Shift to public exchanges could save employers $3 trillion

Benefits Pro reports:

“The nation’s employers could save a whopping $3.25 trillion over the next decade by shifting most of their employees from workplace health plans to the public exchanges.

That’s according to an S&P Capital IQ report that notes government subsidies and individuals themselves would be left to pick up the tab.

The S&P 500 alone, it said, could save $700 billion through 2025 – potential savings that represent 4 percent of those companies’ market capitalization.

Likening it to the shift of employees to their own retirement accounts, the financial information provider said it believes the Patient Protection and Affordable Care Act will result in “profound, and possibly unintended, consequences for corporate America, the average U.S. employee, and more broadly, the entire U.S. economy.”

Whether employers will actually shift workers off their plans has been a big question for some time. Beyond addressing the bottom line, nowhere in the report does S&P Capital IQ try to wrestle with the business or moral implications of such a move. It also says nothing about the notion of pay raises or stipends employers might have to offer to soften the blow of ending coverage.

Many in the human resources business believe cutting off benefits will leave corporations at a competitive disadvantage, in terms of recruitment and retention.

On that point, S&P Capital IQ said only that a move away from employer-sponsored health care creates an opportunity for companies to use health care coverage as a recruitment tool, “as opposed to an expected or assumed benefit of employment.”

Individuals also could benefit, it said, because with more people buying insurance, coverage should become more affordable. PPACA advocates say the same thing about the law, though few believe premiums next year will rise at appreciably lower rates.
It also touted the advantage of “widespread portability of benefits, allowing an individual to maintain preferred care givers and benefit coverage terms in the event of changing employers over the course of an individual’s career.”

On the flip side, the report did acknowledge these “improvements” could come at a cost.

Among them: individuals could lose any cost-sharing by employers. Also, premiums will no doubt rise for some individuals if they don’t qualify for subsidies.

S&P Capital IQ included what sounds like a warning to employers on these points.

“At the moment, any drastic changes to employer-provided health care benefits would likely be frowned upon by employees and the voting public at large. Neither lawmakers nor the White House originally anticipated the idea that [PPACA] could provide corporations with an enormous subsidy to earnings. However, once a few notable companies start to depart from their traditional approach to health care benefits, it’s likely that a substantial number of firms could quickly follow suit.

Any employer “play or pay” penalties under the PPACA for failing to provide coverage, it said, will not be enough to incentivize companies to continue offering health care benefits to their employees, especially in light of rising insurance costs.

In the end, it predicted, corporations “will enact these changes to satisfy their most sacred compact with their investors, which is to maximize shareholder value.”

The report contained echoes of recent book by one of the architects of the PPACA, Ezekiel J. Emanuel, who predicts that by 2025, fewer than 20 percent of employers will offer coverage to workers. Thomas Parry, president of the Integrated Benefits Institute, argues employers who do so stand to lose more than they might gain.

Parry’s position is that, after decades of providing health coverage to employees, companies have amassed huge amounts of health data. This data includes lost work time due to illness, relationships between certain lifestyle habits/choices and work, the effects of obesity on long-term productivity, and more.

“If employers decide to let someone else take care of their employees’ health coverage, they are going to lose access to a lot of very crucial information,” he said in a recent interview.

“You need to understand the value of a healthy workforce. If a healthy workforce comes to work more often and does a better job, it’s good for your business. If you don’t understand that, and are only focused on short-term cost savings, you’re risking your business.”