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Nov 20, 2014 3:35 PM

Polls: Employers still prioritize health coverage

The Associated Press

Employers squeezed by years of rising medical costs and pressure from the health care overhaul are still making employee health insurance a priority, but that coverage may grow skimpier in the coming years.

A poll from The Associated Press-NORC Center for Public Affairs Research found that companies that offer health insurance see it as a key tool to attract workers and keep them on the job. But they're also sweating the expense, with 86 percent citing the cost of coverage as a key factor in picking a plan.

A separate survey from the benefits consultant Mercer found that only 4 percent of all large employers say they will likely drop their employee health plans within the next five years, a figure that has trended down over the past few years.

"We've been hearing lots of people blowing alarms about employers dropping plans and getting out of the business, but that's never what our data showed," said Beth Umland, Mercer's director of health and benefits research.

The survey results run contrary to speculation among benefits insiders that more companies would consider dropping insurance coverage for their employees. They figured companies might do so in order to curb health care costs, which have climbed faster than inflation for years for many employers. The health care overhaul also has added more costs in some cases with taxes, fees and coverage mandates.

Additionally, the overhaul created public insurance exchanges on which people can buy coverage. That could offer a safety net for companies that had offered benefits only because their employees had no other way to get them.

Many companies have pared their coverage by making their workers pay a bigger share of the doctor bill. In some cases, they've also cut coverage for spouses of workers who can find insurance elsewhere. But business owners say they still see several reasons to offer some coverage.

A total of 81 percent that offer insurance in the AP-NORC poll said they do so mainly because it's the right thing to do, while about 60 percent say it helps recruit and keep workers.

Kinetic Systems Vice President and co-owner Judy Solomon says she has to provide insurance to attract and keep engineers when competing against bigger companies. Her Boston business has 32 full-time workers and makes equipment that helps control vibrations for sensitive scientific instruments

She also thinks her lower-wage workers should have coverage as well.

"I won't drop it no matter how much it goes up (in price)," she said. "I've sustained as much as an 18 percent increase in some years."

Companies are generally wary about making big changes to their benefits to avoid pushing employees to leave, especially if unemployment rates are low and the pool of possible replacements is weak.

"Historically, as the labor market improves, employers are more willing to go along with the status quo, so to speak," said Jon Gabel, a senior fellow at NORC at the University of Chicago.

Offering insurance also can make good business sense. Companies get a tax break for offering benefits. They lose that if they drop coverage. And, depending on a company's size, it also may have to pay an overhaul-mandated fine for not providing coverage.

In addition, a company that drops coverage probably will have to give employees more cash to help them buy coverage on their own and avoid a mass exodus of unhappy workers.

While companies in general remain resolute about offering coverage, the expense may become too much for smaller businesses that generally have less control over rate hikes and what they offer their employees. The Mercer study found that 16 percent of companies with 50 to 199 employees say they are likely or very likely to drop medical plans in the next five years.

Employers that stick with benefits may not offer the same coverage year after year, though. Ezell Precision Tool Co. used to pay the entire premium for its workers. That changed after that bill spiked 40 percent a few years ago. Now the Clearwater, Florida, company covers half the premium and has workers pay a $10,000 deductible before most of their insurance coverage starts.

Nevertheless, Controller Anne Short said her company remains committed to offering some coverage.

"It's the right thing to do," she said.

The AP-NORC Center for Public Affairs Research survey of employers on the health insurance market included interviews by telephone or online with a representative sample of 1,061 private sector companies with at least three employees. It was conducted by NORC at the University of Chicago from August 19 through October 8, with funding from the Robert Wood Johnson Foundation. For results among the full sample of employers, the margin of sampling error is plus or minus 5.6 percentage points.



AP-NORC Center: www.apnorc.org


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