Will some U.S. employers drop health benefits?

A controversial study by consultants McKinsey and Company suggests that at least 30 per cent of American employers are likely to stop offering health insurance by 2014 because paying an annual fine of $2,000 per worker will be cheaper than continuing to subsidize coverage.

Among employers with a high awareness of reform, this proportion increases to more than 50 per cent and upwards of 60 per cent will pursue some alternative to traditional employer-sponsored insurance.

That’s because the Affordable Care Act initiated by President Obama includes provisions that will make employer-sponsored health care more expensive, explains Kelley Butler, the Editor of the U.S. publication Employee Benefit News. For example:

- The law will require all employers with more than 50 employees to offer health benefits to every full timer or pay an annual fine of $2,000 per worker (after the first 30).

 - Employers will have to cover adult dependent children up to age 26, even if they are married or no longer in school. Currently they can take adult children off their plans at age 21.

- Workplace health insurance will be required to pay 100 per cent of any preventative care including mammograms, prostate examinations and well baby visits.

- Annual and lifetime limits on care must be eliminated.

- Employees cannot be refused coverage due to pre-existing conditions.

“We don’t have a handle on yet is the minimum benefits coverage employers must offer and these details are not likely to be released until next year,” says Butler. “Depending on what is in the minimum benefits standards, employers could say it is too expensive to continue providing a plan and nix it altogether.”

The latest census data shows that about 51 million Americans out of a population of about 300 million are without health care insurance. The goal of President Obama’s health care reform is to fill that gap.

Starting in 2014, all Americans should have health insurance. However, a Florida judge recently ruled that this obligatory element of ObamaCare was unconstitutional and the 11th Circuit U.S. Court of Appeals is hearing arguments on appeal this month. The case is expected to reach the country’s Supreme Court by early 2012.

People who are not offered affordable health insurance coverage by their employers may be offered income-indexed premium subsidies towards policies they will be able to purchase on newly created state insurance exchanges. The subsidies will cap the amount lower and middle-income individuals and families have to spend on health coverage to about 9.5 per cent of household income for those with a household income less than 400 per cent of the federal poverty level (about $89,900 for a family of four).

Butler says if her employer SourceMedia cancelled employee health care coverage, her family would not be eligible for a subsidy. Currently she has a high deductible health care plan partially-paid by the company for which she pays monthly premiums of about six to seven per cent of her salary. In addition, due to the high deductibles she has to pay amounts at point of service in doctors’ offices equal to two per cent or more of her earnings per year.

I asked Butler what the buzz is among U.S. employers she is in contact with on a daily basis. She says most of them are taking a “wait and see” attitude because the law could significantly change as a result of court challenges. They also want to be sure that available coverage is robust enough before they dump their employees into the exchange option.

And if the Obama is not elected to a second term, she says all bets are off. “If we have a Republican Congress and a Republican president, the law will most definitely be repealed.” Then it would be back to the drawing board for the 17 per cent of Americans who can’t afford to be sick.

Warts and all, it makes the Canadian health care system look pretty good. No wonder in a 2004 CBC contest, Canadians voted the father of medicare Tommy Douglas as the Greatest Canadian. He’d still get my vote today.

Also see: The truth about ObamaCare  and Obama’s reality problem on health care .