Health Care & Life Sciences and Health Care & Insurance

Survey: Reform threatens retail, hospitality

August 13, 2012

When the lion’s share of the health care reform provisions take effect in 2014, the industries expecting to take the biggest hits are retail and hospitality.

Nearly half of employers in the sectors expect the Patient Protection & Affordable Care Act to boost their health plan costs more than 3 percent that year, according to a survey released last week by Mercer, the New York-based benefits consultant.

The concerns among retailers, restaurants and hotels are far different than in other industries, such as manufacturing, financial services, transportation and government, where only one-third to one-quarter of companies expect to see cost bumps of 3 percent or more due to health care reform.

“With health benefit cost already rising at twice the rate of general inflation, an additional increase of 3 percent or more will be very tough for employers to absorb,” Sharon Cunninghis, leader of Mercer’s health and benefits business, said in a prepared statement.

The 2010 health reform law, championed by President Obama, in 2014 will require all employers with more than 50 workers to provide health insurance to their employees, or pay a penalty. Also, all Americans must obtain health coverage or pay a tax.

For companies with 100 or fewer workers, the law will also create government-run insurance exchanges through which workers can obtain subsidies to help purchase private health insurance. Those exchanges will somewhat standardize the benefits of insurance in order to make comparison shopping easier.

One further complication for retail and hospitality businesses is their large number of part-time employees. The health reform law requires employers to provide health benefits to any employee working 30 hours a week—meaning many more of those workers must be on the company health plan.

But according to Mercer’s survey, two-thirds of those employers are considering changes to their plans that would ensure more of their part-timers don’t qualify for health benefits.

Since retailers and hospitality companies also have lots of low-wage workers, they expected some of their workers to receive coverage under the health reform law’s expansion of Medicaid coverage to all adults making up to 133 percent of the federal poverty limit.

But after the U.S. Supreme Court ruled that state governments could opt out of this expansion—and several have vowed to do so—the companies’ low-wage workers could be left in the cold. Providing health coverage to them is potentially more expensive than coverage for higher-wage employees, because the health reform law limits the percentage of workers’ income that can be contributed toward health benefits.

“Extending coverage to more employees will be a significant new expense for these employers,” said Tracy Watts, Mercer’s U.S. health care reform leader, “especially because other provisions regulate how much an employer can require employees to contribute to the cost and how good the coverage must be.”

Overall, 37 percent of employers surveyed by Mercer expect the 2014 health law changes to drive up costs more than 3 percent. One in five employers expects costs to rise 5 percent or more.

About 27 percent of employers expect costs to rise 2 percent or less, and 10 percent expect costs to rise not at all in 2014. The rest of employers said they do not know how much the new requirements will raise costs.

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