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Survey: Reform threatens retail, hospitality

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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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  • Obamacare
    3% increase....really? As it is said "What planet are you from" to the survey takers. That is pure krap. Expect 15% minimum increases plus the wealth tax, unrealized income tax, being one of the few that pay income tax tax, etc etc etc.

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  1. You are correct that Obamacare requires health insurance policies to include richer benefits and protects patients who get sick. That's what I was getting at when I wrote above, "That’s because Obamacare required insurers to take all customers, regardless of their health status, and also established a floor on how skimpy the benefits paid for by health plans could be." I think it's vital to know exactly how much the essential health benefits are costing over previous policies. Unless we know the cost of the law, we can't do a cost-benefit analysis. Taxes were raised in order to offset a 31% rise in health insurance premiums, an increase that paid for richer benefits. Are those richer benefits worth that much or not? That's the question we need to answer. This study at least gets us started on doing so.

  2. *5 employees per floor. Either way its ridiculous.

  3. Jim, thanks for always ready my stuff and providing thoughtful comments. I am sure that someone more familiar with research design and methods could take issue with Kowalski's study. I thought it was of considerable value, however, because so far we have been crediting Obamacare for all the gains in coverage and all price increases, neither of which is entirely fair. This is at least a rigorous attempt to sort things out. Maybe a quixotic attempt, but it's one of the first ones I've seen try to do it in a sophisticated way.

  4. In addition to rewriting history, the paper (or at least your summary of it) ignores that Obamacare policies now must provide "essential health benefits". Maybe Mr Wall has always been insured in a group plan but even group plans had holes you could drive a truck through, like the Colts defensive line last night. Individual plans were even worse. So, when you come up with a study that factors that in, let me know, otherwise the numbers are garbage.

  5. You guys are absolutely right: Cummins should build a massive 80-story high rise, and give each employee 5 floors. Or, I suppose they could always rent out the top floors if they wanted, since downtown office space is bursting at the seams (http://www.ibj.com/article?articleId=49481).

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