Employer mandate delay does little to address cost

Even if an employer holds off on extending health care coverage to all employees until the new Affordable Care Act deadline of 2015, plan design changes and additional enrollment should drive up health plan costs 2% to 3% next year, according to an analysis from Mercer, which says price is still a tremendous issue for companies grappling with health care reform. Avoiding the excise “Cadillac” tax of 2018 is already driving internal changes, says Julio A. Portalatin, Mercer president and CEO.

“The delay will give employers more time to cope with some of the requirements, but they know it’s no free pass,” Portalatin says. “We expect employers to stay 100% focused on cost management. Last year they slowed benefit cost growth to its lowest level in 15 years, but in 2014 they have the new fees and the likelihood of new enrollment to contend with, on top of normal medical inflation.”

Portalatin says that “as employers evolve their go-forward benefit strategies, private exchanges” will continue to be a popular strategy for both cost management and tailored employee choice options.

In a recent Mercer survey, 25% of employers had not yet decided how they would track and report variable employee work hours. The delay in the employer mandate, announced last week, will give those firms time to address this issue, but public state exchanges may still reach out as early as 2014 to verify applicant eligibility for health insurance.

Half of those Mercer questioned were worried about employee questions on exchanges, and 43% had concerns about interacting with those exchanges.

The survey, taken before last week’s announcement, had approximately a third of employers currently lacking health coverage for every employee working at least 30 hours a week. Tracy Watts, a senior partner in Mercer’s Washington office, says the delay offers a “gap year” for prep time, but the decision on expanding coverage should still be made.

“While we don’t know for sure whether these employers will choose to expand eligibility early, they have sufficient lead time to decide to hold off,” Watts says. “Most have not announced changes yet, and if they have an extensive part-time work force, the money to be saved by not expanding coverage in 2014 could be considerable.”