticker symbol: MMC) on the New York, Chicago and London stock exchanges. For more information, visit www.mercer.com.


Stephanie Poe, 202-331-5210
[email protected]

KEYWORDS:   United States  North America  New York

INDUSTRY KEYWORDS:   Health  Public Policy/Government  Healthcare Reform  Professional Services  Consulting  Human Resources  Insurance  General Health