GOP report: Health reform will increase employer health costs

Many companies cited in the report received health law funds

Topics: Health Policy, Market Trends, Strategy, Benefits, Labor Expense, Workforce, Benefits, Labor Expense, Finance

May 1, 2012

Some companies on President Obama's jobs council expect the federal health reform law to increase their health care costs, which could incent them to drop workers' coverage, according to a report released last week by Republicans on the House Energy and Commerce Committee.

The report—titled "Higher Costs, More Confusion, Less Coverage"—compiles public and private statements on the health reform law from business leaders on the President's Council on Jobs and Competitiveness, a 27-member advisory panel established last year.

According to the report, some companies anticipate their health care costs to increase because of higher taxes, fees, and administrative burdens created by the overhaul.

Some companies also voiced concerns that provisions requiring no-cost preventive care, the removal of lifetime coverage limits, and coverage for dependents would create an incentive to drop employee-sponsored coverage because the health reform law's penalties would be less than the cost of insuring each worker, the report stated.

For example, Southwest Airlines in 2010 said the overhaul would increase its costs by between $4.7 million and $9.4 million, according to the report. In July 2011, benefits consultant Mercer told Southwest that the overhaul would force the company to pay an extra $414 million annually. Alternatively, Mercer said the company could drop employee-sponsored coverage and pay $111 million in penalties.

According to the report, the documents corroborate concerns that "the law will increase costs, make future planning for hiring and expansions difficult due to the uncertainty created by the law, and could ultimately lead to employers dropping health-insurance coverage for their employees."

However, the Wall Street Journal notes that several companies mentioned in the report—including Southwest—denied any plans to drop their health benefits. The report notes that, "while no member of the council indicated that they were considering dropping their coverage at the current time, the temptation to drop coverage or provide a bare minimum level of coverage remains."

Companies included in report received millions in health law funds

Companies identified in the report have received more than $150 million collectively in health law funding, The Hill's "Healthwatch" reports.

According to "Healthwatch," 13 of the 27 businesses received money from the overhaul's Early Retiree Reinsurance Program (ERRP), and some of the most significant payments from ERRP went to companies that were featured prominently in the report.

"Healthwatch" notes that the report "makes only glancing mention" of ERRP. For example, Boeing—which has received $50 million from ERRP, the most of any of the companies—cited the early retiree money as a possible advantage of the overhaul. Boeing also said that the reform law would force it to shift more health care costs to its employees and retirees.

The reform law allocated $5 billion to ERRP through 2014, but HHS ended the program in 2011 because overwhelming demand from employers depleted its funds (Radnofsky,  Wall Street Journal , 4/26; Adams, CQ HealthBeat, 4/26 [subscription required]; Morgan, Reuters, 4/26; Baker, "Healthwatch," The Hill, 4/27).

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