In a setback for supporters of President Obama’s healthcare reform law, management consulting firm McKinsey & Co said last week that 30 percent of employers will “definitely” or “probably” quit offering health coverage to employees in the years after the law takes full effect in 2014.

According to McKinsey, the figure rises as high as 50 percent among employers with a greater awareness of the healthcare reform law.

Key provisions of the Patient Protection & Affordable Care Act (PPACA) are slated to take effect in 2014, including the employer “Play or Pay” mandate, the individual mandate to buy health insurance and the state-based health insurance exchanges.

The finding of a 30 percent health coverage drop rate appears to result from the interplay between the employer mandate and the state exchanges. The “Play or Pay” provision requires employers to offer coverage that meets both minimum value and affordability tests, while the state exchanges will make available to the uninsured and others subsidized insurance plans covering essential health benefits. Read more.

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McKinsey: 30 Percent of Employers Could Drop Health Benefits

Fri Jun 17, 2011

In a setback for supporters of President Obama’s healthcare reform law, management consulting firm McKinsey & Co said last week that 30 percent of employers will “definitely” or “probably” quit offering health coverage to employees in the years after the law takes full effect in 2014.

According to McKinsey, the figure rises as high as 50 percent among employers with a greater awareness of the healthcare reform law.

Key provisions of the Patient Protection & Affordable Care Act (PPACA) are slated to take effect in 2014, including the employer “Play or Pay” mandate, the individual mandate to buy health insurance and the state-based health insurance exchanges.

The finding of a 30 percent health coverage drop rate appears to result from the interplay between the employer mandate and the state exchanges. The “Play or Pay” provision requires employers to offer coverage that meets both minimum value and affordability tests, while the state exchanges will make available to the uninsured and others subsidized insurance plans covering essential health benefits.

Some have speculated that the combination of an enforceable federal government mandate on employers to offer specific coverage, coupled with the existence of an alternative source of comprehensive health insurance, i.e., the state exchanges, might encourage some employers to drop coverage, pay whatever fees the government assesses and refer employees to the exchanges.

McKinsey concludes on the basis of its survey that the 2010 healthcare reform law will trigger a “radical restructuring” of employer-sponsored health benefits.

To be sure, forecasts of employer decisions with respect to worker health benefits years ahead are just that: forecasts. Like Farmers’ Almanac snow predictions, they can be way off the mark.

On the other hand, the McKinsey survey targets a present reality—the PPACA is fraught with uncertainty for employers, not the least of which is uncertainty about compliance with sweeping new federal government mandates.

No one knows today whether 5, 10, 15, 20 or 30 percent of employers will stop offering health coverage over the next few years. There is no question, however, that most employers will be keeping their options open.