Small and mid-sized employers will be hit hardest financially when complying with provisions in the Patient Protection and Affordable Care Act. But larger employers, says a new report, won’t be as affected as some have predicted.  

In general — despite employer fears — the provisions of health reform haven’t yet made a strong financial impact on most businesses, says the 2012 employer survey conducted by the Midwest Business Group on Health and co-sponsored by the National Business Coalition on Health, Business Insurance and Workforce Management.

Large employers say the cost impact of the PPACA in 2011 — including extending coverage to adult children up to age 26 — was less than 2 percent, the survey finds. But the cost impact is higher for small and mid-sized employers, who say their increases were up to 5 percent.

Many small employers anticipate increases in their health benefit costs over 10 percent in the future due to the PPACA.

“Small employers fear the potential financial impact of future ACA changes, while larger organizations see the potential of improved cost and quality improvements as enabled through many of the requirements of the ACA,” says Larry Boress, MBGH president and CEO.

These results are different from a Willis survey out this month that found compliance with health care reform has already drove up costs for some employers’ group health plans, and a majority of employers expect price increases to be passed on to employees.

The Midwest Business Group survey also says fewer U.S. employers said they plan to drop coverage due to the law’s mandate than was reported in 2010. Six percent of all employers said they were likely to pay the penalty fee and drop health benefits coverage for employees in order to save money—down by more than half from the company’s 2010 survey results.

Less than 30 percent of employers that are likely to drop coverage say they will raise salaries to enable individuals to buy health coverage on their own.

Torn on reform

Still, the survey finds, employers aren’t completely on board with the reform law. Almost half (42 percent) of employers surveyed say they hope the PPACA is struck down in its entirety. Most large employers say they expect the Supreme Court to uphold the law but strike down the individual mandate.

The survey pointed to exactly what provisions employers did and didn’t like.

They favor repeal of the following PPACA provisions: the excise tax on high cost plans, capping flexible savings account contributions, prohibiting using FSA amounts for over the counter drugs with prescriptions; and reporting cash value of benefits on W-2 forms.

They favor retaining the provisions of removal of co-pays for preventive care, mandating coverage of preventive services, the creation of health insurance exchanges, elimination of annual and lifetime limits on essential benefits, and extending coverage to adult children.

Employers are split on the value of some provisions, including requiring employers who drop coverage to offer vouchers to help people buy insurance, imposing penalties on employers who do not provide health benefits, mandating individuals to obtain health insurance, and defining minimum essential benefits.

“Employers appear to be warming up to the potential value of ACA provisions on prevention and wellness incentives, provider payment reform, medical homes, ACOs, and cost and quality transparency even while expressing continued frustration with the law’s slow pace toward cost containment,” says Andrew Webber, NBCH president and CEO. “And while employers seem to have less of an appetite for dropping coverage than noted in previous surveys, alternatives like defined contribution strategies are beginning to be considered and bear close monitoring in the years ahead.”

The survey was conducted online from February to March 2012. There were approximately 440 respondents from 34 states; 58 percent representing employers with more than 500 employees and 25 percent representing employers with 50-500 employees.