Will Companies Drop Health Coverage Because Of Health Reform Law

If you were a business owner, and knew that you could save a lot of money by dropping your company health insurance plan and put your employees into the health insurance exchange where they could get similar coverage, would you do it? That’s the question that the House Ways and Means Committee was trying to answer in a new report they released recently. Their analysis showed that businesses could save $28 billion in the first year of health care reform (2014) by dropping the company benefit plan and paying a small penalty for ending the employee coverage.

From a company perspective, the employees will still get coverage, and potentially at lower cost, especially if they qualify for US government subsidies. While the company saves thousands if not millions of dollars, which then flows to the bottom line as increased profits. This will be a very tempting test for smaller companies that are struggling to make ends meet in a tight economy.

The Congressional Budget Office says that employers won’t drop health coverage because they use the benefit plans to retain and attract their employees. However, both reports only talk about the largest companies in the US, and forget about the small business that is offering benefits to it’s employees as a nicety. In the small business group health insurance marketplace, the cost of health plans is typically much higher than the cost of plans in the individual & family health insurance market. So it is possible that businesses could split the cost savings with employees and let the employees get health insurance through the exchange that is comparable to what they had through work. Both sides would win and health care reform would take a potential financial hit in increased subsidies.

Stay tuned for more.