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Sunset looms for employer health plans

By Jay MacDonald · Bankrate.com
Tuesday, May 6, 2014
Posted: 6 am ET

Should employers continue to offer health insurance to their workers?

That's been the topic of sober, bottom-line discussions in corporate boardrooms across the land these past few years as unsustainable health care costs, combined with a growing public policy shift toward universal coverage, set the stage for companies to make a graceful exit from a non-core business function.

What's more, the days of the old chocolate-or-vanilla employer health plan may be over sooner than anyone expected.

Everybody, into the exchanges!

A study released last week by financial research firm S&P Capital IQ predicts that by 2020, 9 in 10 workers currently receiving health insurance th© Jim Vallee/Shutterstock.comrough their employer will instead be managing their own health plan, 401(k) style, on a government exchange created under Obamacare.

The report goes on to estimate that by 2025, the S&P 500 companies -- America's short list of corporate giants -- would save $700 billion, or 4 percent of their total value, by discontinuing employee health plans. For all U.S. companies with more than 50 employees, the savings would be closer to $3.25 trillion, the study claims.

"According to model estimates, employers are set to benefit the most as the government takes on a larger funding role," according to the report.

Which will likely set off some strategy retooling among those wishing to repeal Obamacare.

Where is health reform taking us?

Those enticing savings, after all, would scarcely be on the horizon if President Barack Obama's landmark Affordable Care Act had not mandated that most Americans obtain health insurance or face the financial consequences -- namely, both the federal tax penalty and the catastrophic risk of "going bare."

The creation of HealthCare.gov and the other state-based insurance exchanges also helped break the "job lock" dilemma that left many employees trapped in jobs simply for the health insurance benefits.

Who knew the change could be such a corporate moneymaker? Most health economists, that's who.

Not only is America's idiosyncratic, three-party health care system costly, inefficient and increasingly ineffective, it's now outdated and unnecessary, thanks to the individual mandate and availability of government subsidies that make health care affordable.

Similar to pensions

S&P Capital IQ Managing Director Michael G. Thompson likens the impact of Obamacare on employer-provided health insurance to the 1978 creation of 401(k) plans on traditional employee pensions.

"We still expect some companies to hold on to their health care plans, just as some private companies still have pensions," he told The New York Times. "But we think that the tax incentives for employer-driven insurance are not enough to offset the incentives for companies to transition people over to exchanges and have them be more autonomous around management of their own health care."

Here's more about the brave new world of defined benefits and private exchanges.

Follow me on Twitter: @omnisaurus.

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1 Comment
S.Legg
May 08, 2014 at 1:31 pm

Affordable Health Care is a joke. My wife investigated healthcare.gov insurance offerings with the following result:

A policy with $5000-6500 out of pocket max with an annual deductible of at least $3000 comparable to an Aetna policy we already had in force was a premium difference of $317/month with Aetna versus $695 - $750 under healthcare.gov. If this is affordable, somebody is lying and the program is ridiculous. Check it out, you might be surprised. When all major companies quit health insurance coverage is when the fun will begin!!

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