33% of Employers Contemplating Dropping Healthcare Coverage

Incidentally, both the CBO and this group are probably way off. 1/3 is much to high, they aren’t counting on the fact that most employers enjoy offering health insurance and use it to compete for the most competent and desirable employees. However, the CBO was super rosy, so the budget will likely get busted wide open anyway.

Thirty percent of employers will definitely or probably stop offering health benefits to their employees once the main provisions of President Obama’s federal health care law go into effect in 2014, a new survey finds.

The research published in the McKinsey Quarterly found that the number rises to 50 percent among employers who are highly aware of the health care law.

McKinsey and Company, which identifies itself as a management consultant that aims to help businesses run more productively and competitively, conducted the survey of more than 1,300 employers earlier this year. It said the survey spanned industries, geographies and employer sizes.

But the White House pushed back against the report.

“This report is at odds with the experts from the Congressional Budget Office, the Rand Corporation, the Urban Institute and history,” a senior administration official told Fox News. “History has shown that reform motivates more businesses to offer insurance.”

“Health reform in Massachusetts uses a similar structure, with an exchange, a personal responsibility requirement and an employer responsibility requirement,” the official said. “And the number of individuals with employer-sponsored insurance in Massachusetts has increased.”

According to the survey, at least 30 percent of employers would reap financial gain from dropping coverage even if they compensated employees for the change through other benefit offerings or higher salaries.

The research notes among the new provisions that could spur employers to drop coverage is a requirement of all employers with more than 50 employees to offer health benefits to every full-timer or pay a penalty of $2,000 per worker. Those benefits must also be equal between highly compensated executives and hourly employees – requirements that will increase medical costs for many companies.

The findings are distinct from a Congressional Budget Office estimate that only about 7 percent of employees who currently get health coverage through their jobs would have to switch to subsidized-exchange polices in 2014.

The group said its variance is so wide because shifting away from employer-sponsored insurance “will be economically rational” given the “law’s incentives.” The law requires employers to make insurance available to low-income or part-time employees that may not otherwise be covered.

The research found that contrary to what many employers feared, most employees — more than 85 percent — would stay at jobs that no longer offered health benefits. But 60 percent of employees would expect higher compensation.