McKinsey Quarterly has just released a report projecting some of the reactions by employers to the new federal health care law (Affordable Healthcare Act) and a quick look will tell you that changes are a-comin', if this report is even close to accurate.
Early on, the report gives us this:
The early-2011 survey of more than 1,300 employers across industries, geographies, and employer sizes, as well as other proprietary research, found that reform will provoke a much greater response.
• Overall, 30 percent of employers will definitely or probably stop offering ESI [employee sponsored insurance] in the years after 2014.
• Among employers with a high awareness of reform, this proportion increases to more than 50 percent, and upward of 60 percent will pursue some alternative to traditional ESI.
• At least 30 percent of employers would gain economically from dropping coverage even if they completely compensated employees for the change through other benefit offerings or higher salaries.
• Contrary to what many employers assume, more than 85 percent of employees would remain at their jobs even if their employer stopped offering ESI, although about 60 percent would expect increased compensation.
The report concludes that "Our research suggests that when employers become more aware of the new economic and social incentives embedded in the law and of the option to restructure benefits beyond dropping or keeping them, many will make dramatic changes. The Congressional Budget Office has estimated that only about 7 percent of employees currently covered by employer-sponsored insurance (ESI) will have to switch to subsidized-exchange policies in 2014."
At its most basic, says the report, "Health care reform fundamentally alters the social contract inherent in employer-sponsored medical benefits and how employees value health insurance as a form of compensation. The new law guarantees the right to health insurance regardless of an individual’s medical status."
Here's one of the major changes: "A Congressional Budget Office report estimated that only 9 million to 10 million people, or about 7 percent of employees, currently covered by ESI would have to switch to subsidized exchange policies in 2014. Most surveys of employers likewise show relatively low interest in shifting employees from traditional ESI.
"Our survey found, however, that 45 to 50 percent of employers say they will definitely or probably pursue alternatives to ESI in the years after 2014. Those alternatives include dropping coverage, offering it through a defined-contribution model, or in effect offering it only to certain employees. More than 30 percent of employers overall, and 28 percent of large ones, say they will definitely or probably drop coverage after 2014."
Fact is, there will be significant changes. But isn't that what the law was meant to do? A number of years ago my friend Dick Robers, a visionary in our midst, strongly recommended that employers simply drop health care coverage for workers and pay them to take care of their own insurance needs or simply put the money away to self-insure. He believed--and my guess is he still believes--that the sudden drop in income would force insurance companies to make dramatic--and needed--changes to the way they do business. My guess is he's right and that the new federal law takes at least a small step in that direction.
This is either going to work or it is not, but it will be different from what we are experiencing. The definition of insanity is to continue what you're doing and expect change. Change comes by changing. And I don't think many of us will say we don't need change in this area.