Once provisions of the Affordable Care Act start to kick in during 2014, at least three of every 10 employers will probably stop offering health coverage, a survey released Monday shows.Here's what I predict will actually happen - the employers will drop their employer-sponsored plans but most of them will not offer increased compensation to employees. Their reasoning will be that the economic climate can't support higher wages so instead of laying people off they'll allow people to keep their positions and current salaries, but they'll be on their own for insurance.
While only 7% of employees will be forced to switch to subsidized-exchange programs, at least 30% of companies say they will “definitely or probably” stop offering employer-sponsored coverage, according to the study published in McKinsey Quarterly.
The survey of 1,300 employers says those who are keenly aware of the health-reform measure probably are more likely to consider an alternative to employer-sponsored plans, with 50% to 60% in this group expected to make a change. It also found that for some, it makes more sense to switch.
A 4% economic-growth rate for 2011 now looks like a pipe dream. In that case, assumptions about corporate earnings may be high, especially with the Federal Reserve's latest bond-buying program winding down. Kelly Evans discusses.
“At least 30% of employers would gain economically from dropping coverage, even if they completely compensated employees for the change through other benefit offerings or higher salaries,” the study says.
It goes on to add: “Contrary to what employers assume, more than 85% of employees would remain at their jobs even if their employers stopped offering [employer-sponsored insurance], although about 60% would expect increased compensation.”
Just watch.
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