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Willis Survey: Health Care Reform Driving Up Health Plan Costs For Employers

Compliance with health care reform is already driving up costs for some employers’ group health plans, and a majority of employers expect price increases to be passed on to employees, according to a health care reform survey released today by the Willis Human Capital Practice, a unit of Willis Group Holdings (nyse:WSH), the global insurance broker.

While only about a quarter of the responding employers have quantified the cost of compliance within their health plans, a majority (nearly 56 percent) of those employers said the cumulative cost amounted to an increase in cost; over 15 percent noted that the cost increase was between two and five percent, and over 15 percent said that the cost increase was more than five percent. Employers report that their most significant cost drivers are the provision of adult child coverage up to age 26 and the removal of the annual/lifetime limits for “essential health benefits.”

The Health Care Reform Survey 2012, available here, outlines employers’ perceptions regarding the Patient Protection and Affordable Care Act (PPACA) and planned responses to health care reform measures. In addition, the survey provides a current snapshot about what actions employers believe other employers will take in response to health care reform.

The survey represents the findings from a significant population, including more than 2,300 employers of varying sizes, industry sectors and geographic regions.

Key findings from the survey include:

Employers expect that similar employers will pass increased costs on to employees: More than half of the responding employers felt that other, similar employers would pass more of the cost for dependent coverage on to their employees. One-third of respondents thought other, similar employers would reduce coverage to the lowest-cost package to avoid the “pay-or-play” penalty, and a majority of employers also thought that wellness programs would be expanded in scope. Finally, nearly two-thirds of the employers expected that employee contributions would be increased.

Employers are waiting to communicate health care reform changes to employees: Within the next 12 months, 40 percent of employers will be reviewing their strategies for internally communicating benefit rewards.

Only one-third of employers have maintained grandfathered status despite a desire to remain grandfathered: The rate at which respondent employers have lost grandfathered status has far out-paced the Department of Health & Human Services’ expectations for 2012. The accelerated loss of grandfathered status suggests that employers have had to make many plan changes to offset cost increases, and perhaps employers have been more willing to give up grandfathered status in order to take other steps to control costs.

“Now that the health care reform act has entered the implementation phase, the costs and benefits associated with the act are coming into greater focus for employers,” said Jay Kirschbaum, Practice Leader - National Legal and Research Group, Willis Human Capital Practice. “The survey suggests employers realize that costs of providing medical benefits will increase and that they will likely have to pass those costs on to their employees.”

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