How Will Employers Respond to Health Care Reform?0

The Patient Protection and Affordable Care Act (PPACA) is designed to reshape the nation’s health care system over the next decade. While parts of PPACA are already in effect, some of the greater milestones occur in 2014 and 2018.

Already the subject of several legal challenges, individuals who do not obtain or retain qualifying health care coverage by 2014 will be required to pay a penalty as part of their income tax returns.

For “large employers” (those with 50 or more full-time employees), PPACA imposes a penalty ($2,000 per employee) if any of their full-time employees qualify and receive federal subsidies after 2014. This provision exists in lieu of any requirement for employers to offer health insurance coverage to their employees, although the penalty does not apply for the first 30 employees.

The implications of this employer penalty have been widely debated since PPACA first passed. In an attempt to ascertain how businesses intended to respond to this health care reform requirement, McKinsey & Company commissioned a survey of 1,329 private sector employers.

According to the survey results, 30% of responding employers who offered employer sponsored health insurance indicated they would “definitely” (9%) or “probably” (21%) stop coverage after 2014. Although the survey noted it only captured current projections and was not entirely conclusive, the projections raised some industry concerns.

After facing questions and criticism, McKinsey & Company finally released the questionnaire and methodology of its survey. One White House official, Nancy-Ann DeParle (assistant to the President and deputy chief of staff) noted: “As we learn more, it’s become clear that this one flawed study from McKinsey is truly an outlier.”

Although the true impact may not be known until 2014, the concerns are nonetheless significant. A copy of the survey results can be found HERE. Additional articles on the subject also appeared in Monday’s New York Times and Wall Street Journal.


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