“Health care reform is a trigger for transformational changes that are crucial for companies to remain globally competitive.”
– Tom McGrath, Senior Vice Chair, Markets, Ernst & Young LLP
Summary: In Moving forward: companies speak out on health care reform, Ernst & Young LLP reports on our survey findings, detailing the issues of greatest concern to executives and their perceived level of readiness to comply with the new law.
Five findings from the survey
- The C-suite is heavily involved.
Responding to the health care law is a critical business issue on the C-suite agenda and has significant business-wide implications for companies in every industry. A significant majority of respondents reported that planning for the implementation of the law is important to the company, and 59% considered it very important or critical.
- 87% percent of respondents said their company’s CFO will be involved in efforts to respond to the health care law
- 79% said their organization’s CEO will be involved
- Questions remain over planning with incomplete information.
The law is complex, and key aspects are being defined through the rule-making process at the federal agencies. Shifts in power in Congress could result in additional changes to the Affordable Care Act including some changes to the law that respondents noted as important to their companies over the next 24 months.
The challenge for management is to map out their organization’s ongoing response to the health care law without complete information about forthcoming requirements.
- The impact of health care on costs and profitability are still being evaluated.
Cost and compliance are key concerns for respondents.
More than one-third (34%) of them said their company’s biggest challenge or risk arising from the law will be the impact of health care costs on profitability.
Although 44% of respondents said they had not evaluated what effect the health care law will have on the cost of employee health benefits, 43% of those who have evaluated the law’s effects on the cost of employee health benefits said they anticipate significant costincreases because of the law, and 1% said they expect it to decrease costs.
- Increased health care costs will be absorbed by changes in the business model, cost reductions and increasing the amount employees pay for health care coverage.
At the time of the survey, 92% of respondents said their companies were not considering discontinuing health care benefits. Eight percent said they were considering discontinuing employee health care benefits, although some respondents explained that the decision whether to continue providing benefits would depend on market norms in the future.
More than three-quarters (76%) of respondents said their companies are at least somewhat likely to increase the amount employees pay for their health care coverage.
Respondents also said that in reaction to the law their companies likely will make changes to their business models and implement cost reductions outside of health care-related expenses.
- Few have communication plans in place to explain benefit changes to employees.
Companies are uncertain how they will communicate benefit plan changes to their employees. Most survey respondents said their companies had not yet determined what information would be included in their employee communications plans.
Companies will play a central role in educating employees about their options and obligations under the health care law, thereby raising the stakes for employers ’ communication plans.
See a timeline of employer provisions
New law imposes federal tax, compliance and reporting requirements
Beginning in 2014, the law — for the first time in US history — will impose a federal tax on individuals who do not maintain health insurance coverage and on employers with at least 50 full-time employees who do not provide affordable health care coverage for certain employees.
Employers also will face a series of additional new compliance and reporting requirements. The law will be implemented over a 10-year period, but companies must respond now to comply with immediate provisions and prepare for the new coverage provisions in 2014.
Early provisions focused on preserving access to coverage
A number of provisions affecting health insurers and employers that offer health care coverage to employees took effect on September 23, 2010, the six-month anniversary of the law’s enactment.
The majority of these new rules focus on preserving access to health care coverage. They also lay the groundwork for larger scale insurance market reforms that will take effect in 2014 as part of the law’s major coverage expansion.