Surveyed Employers Say They Expect Costs to Increase with Reform

Janice Simmons, May 27, 2010

While U.S. employers may view controlling costs as a healthcare reform priority, only a few of those surveyed this month by Towers Watson, a professional services company, said they believed that reform would slow the tide of rising costs. However, despite these anticipated increases, nearly three fourths of large employers (74%) expect to continue to subsidize healthcare coverage for their active employees.

In terms of how important specific healthcare reform goals are to their organizations, 96% of those surveyed pointed to the containment of healthcare costs as essential or high priority, while 88% cited encouraging healthier lifestyles, and 75% suggested the improvement of quality of care.

However, despite these goals expressed by the employers, most (94%) said they thought that healthcare reform will raise their organization's costs. Also, 61% said reform will have a minimal effect on encouraging healthier lifestyles, and 73% said it will have either a negative or no impact on the quality of care.

"Employers are currently weighing the short term challenges and long term opportunities of the new law," Mark Maselli, North American health and group benefits leader for Towers Watson, said in a statement.

To address anticipated cost increases, many employers said they planned on:

  • Passing on increases to employees: 88%
  • Reducing health benefits and programs: 74%
  • Absorbing costs in the business: 33%
  • Passing on increases to customers: 20%

Also, the surveyed employers remained committed to many initiatives offered before healthcare reform legislation was introduced. For example, only 12% of employers said they would eliminate or reduce their wellness/health promotion programs in the wake of healthcare reform. Conversely, 48% of employers said that reform would encourage employers to offer wellness programs.

The employers also said they expected healthcare reform to result in increases in adoption of consumer directed health plans, 58%; transparency of provider prices, 37%; and of provider quality, 35%.

The survey noted, though, that retirees may not fare as well. Most employers surveyed (77%) said that reform would encourage a number of large employers to reduce offering employer-sponsored retiree health benefits. Forty-three percent of employers that currently offer retiree benefits plan said they plan to reduce or eliminate them.

This trend seemed more pronounced among those employers likely to be subject to the new excise tax on expensive plans approved under healthcare reform. Of that group, 55% said they were likely to eliminate or reduce retiree medical programs.

"Just as many baby boomers are deciding whether to delay retirement, employers will be determining if it makes financial sense for them to remain in the retiree medical business," said Dave Osterndorf, a senior consulting actuary with Towers Watson.

Janice Simmons Janice Simmons is a senior editor and Washington, DC, correspondent for HealthLeaders Media Online. She can be reached at
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