Even as the rising cost of medical benefits has moderated, 11 percent of Indiana employers with 10 or more workers say they will terminate their medical coverage within the next five years, according to the latest survey from the benefits consulting firm Mercer.
The Indiana data from Mercer is not statistically significant because the firm surveyed only 77 employers here. But the result is one of the broadest state-level measures available.
And it shows that even as more details fall into place about the 2010 health reform law, a relatively small but steady group of employers plans to drop coverage. Mercer's survey a year ago showed that 8 percent of Hoosier employers planned to drop coverage after 2014.
The issue of employers dropping health care coverage is being closely watched because it could affect whether President Obama’s health insurance reform law succeeds at reducing the number of the uninsured without spiking federal spending.
The 2010 law creates fines for employers that do not sponsor adequate health benefits for their workers, beginning in 2014. But the law also creates online health insurance exchanges that could provide coverage instead of employers.
Workers with low and moderate incomes can earn subsidies in those exchanges to help them pay for health care coverage. But if too many companies halt their health benefits, it could send more than the estimated 16 million Americans to the exchanges—potentially exploding the projected costs of the program.
Right now, benefits consultants expect that companies with lots of low-wage workers—such as retailers, restaurants and hotels—are the most likely to drop coverage in favor of the public exchanges.
“I don’t think that the majority of professional businesses will use the public exchanges,” said Michael Haffey, senior vice president of marketing at Brown & Brown of Indiana Inc. “But retail, restaurants—absolutely.”
Another option for businesses that want to offload some of the administrative headaches of a health plan is to opt for one of the growing number of private exchanges, such as the Anthem Health Marketplace that will be launched in Indiana on Jan. 1. Nationally, 56 percent of employers said they are likely to use a private exchange for health benefits, according to Mercer’s survey.
Indiana employers paid an average of $10,125 per worker for health benefits this year, up 4.9 percent from the previous year, according to Mercer’s survey.
The growth rate in Indiana was faster than the national average, which was 4.1 percent this year. Spending on health benefits also grew 4.9 percent in Indiana in 2011—when nationwide growth was 6.1 percent.
The national increase in health benefits spending this year was the slowest, by far, since 1997.
Nationally, more employers are following Indiana’s lead in adopting consumer-directed health plans, which combine a personal health savings account or a health reimbursement arrangement with a high-deductible health plan.
In Indiana, 40 percent of employers offered a consumer-directed health plan, up from 38 percent a year ago, according to Mercer’s survey.
Among employees at Hoosier firms, 21 percent are enrolled in a consumer-direct health plan. Nationally, just 16 percent of employees are enrolled in such plans—although that number is rising.
“If we’re not already at the tipping point—and we may be—at this rate of growth it’s coming soon,” said Andrew Rosenberg, leader of health and benefits in Mercer’s Indianapolis office.
Indiana’s spending on health benefits also may have been lower than the national average due to a higher percentage of mid-size firms and a lower percentage of firms with more than 500 employees. Mercer’s survey included 2,809 employers, but none with fewer than 10 workers.