U.S. employers will defray health reform costs: study

NEW YORK Thu Sep 17, 2009 3:12pm EDT

1 of 3. People shout at a town hall meeting on healthcare reform in Littleton, Colorado, August 12, 2009.

Credit: Reuters/Rick Wilking

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NEW YORK (Reuters) - If U.S. health reform efforts lead to higher costs for employers, employees may end up bearing the brunt, according to a new survey.

Employers will not absorb higher costs, choosing instead either to reduce benefits, lower salaries or cut jobs, the survey from professional services firm Towers Perrin said on Thursday.

Eighty-seven percent of employers said they were very likely or likely to cut benefits if reform leads to higher costs. Only 11 percent said they would accept lower profits.

"They simply don't have money and margins today to absorb additional healthcare costs," said Dave Osterndorf, chief health actuary at Towers Perrin.

Should reform reduce benefit costs to the companies, 78 percent they were very likely or likely to retain the savings in the business.

The survey of more than 430 human resource executives at medium and large businesses taken in July was designed to gauge opinions on reform as legislative efforts were heating up.

Congress is weighing bills that would overhaul the healthcare system, which is President Barack Obama's top legislative priority.

Proposals that might drive up employer costs include those that would force employers to expand their coverage, such as to part-time workers, or those that would allow healthy workers to find coverage elsewhere, leaving employers to pay for sicker, more expensive employees, Osterndorf said.

Although the ultimate outcome of reform efforts remains uncertain, nearly one in four companies in the survey are already rethinking changes in light of possible reforms.

Of all the goals of health reform, cost containment was listed most frequently as an absolutely critical or high priority among the businesses in the survey, which ranged in size from roughly 1,500 to 100,000 workers.

But, Osterndorf said, employers believe that issues such as expanding access to coverage and reforming certain insurance practices have received more attention.

"Employers are saying, 'These are important social issues that are being addressed, but they don't necessarily hit on the issues that we're facing as employers,'" Osterndorf said.

Of the healthcare proposals, 53 percent of employers believe research on effectiveness of treatments will help their business by influencing the quality of care.

Employers had varying responses to how they would react to proposals mandating they offer coverage to meet certain minimum standards or pay a penalty -- called "pay-or-play" mandates.

Thirty-seven percent of employers would provide company-sponsored coverage that substantially exceeds the standard. But 29 percent said they would end company-sponsored health coverage and pay the assessment if the per-employee costs to the government were much lower than current costs.

(Reporting by Lewis Krauskopf, editing by Matthew Lewis)

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