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1 in 2 Employers Link PPACA to Cost Increases

 |  By Margaret@example.com  
   August 14, 2013

Fifty-five percent of employers surveyed about the impact of the Patient Protection and Affordable Care Act report increased business costs in the range of 1% to 4%.

Many employers have waxed eloquent about the effect of the Patient Protection and Affordable Care Act on their business costs. Their statements often include dire warnings about layoffs and large premium increases. But when employers actually put pen to paper (or fingers to keyboard) they are discovering that the impact may actually be less dramatic.

Survey results show that 69% of employers who offer health insurance benefits have analyzed the impact of healthcare reform on those benefits. About half of the respondents assigned a dollar value to the impact and of those, 55% reported increases from 1% to 4%, according to the 2013 results from ACA'S Cost Impact: Employer-Sponsored Health Plans.

In a telephone interview, Julie Stich, research director for the Milwaukee-based International Foundation of Employee Benefit Plans, said the large share of employers doing ACA cost analysis indicates that employers are "moving forward" in terms of ACA implementation. "They are looking at their direct costs, assessing the impact on their bottom line, and looking for ways to cuts costs."

Among the survey surprises: about 51% of small employers (fewer than 50 employees) reported healthcare benefit increases between only 1% and 6% in 2013, while 28% said the increase was more than 15%. Another 17% said there was no change in costs.

The small employer is something of a poster child for PPACA opposition with pundits often predicting that the costs of healthcare reform will put small businesses out of business.

Employers identified the top three PPACA cost drivers in 2013 as: the Patient-Centered Outcomes Research Institute (PCORI) fee (38%), general administrative costs (35%), and costs associated with resources necessary to communicate with employees about the PPACA provisions (28%).

The PCORI fee will cover the costs of research into the quality and effectiveness of care. In 2013 the fee was $1 for each of the annual average number of covered lives in a self-insured plan. The fee will double to $2 in 2014. Large employers, which tend to be self-insured, will clearly feel the effect the most. More than 40% of employers with more than 500 employees named PCORI as the top cost driver of the ACA.

To counter the cost increases employers are turning to the tried and true. Among the top methods: cost shifts to employees (53%), reduce the level of health benefits coverage (29%) and shift to high-deductible health plans (28%).

Stitch noted that increasing preventive measures such as wellness, value-based healthcare, and disease management was selected by 36% of employers. That is a sign that employers "recognize the importance of healthier employees in the workplace and in their health plans. Encouraging healthier behaviors has a positive impact both on the bottom line and on healthcare costs."

Only 2% of employers plan to drop health insurance benefits as a way to deal with increased costs.

Looking to 2014 employers are most concerned about transitional reinsurance fee costs (18%), followed by the costs of providing health benefits to employees who previously did not have coverage (13%), general ACA administrative costs and costs associated with the excise tax on so-called Cadillac health plans (both 10%).

In 2014 the transitional reinsurance fee will be a hefty $63 per covered life in self-funded health plans. The money will be used to fund reinsurance payments to insurers that cover high-risk members in the individual market.

The online survey was conducted in June 2013. The 728 respondents include benefit and human resources professionals and other industry experts.

Margaret Dick Tocknell is a reporter/editor with HealthLeaders Media.
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