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Businesses Not Interested in Absorbing Costs for Healthcare Reform

John Commins, for HealthLeaders Media, September 17, 2009

Nearly nine-of-10 human resources and benefits executives at several hundred midsized and larger companies say their bottom line won't absorb any additional costs that may result from healthcare reform, according to a new survey.

The poll of 433 executives, conducted by Stamford, CT-based financial and risk managers Towers Perrin, found that employers are prepared to reduce benefits, raise prices for customers, and even reduce their workforces if the healthcare reforms that emerge from Congress increase the cost of providing employee coverage.

"With employer healthcare costs rising more than 150% over the last decade, it's no surprise that 90% of employers list cost containment as the most important healthcare reform goal," says Dave Guilmette, managing director of the Towers Perrin Health and Welfare practice. "Many large employers, however, feel that current reform proposals are focused on other healthcare issues—such as expanding coverage and reforming certain insurance practices—and they feel they have already addressed these issues within their own workforces.

"The way employers would respond to reform proposals that raise or lower their costs is one of our most telling findings—one that could conceivably impact economic recovery," Guilmette says. "With companies struggling to manage rapidly escalating healthcare costs and reclaim profits, only 11% of companies would agree to absorb increased healthcare costs by reducing their profits. The overwhelming majority of companies would respond to higher costs by reducing the benefits their employees receive."

The survey also found that 80% of the companies were closely monitoring the healthcare debate in Congress, 23% of them are rethinking benefit changes in light of possible reforms, and nearly 90% plan to reexamine their health benefit strategies for active employees in response to the passage of healthcare reform legislation.  And while talent management considerations, such as productivity, workforce health, and recruiting and retention, remain important even in a tough economy, cost issues will dominate employers' decision making in a post-reform world, the survey found.

Employers say they are skeptical that the reforms now under consideration will address fundamental drivers of healthcare costs. For example, 65% of employers believe the reforms will have little or no impact on unhealthy consumer behaviors that promote obesity and other chronic health issues.

However, 53% of employers believe that research on comparative effectiveness will have a positive impact on their business, and 44% believe that it will be good for business to reform the health insurance market to ensure guaranteed access to coverage regardless of health status. Nearly half of survey respondents believe that an employer "pay or play" mandate would negatively impact business.

Despite the sharp focus on costs, the survey respondents expressed strong positive views on the importance of workforce health to business success, the role of health benefits in the rewards portfolio, and the opportunities benefit programs provide in influencing workforce health. Notably, 61% say they would stand by their commitments to employee wellness and health promotion programs even if they no longer offered medical benefits.

"For many companies and in certain industries, health benefits are viewed as critical to the total rewards package," says Ron Fontanetta, Towers Perrin principal. "These programs provide important levers in managing talent and supporting other key business objectives."

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