The Patient Protection and Affordable Care Act of 2010 (PPACA) could create strong financial incentives for even the most benevolent employers to dump group health plans members into the individual health insurance market, according to Republicans at the House Ways and Means Committee.
Republican analysts conclude in a look at the possible effects of PPACA on the group health market that the large employers that participated in a committee survey could save an average of $402 million each in 2014, or about $4,821 per full-time and part-time U.S. employee, by eliminating group health benefits.
The analysts say they polled all of the companies on the Fortune 100 list and based their report on data from the 71 companies that responded.
The participating companies now spend an average of $541 million each per year on health benefits for active employees, the analysts say.
PPACA opponents are fighting the act in Congress and in the courts. If PPACA takes effect as written and works as drafters expect, it will require employers with the equivalent of 50 or more full-time employees to provide a minimum level of health benefits or else pay a penalty.
But the penalty will only be $2,000 per non-covered employee per year, and PPACA is supposed to give individuals the ability to buy coverage on a guaranteed-issue, mostly community-rated basis, the analysts say.
The companies that participated in the Ways and Means survey believe they would pay an average of $139 million each in penalties per year if they eliminated group health benefits but that the net savings would be about 3 times that amount.
PPACA supporters have pointed out that employers already could save the full cost of providing health benefits — an average of $541 million for each of the companies that participated in the Ways and Means survey — by eliminating health benefits today.
Many employers continue to provide health benefits even in states such as New York that already require insurers in the individual market to sell individual coverage on a guaranteed-issue, community-rated basis, PPACA supporters say.
Earlier in the spring, Rep. Pete Stark, D-Calif., said at a hearing on PPACA that analysts at the Congressional Budget Office and a number of private organizations, such as RAND, Santa Monica, Calif., and the Lewin Group, an arm of UnitedHealth Group Inc., Minnetonka, Minn. (NYSE:UNH), have predicted that the effects of PPACA on the employer plan market will likely be modest.
“Let’s remember that the employer mandate only applies to companies with 50 or more full-time employees,” Stark said at the hearing, according to a written version of his remarks posted on the Ways and Means website. “The data show that in our purely voluntary health insurance system today, virtually all – 94% – of employers at this size already offer coverage to their workers. Thus, the mandate doesn’t negatively affect them. Instead, it levels the playing field among employers by making sure that each pay their share of health care costs for their workers.”