Lockton Exec. Testifies to Congress on Health Reform Cost to Employers

Lockton Executive Says Employers Wary of Health Reform Costs, Testifies to Congress, Releases Study of Cost Pressures on Employee Benefit Plans

Mike Brewer, President of Lockton Benefit Group, urged a U.S. House Committee March 10 to help employers reduce the costs and administrative burdens of the health reform law passed last year.

“Our clients find that the health reform law makes what is already a costly and administratively burdensome endeavor – the sponsorship of a simple group health insurance plan – even more expensive and more hassle-prone,” Brewer told the U.S. House Education & Workforce Committee’s Subcommittee on Health, Employment, Labor and Pensions. “Our clients wish that Congress would work to make an employer’s provision of health insurance easier and less costly, rather than more expensive and more burdensome.”

In conjunction with the hearing, Lockton Benefit Group released an actuarial modeling study of more than 130 employee benefit plans that shows that the health reform law imposes additional costs on employers’ health plans. The study also shows that the law will create a financial incentive for some employers to terminate health benefit plans in 2014 when new Insurance Exchanges take effect. See the report, “Employers Wary of Health Reform Costs and Hassles.”

“Employers are burdened and frustrated by aspects of the health reform law that add costs to their health plans,” said Brewer. “Some employers will eliminate group health coverage and full-time jobs in 2014 because of the law.”

Brewer told the House Subcommittee, “Across all industry segments in our book of business, clients will have a significant financial incentive to terminate their group coverage once the Insurance Exchanges present employees with another subsidized health insurance option. The vast majority of our clients currently spend far more on health insurance per employee than the nondeductible penalty under the “play or pay” mandate. By 2014, this gap will be much larger still.”

“Thus far, few clients have told us they definitely intend to terminate group coverage in 2014, when Exchange-based coverage becomes available.” Brewer testified. “Similarly, few clients have told us they definitely intend to maintain their group coverage. The majority of our clients tell us they will wait and see. What they will do in 2014 depends on their health insurance costs and budget in 2014, and their perceived need to use a health plan to gain a competitive advantage for labor.

“With regard to this latter point, many clients have told us, ‘We won’t be the first to drop coverage, but we won’t wait to be third, either.'” See a brief portion of Mike Brewer’s testimony:

Lockton actuaries modeled the impact of health reform for hundreds of its clients, and aggregated results from 136 of those analyses into a report that examines the impact of the health reform law on middle-market health plan sponsors. The report includes a variety of industry segments, including construction, government, healthcare, manufacturing, professional services, transportation and retail and entertainment. See the report here with industry comparisons.

The modeling project assesses the additional costs for employers and employees in their current health plans due to changes imposed this year by the health reform law. It also evaluates the financial implications of options employers will have in 2014 when they are required by to offer health coverage to full-time employees or risk penalties. For a full webcast of the one-hour hearing, see the U.S. House Education & Workforce Committee.

Not Legal Advice: Nothing in this Alert should be construed as legal advice. Lockton may not be considered your legal counsel and communications with Lockton’s Compliance Services group are not privileged under the attorney-client privilege.

Circular 230 Disclosure: To comply with regulations issued by the IRS concerning the provision of written advice regarding issues that concern or relate to federal tax liability, we are required to provide to you the following disclosure: Unless otherwise expressly reflected herein, any advice contained in this document (or any attachment to this document) that concerns federal tax issues is not written, offered or intended to be used, and cannot be used, by anyone for the purpose of avoiding federal tax penalties that may be imposed by the IRS.

Lockton Benefit Group | 444 West 47th Street | Suite 900 | Kansas City | MO | 64112

About thebenefitblog

Eric is a Producer at Lockton Insurance Brokers, Inc., the world’s largest privately held commercial broker. Eric has over 23 years of experience in the insurance industry and has spent the last 11 years with Lockton. Eric specializes in Health & Welfare Benefits, Retirement Planning, and Executive Benefits. Eric's clients utilize his expertise in the areas of Plan Due Diligence, Transaction Structure, Fiduciary Oversight, Investment Design, Compliance and Vendor negotiation to improve the operational & financial outcome for each client. The Benefit Blog is a place to share that expertise and industry news.
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