CHA News Article

Report Predicts ACA Could Shift Health Care Benefit Responsibility Away from Employers
Reports $3.25 trillion potential savings to U.S. businesses through 2025

S&P Capital IQ Global Markets Intelligence (GMI) released a report yesterday that predicts the Affordable Care Act (ACA) could shift health care benefit responsibility away from employers, resulting in savings for S&P companies of nearly $700 billion –  and potential total savings to all U.S. businesses of $3.25 trillion – through 2025. According to the report, the incidental economic incentives that the ACA provides to companies make it reasonable to assume that employers will terminate health care coverage for lower-paid and part-time employees due to rising health care costs. GMI Research constructed a proprietary model to evaluate how companies might, over time, move away from the traditional health care insurance relationship with employees. The model assesses the impact on both employees and corporate America, benchmarked by S&P 500 member companies.

According to the report, the ACA presents an opportunity for companies to radically redefine the role they play in the health care system, mirroring events that happened decades ago, as companies reconsidered their employee retirement benefit policies. Potential implications for companies include:

  • Increased profitability for corporations since they may be relieved from the financial, regulatory and administrative burden of providing health care coverage as a traditional term and condition of employment;
  • Utilizing health care coverage as a recruitment tool, as opposed to an expected or assumed benefit of employment; and
  • Grasping the opportunity to shift retiree health care benefits toward the exchanges, thereby reducing or outright shedding long-term corporate expenses.

GMI Research began its assessment by investigating historical health care premium cost trends; establishing reasons why companies will look to change the traditional health care arrangement between employers and employees; and considering the potential ramifications as corporations reduce or eliminate the practice of offering health care insurance coverage to their employees. The report asserts that the transition away from employer-sponsored health care toward the ACA exchanges is likely to occur in stages, with companies moderating the rollout in order to minimize the disruption to their business. GMI Research predicts the first wave of transition to focus on entry-level college graduates, lower-wage workers or part-time employees, as these individuals are well positioned to benefit the most from government subsidies. It is expected that corporations will increasingly move more employees onto the exchanges over time.

The S&P 500 represents a material portion of the U.S. economy and is seen as a proxy for the entire U.S. economy. Its employment base is estimated to embody about 20 percent of the U.S. employee base for companies exceeding 50 employees. In reviewing the potential impact of changes to the traditional health care arrangement for the S&P 500 companies, the model also captures the possible financial impact on the U.S. economy and the stock market.