Estimating the Cost of Health Reform

Some of the new health care reform provisions will begin within the next six months for many employers.  While it is impossible to predict how much benefit costs will increase for all companies, certain factors can be used to make a rough estimate.

For example, look at the demographics of the employees.  Employers with a young workforce will have fewer employees with young adult children eligible for coverage.  Premium increases resulting from this provision most likely will be significantly less than companies with many employees in the 45-60 age range.  Some employers in the latter category are considering different ways to reduce their costs.  They are looking at adding additional premium tiers, or boosting premium shares for dependent coverage.  Nearly half are considering requiring adult children to certify that they have no other coverage available.  Under the current law until January 1, 2014, adult children are ineligible if they can enroll in another employer plan.

Another part of the reform plan calls for a 40% excise tax imposed on premiums which exceed $10,200 for single coverage and $27,500 for family coverage.  Although this provision will not start until 2018, it poses a serious problem for employers with generous plans.  If they cut coverage back, they may lose current employees and an important recruiting edge.  If they don’t, employers face additional costs.

From Business Insurance, posted May 20, 2010, based on a survey by Mercer of 791 employers.